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HealthSavings Blog

Think Inside the Shoebox

You might think of a shoebox as just a trusty place to keep your sneakers, but when paired with a health savings account (HSA), it offers the very best way to maximize your retirement savings dollars.

Remember that HSAs have a triple tax benefit: contributions are pre-tax or tax-deductible, interest earned is tax-free, and withdrawals for qualified medical expenses are tax-free as well. Also, your HSA belongs to you, so you keep it if you switch jobs or retire.

Many people treat their HSAs like an FSA and just use it to pay for their current medical expenses. However, you can also invest those funds for long-term tax-free growth and treat your HSA like a medical 401(k). That way, you keep the maximum amount of funds in your HSA where they’ll gain the maximum interest.

If you choose to invest your HSA, you’ll want to pay for medical expenses out-of-pocket to avoid dipping into HSA funds. And as you pay for those medical expenses, make sure to save your receipts in the proverbial shoebox or app.

Here’s why: there’s no time limit on when you can reimburse yourself for qualified medical expenses. That means you can reimburse yourself tax-free years or decades later once your HSA funds have had time to grow.

And here’s the best part, you can use those reimbursed dollars from your HSA on anything you want. Boat, vacation, whatever you like … it doesn’t have to be medical at all. It’s like pulling money out of your 401(k) and not having to pay taxes on it.

An HSA isn’t just a flexible way to pay for current medical expenses; it’s a powerful piece of a comprehensive retirement strategy. Ready to begin investing? Click the button below to get started.

 

Author: James Denison