More than Health Savings – It’s an Investment Tool

More than Health Savings – It’s an Investment Tool

Health care costs can be unexpected, expensive and are not always completely covered by insurance. Maybe you need dental work or prescription glasses and contacts, or need a little more physical therapy from a pickleball injury than your insurance allows. These are the types of expenses for which funds put into your Health Savings Account can be used. Those funds can also help you cover medical insurance co-pays and deductibles, prescriptions, mental health counseling and numerous other costs. An HSA calculator can help you decide how much to save.

But saving money for health care expenses is not the end of the HSA story. There are three BIG tax benefits to an HSA (the only way to get all three).

1. You don’t pay federal taxes on the money you earn that you contribute to your HSA.
2. You don’t pay federal taxes on money you withdraw from your HSA to use for health care costs.
3. You don’t pay federal taxes on earnings from funds you invest from your HSA.

That’s right, you CAN INVEST the money you have in your HSA in any number of investment accounts and grow the money you have saved tax free. Your HSA basically functions similar to a 401(k) retirement account. Check with your employer, health care plan or bank on the minimum you need to get started.

Why would you want to invest your HSA funds?

Let’s say you started your job with two young children and a small savings account, you may have decided it was good to add funds to an HSA for unexpected expenses, and since the withdrawals were automatic and regular, you didn’t change the amount for ten years or more. Now that you are older and your kids are in college, or out of the house, you realize you have several thousand dollars that haven’t been used.

It’s easy to leave those funds in the HSA, go online to invest them, and diversify your portfolio for your upcoming retirement or even unknown medical expenses. The money you put in an HSA is yours for your entire life, it doesn’t matter if you change jobs or retire. You can also transfer funds that you have invested back into your HSA if you need them for medical expenses down the road. Taking some of the worry out of unexpected health care needs.

Don’t have an HSA? Get started now through your employer, your health care plan or your bank if you have a high deductible health care plan, and think of it as your smartest financial decision to date. It truly is a win – saving tax free; win – a reserve of cash when health care needs pop up, win – a way to save money for retirement.

Please consult your Tax Advisor