We rarely release sequels; we don’t want to get anywhere close to Rocky 27 (or wherever we are in that long series), but we do feel the need to update and reaffirm our original commentary and the market’s current need for clarity. At any given time, the market’s value reflects the best combined knowledge of where the economy is heading as measured by the future profits of all publicly traded companies. That doesn’t mean the market is always correct; it just means it tends to be the best combined sense of where we are and where we’re going. There are times, though, when this common consensus (“the market”) is wrong.
As we wrote in our earlier economic commentary, we have “a new administration using new methods to change the economic order they inherited.” At some level, this is always what new administrations do; they change directions subtly or substantially. But this administration is upending the traditional, if unwritten, rules of how things are done in Washington. On top of that, this President’s personal style is very brash and undiplomatic, to say the least, and he negotiates hard in private and in public.
Accordingly, we see public blow ups between heads of state in the oval office, and we see tariffs thrown around in seemingly casual fashion for negotiating leverage. This last point is among the most important.
We want to be very clear in stating that a massive tariff regimen in our country and around the globe would be very bad economically. Prices increase, and economic efficiency decreases. The question, therefore, is whether tariffs are an economic goal in and of themselves, which would be harmful, or are they a negotiating tactic to force a trading partner to reduce their own tariffs?
The reverse of this is also true; free trade is extremely positive. The reality that is rarely mentioned is that “free” trade has rarely – if ever – existed. Even in what have been called free trade periods there were always some tariffs in place. Political leaders around the world sometimes get very close to negotiating a free trade environment, but there are always some protected industries where tariffs remain.
As a quick example, despite the U.S./Mexico/Canada Trade Agreement, Canada still imposed 200% to 300% tariffs on U.S. dairy products. That is not “free” trade. It might have been better than what existed before the agreement, but the negotiators did not get to pure “free” trade.
President Trump came into office with the expressed opinion that this trade deal (USMCA), along with several others around the world, was a bad deal and should be renegotiated. The outcome of all these renegotiations will have a substantial impact on the U.S. economy as well as the world’s economy.
The end result is not knowable at this time, and this President is negotiating in a manner the market is unaccustomed to seeing. Therein lies much of the volatility we are experiencing. We should expect a pattern of continued market volatility for a while as the overall direction is determined.
The Economic Data
The economic data remains much as it was when we wrote our earlier commentary. On the positive side, liquidity conditions remain good (banks have plentiful reserves), business capital investment seems to be improving, private sector employment is still growing, loan delinquencies are low, the dollar is strong, inflation seems to be under control, and promised tax reductions will spur economic activity as will reduced regulatory burdens.
On the potentially negative side, business capital investment could be stronger, public sector employment is going to decrease, recent loan delinquency rates have edged up a bit, and inflation is still slightly higher than the Fed’s 2% goal, holding them back from reducing rates further, and the reduction in government employment will reduce economic activity in some sectors.
The interaction of the positive and negative elements does not argue for a massive recession. As readers may have already concluded from the discussion above, we don’t know what the actual policy outcome will be, but we do know a couple of very critical components that influence how we recommend reacting:
Economic Commentary – Looking for Clarity (Part 2)
We rarely release sequels; we don’t want to get anywhere close to Rocky 27 (or wherever we are in that long series), but we do feel the need to update and reaffirm our original commentary and the market’s current need for clarity. At any given time, the market’s value reflects the best combined knowledge of where the economy is heading as measured by the future profits of all publicly traded companies. That doesn’t mean the market is always correct; it just means it tends to be the best combined sense of where we are and where we’re going. There are times, though, when this common consensus (“the market”) is wrong.
As we wrote in our earlier economic commentary, we have “a new administration using new methods to change the economic order they inherited.” At some level, this is always what new administrations do; they change directions subtly or substantially. But this administration is upending the traditional, if unwritten, rules of how things are done in Washington. On top of that, this President’s personal style is very brash and undiplomatic, to say the least, and he negotiates hard in private and in public.
Accordingly, we see public blow ups between heads of state in the oval office, and we see tariffs thrown around in seemingly casual fashion for negotiating leverage. This last point is among the most important.
We want to be very clear in stating that a massive tariff regimen in our country and around the globe would be very bad economically. Prices increase, and economic efficiency decreases. The question, therefore, is whether tariffs are an economic goal in and of themselves, which would be harmful, or are they a negotiating tactic to force a trading partner to reduce their own tariffs?
The reverse of this is also true; free trade is extremely positive. The reality that is rarely mentioned is that “free” trade has rarely – if ever – existed. Even in what have been called free trade periods there were always some tariffs in place. Political leaders around the world sometimes get very close to negotiating a free trade environment, but there are always some protected industries where tariffs remain.
As a quick example, despite the U.S./Mexico/Canada Trade Agreement, Canada still imposed 200% to 300% tariffs on U.S. dairy products. That is not “free” trade. It might have been better than what existed before the agreement, but the negotiators did not get to pure “free” trade.
