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:
- max out your HSA contributions (some employers even include a match!)
- invest HSA in low cost index funds
- pay medical expenses out of pocket, save the receipt
- let your HSA investments grow tax free
- later when you're ready to withdraw, use the saved receipts for tax-free withdrawals
- for the remainder amount in your HSA, withdrawals are taxed as income
HSA - The Ultimate Retirement Account on Mad Fientist goes over all the advantages of an HSA.
← Prev / Home / Next →
Max Out Your 401k Take advantage of employer match and tax savings
Max Out Your Roth IRA Save additional money in an IRA (via a backdoor)
Use Low Cost Index Funds Save on fees and diversify your nest egg
How Do You Withdraw Savings? After retiring, in what order should you withdraw from your accounts?