More Than Medical: Turn your HSA into a Wealth-Building Tool

Welcome to the Triple-Tax Benefit of a Health Savings Account "HSA"!

What is an HSA?

An HSA is an account with unique benefits: 1—it allows you to save pre-tax; 2—you can grow your investments tax-free; and 3—you can withdraw funds for healthcare expenses—all without paying taxes. For high earners looking for smart, tax-efficient ways to save, an HSA can be a game-changer.

Understanding the Triple Tax Benefit

For 2024, the IRS allows contributions up to $4,150 for individuals and $8,300 for families, with an additional $1,000 allowed for those over 55. High earners can leverage HSAs to shield more of their income from taxes while planning for healthcare needs.

Strategies to Maximize Your HSA Benefits

?HSAs offer unique opportunities, especially if you think of the account as more than just a healthcare fund.

Here’s how you can stretch the HSA’s value:

• Max Out Contributions Every Year

For those in higher tax brackets, maxing out HSA contributions can generate substantial tax savings. For example, if you're in a 35% bracket, contributing the family maximum of $8,300 means saving over $2,900 in taxes—a way to prepay for future medical costs while saving on taxes today.

• Invest for Long-Term Growth

Many HSA providers allow you to invest HSA funds in options like mutual funds or ETFs. By investing instead of letting the funds sit in cash, you can grow your HSA over time, similar to a retirement account. Consider the difference between letting $10,000 sit in cash versus investing it for 20 years—investment growth can make a major difference in your future healthcare fund.?

Example: Sarah, a 45-year-old executive, contributes the maximum to her HSA annually and invests in a diversified mix of ETFs or Mutual Funds. After 15 years, she’s built a tax-free healthcare fund of over $100,000, ready to cover Medicare premiums, dental expenses, and other costs in retirement.

• Delay Reimbursements for Tax-Free Growth

If possible, consider paying for medical expenses out-of-pocket now, saving receipts, and letting your HSA grow. The IRS doesn’t require a time limit on withdrawals, so you can reimburse yourself years down the road and allow your balance to grow tax-free.

Example: Michael, a high-earning attorney, spends $1,500 on medical expenses each year, paying out-of-pocket while saving receipts. Meanwhile, his HSA grows through regular contributions and investment gains. At retirement, Michael has a sizable balance to cover healthcare costs or to reimburse himself for past expenses.

• Utilize for Retirement Expenses

After age 65, you can use HSA funds for non-medical expenses, with only regular income tax applied (no penalty). This flexibility makes the HSA a great backup retirement fund for high-earners looking to cover unexpected costs.

Example: When her HSA reaches $150,000, Sarah decides to use it as an emergency fund for retirement. She knows that if healthcare or other costs arise, she has a tax-free or tax-advantaged account ready.

?Why HSAs Are Essential for High Earners

An HSA is more than just a healthcare account—it’s also a powerful way to build wealth thanks to its triple tax benefit. You get a tax break when you contribute; your money grows tax-free, and you can withdraw it for medical expenses without paying taxes.

This powerful account supports both your short-term needs and long-term financial goals.

Consult with a qualified financial advisor—especially a CFP Board —CERTIFIED FINANCIAL PLANNER? Professional—to ensure you’re maximizing your HSA contributions, investing strategically, and using reimbursements effectively.

PDF from the IRS on HSAs and other Tax-Favored Health Plans: https://www.irs.gov/publications/p969