Health Savings Accounts (HSAs) offer far more than security for health expenses. You get a triple crown of savings, plus an additional bonus:
First Crown – You receive a tax deduction for the contribution, like a traditional IRA.
Second Crown – The savings account grows tax free, like a Roth IRA
Third Crown – You can take distributions from the health savings account tax free, as long as they were used for qualified medical expenses. The qualified medical expenses can be incurred any time after the HSA was set up. They can be accumulated over years and paid in a future year.
The funds in your health savings account can be invested in mutual funds or set up as a self-directed fund for you to invest in alternative investments outside of the stock market. These investments can be in real estate, precious metals, cryptocurrency, or private businesses.
My rule of thumb is to keep a reasonable amount in cash in the HSA so you do not have to sell your investments to reimburse yourself for qualified medical expenses. I personally have set a minimum cash balance in my family HSA and invest anything over that for the long haul. If my cash falls below the minimum cash balance, I will replenish it with any current year HSA contributions until it is back to the minimum amount and then continue investing any additional contributions.
The bonus, fourth crown, of your triple crown of savings is there are no earnings phaseouts to contribute to your HSA like there are with the IRA or Roth. Everyone is allowed to contribute the maximum amount each year to their own HSA.
But wait, there’s more! Once you reach age 65, you can make withdrawals from your HSA for non-medical purposes. This means your HSA can then be treated like a Traditional IRA.
You will need to have a high-deductible health care insurance in order to contribute to your HSA. If you are diligent and contribute the maximum amount each tax year, the fund balance can grow rather quickly.
Contact your Tax Strategist today: Reducing Taxes. Increasing Wealth.
Please understand that I cannot give you specific investment or legal advice, just guidance in these areas, and you should consult a professional licensed in these areas for specific advice before making any final decisions.
