The following infographic, “A Guide to Investing Your HSA Account for Growth”, provides an overview on Health Savings Account (HSA) basics.
Read below to find out why you should use your HSA for retirement, investment strategies, and more.
Guide To Investing Your HSA Account for Growth
Health Savings Accounts (HSAs) are more than just a tax-advantaged tool for paying medical expenses. They can also help you save for retirement.
Why Use an HSA for Retirement?
HSAs offer a triple tax advantage:
- All contributions to your HSA account are tax deductible
- All funds in your account grow tax-free – including interest, dividends or capital gains
- Withdrawals to pay for qualified medical expenses are tax-free
- HSA funds can be invested the same as a 401k or IRA account
- Withdrawals for qualified medical expenses are always tax-free, regardless of your age
- Must be enrolled in an HDHP to contribute, and not enrolled in Medicare
- After age 65 you can use withdrawals for any expense, although they will be taxed at your normal rate
- You own your HSA account, and take it with you when you change jobs or retire
Annual Contribution Limits
- For 2022
- Self: $3,650
- Family: $7,300
- For 2023
- Self: $3,850
- Family: $7,750
- “Catch-up” contributions (age 55 or older): $1,000
HSA Investment Strategies
- Treat your HSA like an investment account; don’t spend the funds unless needed for medical expenses
- Max out your investment by making the full annual contribution each year (including the extra $1,000 catch-up after age 55)
- Take full advantage of any employer matching contributions
- Invest unspent funds wisely, using sound diversification and risk strategies
How Much Could You End Up With?
With maximum annual contributions and minimal medical expense withdrawals, you can build a hefty nest egg to complement your regular retirement plan.
- Start your HSA account at age 26
- Make the maximum family coverage contribution every year until age 65, including catch-up contributions
- Earn an average annual return of 8% by investing in the stock market
- Do not make any withdrawals for medical expenses
- Pay no fees for your plan
By retirement at age 65, your HSA would be worth more than $1.9 million!
Even if you only contribute $3,000 a year for 20 years, don’t withdraw any funds and the money grows at 8%, you will still end up with $148,000 – a nice addition to anyone’s retirement.
Why an HSA is Superior to an IRA/401k Plan
- Once you begin withdrawing funds from a 401k or IRA, you pay income tax regardless of how the funds are spent.
- Unlike 401(k)s or IRAs, an HSA does not require you to begin making withdrawals at a certain age.
- The funds can stay in your HSA account (earning interest or investment income) as long as you want.
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