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How to Make the Most of Your HSA Investment

As you get older, you start to notice some . . . changes. Your back is a little stiffer when rolling out of bed some mornings. You start feeling pain in your knees. Going up a flight of stairs begins to seem like climbing Mount Everest. 

As your golden years creep up, you’ll probably spend more on medical expenses, too. There will likely be more doctor visits, more surgeries and more medication. It adds up fast.

How much are we talking about? The average couple retiring today needs a whopping $280,000 to cover the cost of health care throughout their retirement.(1) Let that sink in: That’s more than a quarter of a million dollars just to cover medical expenses. And we’re not even counting extra medical costs like dental work or long-term care.

You need to plan ahead for those future health costs. We don’t want you to have to worry about how you’re going to pay your medical bills in your retirement years. That’s where a health savings account (HSA) comes in. 

The truth is, your HSA is more than just a regular old savings account. Your HSA investment options can help you save for doctor visits and prescriptions and add some extra tax-free cash to your retirement dreams. 

What Is an HSA?

A health savings account is a tax-advantaged savings account paired with a high-deductible health plan (HDHP) that can help you pay for medical expenses—both now and in the future. 

Your HSA usually starts as a cash account which earns interest like a savings account. But once you reach a certain balance, you can change your HSA into an investment account, which functions a lot like an IRA. 

In most cases, we're a huge fan of HSAs. Why? Because they can save you money on health insurance if they work for you and your family. Not only that, but they can also play a role in helping you save for retirement. 

Here are a few reasons you should consider an HSA-eligible health insurance plan: 

1. Lower monthly premiums help you save money. 

Having an HSA-qualified, high-deductible health plan means you’ll pay less in monthly premiums than you would with a traditional health plan. The downside of a higher deductible is that you’ll need to pay more before your insurance kicks in. 

But if you and your family are healthy and rarely go to the doctor, an HSA is the perfect plan. 

Plus, regularly putting money into your HSA is like building a brand-new emergency fund just for medical expenses. It can help you cover your deductible and any other out-of-pocket costs that pop up.

2. HSAs come with some amazing tax benefits. 

You know the old saying that good things come in threes? Well, that seems to be true for HSAs. With an HSA, you can take advantage of not one, not two, but three incredible tax benefits that can help you save for medical expenses both now and in the future:

  • You’re not taxed when you put money into your HSA. 
  • The money in your HSA grows tax-free. 
  • You’re not taxed when you take money out to pay for medical expenses. 

On top of that triple tax advantage, your HSA contributions can lower your tax bill by reducing your taxable income. For example, if you put $2,000 into an HSA in a year, you lower your taxable income by $2,000. 

3. You own your HSA and it rolls over each year.

What happens to the money in your HSA if you don’t use it all at the end of the year? Or what if you leave the job where you had an HSA-qualified health plan? 

The great thing about an HSA is that it’s completely yours. So if you get a new job or health plan, you keep your HSA. You can roll the account into your new employer’s plan or leave it alone. Either way, those funds are yours to use for qualified expenses. 

And one of the biggest myths surrounding HSAs is that you lose any money left in the account at the end of the year. But that’s not true! Your HSA balance rolls over year-to-year, so you still have access to all the money in the account. 

If you’re interested in exploring high-deductible health plans that are eligible for an HSA, let one of the independent agents at Health Trust Financial help you.

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HSA Investments in Retirement: The Health IRA

In professional basketball, we all know who the superstars are. Guys like LeBron James and Stephen Curry grab the headlines—and rightfully so! But just as important to any team’s success is the often forgotten sixth man. He’s the guy who comes off the bench and performs well while the starters catch their breath. 

If your 401(k) and Roth IRA are the star players of your retirement plan, then the HSA is like the sixth man—a key additional teammate helping you score extra points on the way to victory.  

One of the things we love most about HSAs is that you can invest your HSA funds so they grow over the long term. Just think of an HSA as a “health IRA.” And when you turn 65, that HSA will act like a traditional IRA.

At that point, you can take out money for anything you like, but you’ll pay taxes on it when you do—just like with a traditional IRA. However, you can still pay medical expenses from your HSA tax-free! That makes using an HSA the best option for covering health costs in your retirement years.   

Another thing happens when you turn 65 that will impact how you use your HSA: You become eligible for Medicare coverage. Once you enroll in Medicare, you can’t contribute to your HSA anymore since it’s not a high-deductible health plan. But don’t worry. You can still use whatever money is in your HSA tax-free for medical expenses.

Having an HSA also means there’s no minimum distribution. You can keep money in an HSA as long as you like.

Which HSA Investment Options Should You Choose?

Good question. There’s no need to get fancy when it comes to investing your HSA funds.

Your provider will give you several HSA investment options to choose from, but we want you to keep it simple. Look for good growth stock mutual funds and spread your HSA investment across four categories: growth, growth and income, aggressive growth and international.

There are many ways to invest with an HSA, so make sure you talk with an investment pro to choose your HSA investments wisely.

How Much Should You Contribute to an HSA?

Now, just like with a 401(k) or an IRA, there’s a limit to how much money you can put into an HSA each year. For 2024, individuals can save up to $4,150 in their HSA (those with family coverage can contribute up to $8,300). If you’re age 55 or older, you can save an extra $1,000 each year to play catch-up.2

How much money should you put into an HSA each year? That depends on where you are in your financial journey.

A good goal is to save enough money in your HSA account to cover your annual deductible each year. To help you get there, some employers who offer HSA-qualified health plans will match your HSA contributions up to a certain amount.(3) If that match is available to you, that’s a great place to start. It’s free money!

And if you can find a way to cash flow your medical expenses without diving into your HSA, that’s even better. That way, you can pile cash into your account and enjoy some of that tax-free growth we talked about earlier.

Beyond that, if you’re healthy and you’ve reached the point you feel ready to invest more than 15% of your income into retirement, an HSA is a good place to put some extra cash.

There is one thing you need to remember about an HSA: In order to put money into an HSA, you must be enrolled in a high-deductible health plan.

And don’t start putting too much extra money into your HSA for retirement purposes before you’ve taken care of basic Baby Steps like saving for college and paying off the house. First thing’s first!

How to get an HSA

Now that you know what an HSA is and how much it can do for you financially, you might be wondering what the best way to get one is. Well, like we said above, the first step to opening an HSA account is to get an HSA-qualified HDHP (high-deductible health plan). But we've thrown a lot at you, and if you have questions about any of this stuff, don't worry—there are people who can help.

Our RamseyTrusted partner Health Trust Financial has a team of the best health insurance experts to guide you through your insurance options. These independent agents have the heart of a teacher and will help you find which HDHP is right for you.


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