Brennan Schlagbaum and his wife paid off six-figures in debt and now have a net worth of nearly $2 million.
He and Erin have three types of retirement accounts: two individual retirement accounts , a solo 401, which is an individual 401 plan specifically for business owners like Brennan who don't have employees, and Erin's employee stock ownership plan from her previous employer. Similar to an IRA, you can make annual contributions to an HSA and you get significant tax perks. In the case of an HSA, you actually get: You can contribute pre-tax dollars , your contributions and earnings grow tax-free over time, and you can withdraw your money tax-free to cover qualified medical expenses. , you'll pay ordinary income taxes on the withdrawal and owe a 20% early withdrawal penalty.
While the Schlagbaums can use their HSA funds for their medical costs right now, they opt not to. They're in a financial position where they can afford to pay out-of-pocket with the cash flow from Brennan's company, meaning their HSA money can continue to grow. The fact that there's a contribution limit is"a sign that it's a really good account from a tax-savings perspective, he added."There's a reason they put a cap on it. So, if we put all of our $7,750 in there, we want to make sure all of that is invested and not touched."
"If you're a healthy individual or you're single and you don't have a lot of medical visits, the HSA can be a great route," said Schlagbaum."The opposite side of the spectrum is me and our family: the person that has the babies and the health concerns. That can get expensive."
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