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Investing in your Health Savings Account

Investing in your Health Savings Account

January 22, 2019

Health savings accounts (HSA) are one of the few investment vehicles that are available that are triple tax advantaged. This means that when you earn money today, it is not taxed. It grows inside the HSA tax free, and when you take it out and use it on qualified health expenses, it’s still never taxed!

Think about this… you get to retirement and you have to pay for medical expenses. You can either take money out of your 401(k) or IRA and pay income taxes on it, and then use those dollars to pay for healthcare expenses. Or you can have funds inside your HSA that grow tax free and when you take them out and use them in retirement, you still never pay tax on them.

You had those investments grow throughout the course of your lifetime and now you get to take them out and never have to pay income tax or capital gains taxes on those investments.

That’s extremely powerful.

Fidelity did a study in 2017 that found that the average person is going to spend about $275,000 in retirement on healthcare1. So, if you can take advantage of a triple tax savings today to pay for some of those retirement healthcare expenses, that’s very powerful.

I bring this up because I was talking to a prospect last week that was not using their HSA as an investment vehicle because they simply did not know – and that’s okay! They were using their HSA like many people do – a savings account to pay for and fund all their medical expenses today. They were not aware that they could invest inside their HSA, and most importantly, with the power of compound interest! They could use that money in retirement – when you’re not making income any more – to fund some of those higher expenses. 

If you haven’t sat down to think about all the ways you can fund your retirement and take care of current day expenses, reach out to us. We will help you navigate through all the options available and help decide what will make sense for you and your family.