HSA
Personal FinanceDefinition
Health Savings Account. Only available to people enrolled in a high-deductible health plan. It is the best tax deal in the entire US tax code because it is triple tax-advantaged: you deduct contributions on your taxes, the money grows tax-free, AND withdrawals for qualifying medical expenses are tax-free.
Power move: pay current medical bills out of pocket and keep the receipts in a folder. Let the HSA invest and grow for decades. Decades later, reimburse yourself tax-free for all those old receipts. The HSA effectively becomes a bonus retirement account.
Power move: pay current medical bills out of pocket and keep the receipts in a folder. Let the HSA invest and grow for decades. Decades later, reimburse yourself tax-free for all those old receipts. The HSA effectively becomes a bonus retirement account.
Example
Max out an HSA (2024 limits: $4,150 single / $8,300 family) every year for 30 years, invested at 8%. The balance crosses $400,000. Every dollar is tax-free if spent on healthcare. Non-medical withdrawals after age 65 are taxed as regular income, just like a Traditional IRA.