President Trump came into office with the expressed opinion that this trade deal (USMCA), along with several others around the world, was a bad deal and should be renegotiated. The outcome of all these renegotiations will have a substantial impact on the U.S. economy as well as the world’s economy.
The end result is not knowable at this time, and this President is negotiating in a manner the market is unaccustomed to seeing. Therein lies much of the volatility we are experiencing. We should expect a pattern of continued market volatility for a while as the overall direction is determined.
The Economic Data
The economic data remains much as it was when we wrote our earlier commentary. On the positive side, liquidity conditions remain good (banks have plentiful reserves), business capital investment seems to be improving, private sector employment is still growing, loan delinquencies are low, the dollar is strong, inflation seems to be under control, and promised tax reductions will spur economic activity as will reduced regulatory burdens.
On the potentially negative side, business capital investment could be stronger, public sector employment is going to decrease, recent loan delinquency rates have edged up a bit, and inflation is still slightly higher than the Fed’s 2% goal, holding them back from reducing rates further, and the reduction in government employment will reduce economic activity in some sectors.
The interaction of the positive and negative elements does not argue for a massive recession. As readers may have already concluded from the discussion above, we don’t know what the actual policy outcome will be, but we do know a couple of very critical components that influence how we recommend reacting:
Investment Implications
As of this writing, the broad market, as measured by the S&P 500, is:
If the headlines about the budget negotiations with Congress and about the tariff negotiations were not so hyperbolic, most people wouldn’t react much to 1%, 5%, or even 9% market losses; these size corrections have occurred fairly regularly throughout history. Accordingly, most people wouldn’t be tempted to touch their portfolios.
The danger is that the press coverage does prompt investors to panic. We are very confident that market losses of this magnitude will reverses themselves and will therefore be seen in hindsight as being paper losses. If an investor were to panic and sell out, and if the market recovers as suddenly as it can do, then paper losses become “real” losses very quickly, and real losses can be difficult to reverse.
Our recommendation is to design and maintain a portfolio that is allocated to accomplish realistic growth goals, operate within a client’s defined risk tolerance (there is no such thing as 100% risk-free), and provide liquidity for projected withdrawals, then that portfolio structure should be maintained, not compromised. In fact, to the extent that significant rebalancing opportunities present themselves, portfolios should purposely rebalance into the losses.
Executive Summary
We still live in a volatile time with a new “normal” in how Washington determines policy with new rules replacing old ones. The greatest threat to the economy remains a permanent regime of high tariffs across the globe. But if tariffs are simply being used for negotiating leverage and if the ultimate outcome is a greater degree of free trade, then the long-term outcome will be quite good, even as the near-term volatility is a bit nerve-racking. It is at times like these when market timing can inflict serious damage to an investment portfolio, and the wisest strategy is to still maintain the right balance between return goals, risk tolerance, and liquidity needs.
A Health Savings Account (HSA) is a tax-advantaged savings account designed to help individuals with high-deductible health plans (HDHPs) pay for qualified medical expenses. What sets HSAs apart is their triple tax advantage: contributions reduce taxable income, earnings grow tax-free, and withdrawals for eligible medical expenses aren’t taxed.
For anyone looking to reduce healthcare costs, save on taxes, and even prepare for retirement, an HSA is a powerful financial tool. Here’s why it matters:
Quick Overview
Eligibility and Contributions
To qualify for an HSA, you must enroll in a High Deductible Health Plan (HDHP). For 2025, that means a minimum deductible of $1,650 for self-only coverage or $3,300 for family coverage. Being enrolled in other coverage, like Medicare, will disqualify you.
Contributions can come from you, your employer, or even family members, and must be cash (not investments or property).
For Health Savings Account, in 2025, individuals can contribute up to $4,300 and families up to $8,550, with an additional $1,000 catch-up contribution allowed for those 55 and older.
(Age 55+)
Health Savings Account Benefits
HSAs offer unmatched tax perks:
Compared to other accounts like 401(k)s and IRAs, HSAs have no required minimum distributions (RMDs), making them ideal for long-term wealth building. The account is also fully portable – you own it outright even if you change jobs or insurance plans.
Managing Your Account
Maximizing an HSA starts with selecting the right provider – look for low fees, robust investment options, and user-friendly interfaces. Many HSA administrators offer the ability to invest your balance in mutual funds, ETFs, or other vehicles.
Keep thorough records of your contributions, distributions, and receipts. This documentation ensures IRS compliance and preserves your tax advantages. Consider using your HSA debit card for convenience, but always retain proof of qualified expenses.
Using Your HSA
HSA funds can be used for a broad range of medical expenses, including:
Keeping receipts is crucial, especially if you choose to pay out-of-pocket and reimburse yourself later – a strategy that allows your HSA investments to grow tax-free for longer.
Investment Options
HSAs aren’t just for short-term spending – they can serve as investment accounts for long-term financial planning. Investment strategies vary based on your goals:
needs
annual deductible
70% bonds
future needs
40% bonds
planning
Experts recommend keeping at least enough cash to cover your deductible and investing the rest according to your risk tolerance.
