How you and your adult child between ages 19 and 26 years old could leverage this planning idea for HSAs and Roth IRAs. A one-two punch!

You likely already know that The Affordable Care Act allows children to stay on their parent’s health insurance plan until age 26. What you might not realize is that this can open up opportunities for your adult child—or even you—to contribute to a Health Savings Account (HSA) in their name, offering substantial tax advantages. Let’s get into this incredibly overlooked area of planning!

What are the advantages of Health Savings Accounts?

HSAs offer a triple-tax advantage, making them one of the most powerful tools for managing healthcare costs and saving for the future.

• Your contributions are 100% tax-deductible since they are deducted from your gross income.
• All interest earned in the HSA is 100% tax-deferred unless used for non-eligible medical expenses.
• Withdrawals from your HSA are 100% tax-free for eligible medical expenses.
• HSA funds roll over year-to-year. If you use it correctly, this account can build for decades like a traditional retirement account. Save your medical receipts and pay out of pocket for your medical expenses; that part is key here.

Contributing to a HSA

If you want to contribute to your child’s HSA, this doesn’t mean you need to choose between yourself and your child. They can continue to contribute to their own HSA as well. Additionally, if your child wants to contribute to their own HSA, this doesn’t mean you have to stop your contributions.

Things to note:

• Parents must be covered under a High-Deductible Health Plan (HDHP) to contribute to an HSA.
• When your family has HDHP coverage, you can contribute up to $8,300 ($8,550 in 2025) for your child’s too! That’s powerful!
• A parent can gift a child money to put in their HSA—but one needs to pay attention to federal gifting limits each year.
• An adult child cannot be claimed as a dependent on someone’s tax return (including the parents) if they want to open an HSA in their name.

Contributing to an HSA offers more than just immediate tax savings. It also allows young adults to build a healthcare nest egg, take advantage of long-term growth, and even use the funds for future medical expenses well into retirement.

Expand Their Savings with a Roth IRA

If your child is employed and earns an income, they can open a Roth IRA. This is another opportunity for you to contribute to their financial future. Parents can contribute to their child’s Roth IRA as long as the total contribution (from the child, parents, or anyone else) does not exceed the annual limit ($7,000 in 2024) or the child’s earned income. Contributions you make on behalf of your child count toward your annual gift tax exclusion limit.

Key Roth IRA Benefits:

• Tax-free growth: Investments grow tax-free, and qualified withdrawals are also tax-free.
• No required distributions: Unlike traditional IRAs, Roth IRAs have no required minimum distributions (RMDs), offering more flexibility in retirement planning.
• Penalty-free early withdrawals: Contributions (but not earnings) can be withdrawn at any time, making it a flexible savings option.

By combining the tax advantages of HSAs and Roth IRAs, you can help your child build a robust financial foundation that supports both their healthcare needs and long-term retirement goals.

If you’re navigating health insurance options or want to explore how HSAs and Roth IRAs can benefit your family’s financial plan, reach out—I’m here to help!

How you and your adult child between ages 19 and 26 years old could leverage this planning idea for HSAs and Roth IRAs. A one-two punch!

You likely already know that The Affordable Care Act allows children to stay on their parent’s health insurance plan until age 26. What you might not realize is that this can open up opportunities for your adult child—or even you—to contribute to a Health Savings Account (HSA) in their name, offering substantial tax advantages. Let’s get into this incredibly overlooked area of planning!

What are the advantages of Health Savings Accounts?

HSAs offer a triple-tax advantage, making them one of the most powerful tools for managing healthcare costs and saving for the future.

• Your contributions are 100% tax-deductible since they are deducted from your gross income.
• All interest earned in the HSA is 100% tax-deferred unless used for non-eligible medical expenses.
• Withdrawals from your HSA are 100% tax-free for eligible medical expenses.
• HSA funds roll over year-to-year. If you use it correctly, this account can build for decades like a traditional retirement account. Save your medical receipts and pay out of pocket for your medical expenses; that part is key here.

Contributing to a HSA

If you want to contribute to your child’s HSA, this doesn’t mean you need to choose between yourself and your child. They can continue to contribute to their own HSA as well. Additionally, if your child wants to contribute to their own HSA, this doesn’t mean you have to stop your contributions.

Things to note:

• Parents must be covered under a High-Deductible Health Plan (HDHP) to contribute to an HSA.
• When your family has HDHP coverage, you can contribute up to $8,300 ($8,550 in 2025) for your child’s too! That’s powerful!
• A parent can gift a child money to put in their HSA—but one needs to pay attention to federal gifting limits each year.
• An adult child cannot be claimed as a dependent on someone’s tax return (including the parents) if they want to open an HSA in their name.

Contributing to an HSA offers more than just immediate tax savings. It also allows young adults to build a healthcare nest egg, take advantage of long-term growth, and even use the funds for future medical expenses well into retirement.

Expand Their Savings with a Roth IRA

If your child is employed and earns an income, they can open a Roth IRA. This is another opportunity for you to contribute to their financial future. Parents can contribute to their child’s Roth IRA as long as the total contribution (from the child, parents, or anyone else) does not exceed the annual limit ($7,000 in 2024) or the child’s earned income. Contributions you make on behalf of your child count toward your annual gift tax exclusion limit.

Key Roth IRA Benefits:

• Tax-free growth: Investments grow tax-free, and qualified withdrawals are also tax-free.
• No required distributions: Unlike traditional IRAs, Roth IRAs have no required minimum distributions (RMDs), offering more flexibility in retirement planning.
• Penalty-free early withdrawals: Contributions (but not earnings) can be withdrawn at any time, making it a flexible savings option.

By combining the tax advantages of HSAs and Roth IRAs, you can help your child build a robust financial foundation that supports both their healthcare needs and long-term retirement goals.

If you’re navigating health insurance options or want to explore how HSAs and Roth IRAs can benefit your family’s financial plan, reach out—I’m here to help!