IF YOUR BRAIN switches off every time you hear about health savings accounts (HSAs), you are not alone. Between the complex reimbursement rules and the clunky payment portals, many people skip the stress and headache of HSAs altogether. But I’m here to tell you that HSAs are worth it—maybe just not in the way that you’re used to.
Juuuust in case you aren’t familiar, a health saving account is a hybrid that blends medical expense coverage with a 401(k)-style retirement account. These accounts were created back in 2004, and were paired with high-deductible health plans that put more of the spending onus on the employee. To help soften the blow of more expenses, some employers kick in a couple hundred to several thousand dollars a year. Another bonus: That money rolls over each year, unlike flexible spending accounts, which have a use-it-or-lose-it rule.
And if all that is making you feel like you’re sitting at company benefits meeting, let me introduce you to Andrew Giancola, host of The Personal Finance Podcast. Giancola calls HSAs a “super retirement account” that wields great powers when it comes to taxes.
Namely that you pay zero income tax on the money you contribute to your HSAs, the growth of that money as it sits in the account, and when you withdraw that money for legitimate medical expenses. Over time, these three benefits can add up to thousands of dollars in tax savings.
Yes, you can turn your dinky company HSA into a powerful retirement account. If you’re lucky, health-wise, and you don’t need the money for medical expenses right away, you can invest it—just like you would in an IRA or 401(k). And, because there’s no time limit on when you have to submit receipts for reimbursement of medical expenses, you can save receipts for medical