Max Out Your HSA

A Health Savings Account (HSA) is a tax-advantaged investment account that's usually combined with a High Deductible Health Plan. As of 2020, the contribution limit to an HSA is $3,550 for individuals and $7,100 for a family.

HSAs are triple tax advantaged:

• contributions can be made pre-taxed
• investment earnings grow without tax
• qualifying medical withdrawals can be made tax-free (other withdrawals will be taxed as income)

There's no time limit on withdrawals for medical expenses. This means you can save a receipt for years, letting your investments grow tax free, before reimbursing yourself. To maximize your HSA advantages:

1. max out your HSA contributions (some employers even include a match!)
2. invest HSA in low cost index funds
3. pay medical expenses out of pocket, save the receipt
4. let your HSA investments grow tax free
5. later when you're ready to withdraw, use the saved receipts for tax-free withdrawals
6. for the remainder amount in your HSA, withdrawals are taxed as income

Further Reading

HSA - The Ultimate Retirement Account on Mad Fientist goes over all the advantages of an HSA.

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