This Georgia teacher’s side-hustle introduced him to his HSA

James Woodfin has been teaching full-time for 5 years. But he recently added another few titles to his resume, including gig worker and health savings account owner. Here’s what those two things mean for him.

During the week, James Woodfin works as a middle school social studies teacher. His days begin around 5 a.m., which leaves him enough time to enjoy the morning a bit before getting out the door. Then, it’s a quick 10-minute drive to school from the home he and his wife share just outside of Savannah, GA. 

But like many folks these days, James’s workweek doesn’t end on Friday afternoon. 

From the classroom to the driver’s seat

James, 30, started working for the food and grocery delivery service Postmates in 2019. He drives mostly on the weekends, since weekdays are long, and he’s not truly done with work until the evening, around 6 p.m. 

“On school days, it’s hard to fit in any driving, even when I’d like to. But that’s part of what’s so nice about gig working. It’s flexible.”

In fact, James has enjoyed gig working so much, he added a rideshare app to his gigging resume not long after starting with Postmates.

“I like to keep busy,” he told me plainly when I asked, surprised, how he fits it all in. “And the extra cash has come in really handy recently.”

James and his wife relocated from Atlanta to Pooler, a small town just outside of Savannah this past July, during what has thus far felt like the apex of the pandemic.

“Not the best time to be saving for a house, I guess,” he chuckled over the phone. “But my health savings account (HSA) was able to act almost like a reserve account during this time. An account specifically for health expenses, which we were always going to have to fulfill, new house or not.”

James has a monthly contribution set up with his Starship account. This means that once a month, Starship automatically deposits an amount pre-selected by James that goes right from his linked bank account into his Starship Spending account. “I’ve had monthly contributions set up from the jump when I got on with Postmates,” he said. “So my savings have been accumulating for just about a year.”

Making his side-hustle worth it

James’s situation is not as different as it may seem for a gig worker. While many rideshare and delivery drivers have made gig work a full-time occupation, there are many more who treat it as a side-hustle, to use a term. If they have a full-time job, they may get health insurance through a full-time employer. And if not, they may look to healthcare.gov and state-based health insurance marketplaces set up as a result of the Affordable Care Act. 

“As a teacher, my school provides health insurance. And it’s a high deductible health plan (HDHP), so I’m eligible for an HSA.” 

But in the five years that James had been a teacher with an HSA-compatible health plan, he’d never actually considered the HSA part. That was until he started working for Postmates nearly a year ago, and learned of their partnership with Starship, which launched at the end of 2018. 

“I did the research, figured out that I was eligible, and started putting money away. Now I’m able to spend on various health expenses—our monthly prescriptions, doctor’s visits, you name it. Using Starship has cut down on our expenses quite a bit.”

Thinking about the future

James also uses his Starship HSA as a retirement account. “I know that if I don’t need the money for health expenses, I should just leave it. It’s growing tax-free in there.”

He’s absolutely right. What you don’t touch doesn’t go anywhere. In fact, it grows tax-free for as long as you keep it in there. Plus, after age 65, the full amount in your HSA is fair game for penalty-free distributions for any unreimbursed health expenses from any point in your life! Plus, like a tax-advantaged retirement account (401(k) or IRA), withdrawals made for non-health-related expenses are then only subject to ordinary income taxes.

“I’m always careful not to grab my Starship card when paying for coffee or something!” James laughed. “I know the rules and don’t need to get fined by the IRS.”

Because HSA funds never expire but roll over year to year, taking money out for ineligible health expenses before age 65 will cost you a pretty penny in the form of standard income tax, plus a 20% fine from the IRS. Avoiding those penalties is key to best using your HSA. If you use the account for ineligible services or expenses, the benefits become moot. 

One thing James wishes people knew about HSAs is simple but integral to the account’s usefulness: the tax benefits. 

“Something people don’t realize, myself included at first, is that if you’re using this money on the expenses you’re meant to use it for, it’s totally tax-free. Deposits, withdrawals, and growth opportunities… they’re all tax-free. These accounts aren’t talked about near enough.”

It’s a common story with HSAs. You start by focusing on the money it is saving you on health expenses. Then, as your HSA nest-egg grows—and your own financial circumstances change—you start to see the long-term retirement income and tax benefits. There’s really nothing like it. And for gig workers like James, it’s an essential tool for continued health and wealth.