If you have a health savings account (HSA), you may be wondering how to get the most out of it. Since an HSA is a tax-efficient account, you can invest the money you contribute to it. And if your health insurance policy includes a high deductible, an HSA can help you cover out-of-pocket medical expenses.
HSA: A Superior Retirement Account
It's a great way to use pre-tax money to pay expensive health insurance deductibles, but it's also a great retirement account. For this reason, you want a strategy behind how you use your HSA.
HSAs are absolutely the best tools we have to save for retirement because they offer a triple tax advantage
- You can use pre-tax dollars to fund your HSA
- This money grows tax free
- You can spend the money tax free on the road
So you take pre-tax money that you've never paid taxes on, grow tax-free over the years, and then spend it tax-free at the end of the game.
Do you have to pay your medical bills with your HSA?
It stands to reason that yes, you can pay your medical bills with your HSA, but this is a conditional yes. If you can pay the medical bills you face [with your HSA], pay them in cash, let the HSA keep growing
However, if you're doing this for a long-term game, a long-term strategy, I don't want you in an HSA which is a type of savings account, I want you in investments.
How to invest HSA funds
Investment firms are great places to put your HSA funds. Fidelity is a very good player in the HSA market, with the ability to make very low-cost investments with your HSA money and grow it over the years much later in life, usually in retirement.
With an annual stock market growth rate of around 10%, investing just $100 a month for 10 years can net you about $120,000.
Learn more about HSAs with:
- fidelity
- Schwab
- Vanguard
conclusion
If your financial situation allows you to pay for medical expenses out of pocket, leave your HSA alone. If you think over the years, over the decades, that you can pay your deductibles with cash, you want the HSA to grow, you want it to grow, and you want to invest the money, not save it.