Did You know You Can Invest Your Health Savings Account (HSA)?

Health Savings Account or HSA are tax advantaged accounts that let you save money for healthcare costs and they can be used to cover out-of-pocket costs at anytime before or during retirement. Many individuals and families opt for this form of saving money for healthcare costs because the premiums are usually low due to the high deductible nature of their health plans—hence why they’re usually associated with “high-deductible” plans. The employee contributes a small amount, usually as low as $20 per pay-period and many employers contribute per pay-period or even quarterly.

Most of us have been told to max out our 401 (k), which is great advice but no one seems to talk about increasing our HSA contribution—and not only contributing more but taking it a step further and investing it so it grows faster. Your HSA dollars are not taxed as long as they’re used for healthcare costs. Using your HSA dollars for retirement healthcare costs is the best way to save for retirement.

HSA’s are triple tax advantaged, meaning that it is similar to a 401 (k) or an IRA but has more tax advantages and the dollars from your payroll deductions go into your HSA account without being taxed, it grows without capital gains tax and withdrawals for medical expenses are tax-free. Why plan to use your 401 (k) or IRA for healthcare costs in retirement when you’ll be subject to taxes on your withdrawals from those plans? This is why investing your HSA and letting it grow over time is far more superior than the traditional retirement plans.

Sounds great but how do you invest it?, you might ask. You have the option to buy and sell stocks of your favorite companies with your HSA dollars just as if it were in a brokerage account—and if you’re new to the stock market or don’t know where to begin when it comes to picking stocks, you can join the exclusive Newbee Club where you get high value stocks right in your inbox each month. Also, see this previous post about how to start investing in a brokerage account with your first $100.