Maximize Your Earnings With a Health Savings Account

Invest Those HSA Contributions! (Updated for 2016)

Choose a Health Savings Account and a High Deductible Health Plan. That way you'll have the most powerful investing vehicle on the planet at your disposal. A Health Savings Account (HSA) is like a 401(k) or IRA on steroids. Why? You get triple tax savings with an HSA. If you choose to invest your contributions, returns are amplified by that tax savings. That's why it's the first place I invest each and every year.

Everything else being equal, a Health Savings Account will yield you a higher after-tax rate of return than any account you can think of. No other tax advantaged account gives you all these benefits:
- Tax free earnings (if qualified)
- Tax deduction on your yearly contribution
- Tax free withdrawal of principle (if qualified)
- Free from payroll taxes (if contribution made by payroll deduction)
- Tax free cash for Medicare premiums
- Tax free cash for spouse and dependent(s) medical care
- Substitute for high-priced long term care insurance

A High Deductible Health Plan?

Enrolling in a High Deductible Health plan is a requirement for opening up and investing in a Health Savings Account. Only in the years that you choose a High Deductible Health Plan will you be able to contribute and invest in your Health Savings Account and enjoy all of those benefits.

This strategy isn’t for everyone. A high deductible health plan means your share of the medical insurance premium will be much lower than other plans, but your out-of-pocket costs will be higher if you need care. If you see the doctor pretty often, and/or take numerous medications, or expect your healthcare costs for the year to be high, you may want to consider a lower deductible plan. Medical costs (deductible, copayment, and coinsurance) will be lower than with the high deductible plans when you need care and may be more economical even though you pay a higher premium.

However, if you’re relatively healthy, willing to take a more proactive role in your healthcare, and make enough to pay some or all of your medical expenses out-of-pocket, you just might get as excited about this strategy as I am.

Invest Most or All of Those Contributions

Not only do unused contributions to your HSA roll forward to an unlimited number of future years, some HSA custodians allow you to invest your HSA contributions. The idea is to leave all or most of those HSA contributions and accumulated earnings alone and invest them for the long term. If you're lucky enough to have an employer contribution, invest those monies as well. Pay most or all of your medical expenses out-of-pocket throughout your working years, and let the most powerful of all the tax advantaged accounts compound and grow. If done right, you’ll have some serious bank come retirement.

Say you’re married and 35 years old. If you start saving and investing the maximum contribution to your HSA this year, you’d accumulate 1.4 million dollars by your retirement date. That’s assuming an 8% yearly compounded return, a retirement age of 67, and the maximum family contribution ($6,750 for 2016, and estimated 3% yearly increases thereafter) is made at the beginning of each year.

Strengthen Your Financial Future

It's one of the smartest investing decisions you can make. Maximize Your Earnings with a Health Savings Account has all the details, from picking a high deductible health plan and HSA to devising an investment plan.

Scroll to the top of the page and click on the "Buy" button and get started right away.