Retirement Planning
When used correctly, HSAs can be a strategic retirement planning vehicle. After age 65, funds can be used for non-medical expenses without penalty (though they are taxed as ordinary income). That flexibility makes HSAs a powerful complement to 401(k)s and IRAs.
Consider these retirement-focused strategies:
Tax Implications
The tax benefits of HSAs are a cornerstone of their appeal:
However, distributions for non-qualified expenses before age 65 are subject to income tax plus a 20% penalty. After 65, only ordinary income tax applies.
Work with a tax advisor to stay within IRS guidelines and maximize your savings for the best results.
Comparing a Health Savings Account to Other Accounts
HSAs outperform many similar financial vehicles in flexibility and tax efficiency. Here’s how Health Savings Accounts compare to other financial accounts:
Disclaimer: The information presented in this table is for general informational purposes only and is used as a broad comparison tool. Contribution limits, tax rules, and eligibility requirements are subject to change depending on the intricacies of each account type.
Unlike Flexible Spending Accounts (FSAs), HSA funds roll over yearly and belong to you regardless of employment. And unlike 401(k)s or IRAs, you can use HSA funds anytime for qualified medical expenses with no penalties.
Family and Estate Planning
HSAs can be used for qualified medical expenses for your spouse and dependents – even if your HDHP doesn’t cover them. Upon your death, the HSA transfers to a named beneficiary. If that’s your spouse, it remains an HSA; for others, it’s treated as taxable income.
To maximize long-term value:
Portability and Flexibility
An HSA travels with you. Change jobs, move states, switch health plans – your HSA stays intact. You can even open multiple HSAs for different strategies (e.g., short-term spending vs. long-term investing).
This flexibility allows you to build a healthcare safety net that evolves with your needs.
Health Care Integration
HSAs are designed to complement HDHPs by reducing your net out-of-pocket costs. They provide a safety buffer against large medical expenses and a way to pay for ongoing healthcare needs like:
When used strategically, HSAs help make high-deductible plans more manageable and affordable.
Is an HSA Right for You?
A Health Savings Account is more than just a savings tool – it’s a cornerstone of a smart financial and retirement strategy. With triple tax advantages, investment potential, and unmatched flexibility, HSAs can significantly reduce healthcare costs and support long-term financial goals.
To get the most out of your HSA:
Whether you’re saving for next year’s doctor visits or planning decades in advance for retirement, an HSA belongs in your financial toolkit.
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Meet Greg Welborn
Greg Welborn is a Principal at First Financial Consulting. He has more than 35 years’ experience in providing 100% objective advice, always focusing on the client’s best interests.
Meet Greg Welborn
Greg Welborn is a Principal at First Financial Consulting. He has more than 35 years’ experience in providing 100% objective advice, always focusing on the client’s best interests.
FAQ | Health Savings Account
A Health Savings Account (HSA) is a tax-advantaged savings account available to individuals who are enrolled in a High-Deductible Health Plan (HDHP). It allows you to set aside money on a pre-tax basis to pay for qualified medical expenses. Funds in an HSA can be used to cover deductibles, copayments, prescriptions, dental and vision care, and more - all while reducing your taxable income. The account is owned by you, not your employer, and the money rolls over year to year.
To qualify for an HSA, you must meet the following criteria:
For 2025, an HDHP must have a minimum deductible of $1,650 for self-only coverage or $3,300 for family coverage, along with a maximum out-of-pocket limit of $8,300 (individual) or $16,600 (family).
The IRS sets annual contribution limits for HSAs, which adjust for inflation. For 2025, individuals can contribute up to $4,300 and families up to $8,550. If you're 55 or older, you can contribute an additional $1,000 as a "catch-up" contribution. These contributions can come from you, your employer, or both combined, but they cannot exceed the annual limit.
HSA funds can be used to pay for a wide range of qualified medical expenses, including doctor visits, prescriptions, vision and dental care, and even some over-the-counter medications. If you use the funds for non-qualified expenses before age 65, you'll pay regular income tax plus a 20% penalty. After age 65, you can use the money for any purpose without a penalty - though non-medical expenses will still be taxed as income.
Yes, many HSA providers allow you to invest your HSA funds once your balance reaches a certain threshold, often around $1,000 or $2,000. You can invest in mutual funds, ETFs, and other securities. This gives your HSA the potential to grow significantly over time, especially if you don’t need to tap into it for short-term medical costs.
Your HSA is yours to keep, no matter where you work or what health insurance you have in the future. It's a portable account, meaning you can continue using the funds for qualified medical expenses even if you're no longer enrolled in an HDHP. However, you can only contribute to the HSA while you're actively covered by a qualifying HDHP.
Yes, you can use your health savings account for non-medical expenses. However, there are conditions you must meet.
If you're under age 65, using HSA funds for non-qualified expenses will result in income tax plus a 20% penalty.
If you're 65 or older, you can withdraw funds for any purpose without penalty - though non-medical expenses are still taxed as regular income (similar to a traditional IRA).
This makes the HSA a potential secondary retirement account for those who stay healthy and don’t use all their medical savings.
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