The is the most tax-advantaged account in existence. It's not just for medical expenses—it's a stealth retirement account.
Triple Tax Advantage
| Benefit | How It Works |
|---|---|
| Tax-free contributions | Reduces your taxable income |
| Tax-free growth | Investments grow without taxes |
| Tax-free withdrawals | For qualified medical expenses |
No other account offers ALL THREE. Not 401ks, not Roth IRAs, nothing.
Pro Tip
The HSA is the only account that's tax-free going in, growing, AND coming out. It's absurdly powerful.
Who Can Use an HSA?
You need a High- Health Plan (HDHP):
- 2024: Deductible of at least $1,600 (individual) or $3,200 (family)
- Max out-of-pocket of $8,050 (individual) or $16,100 (family)
2024 HSA Contribution Limits:
- Individual: $4,150
- Family: $8,300
- Age 55+ catch-up: +$1,000
The Basic Strategy
Level 1: Use it for medical expenses
- Contribute to your HSA ()
- Pay medical bills from HSA
- Save on taxes
Good, but you're leaving money on the table.
The Advanced Strategy
Level 2: Use it as a stealth retirement account
- Contribute the maximum to your HSA
- Invest the money (stocks, ETFs)
- Pay medical expenses out of pocket (keep receipts!)
- Let the HSA grow tax-free for decades
- Reimburse yourself later—or use it in retirement
"I've been saving receipts for 10 years. My HSA has grown to $80,000. I can reimburse myself tax-free anytime, or use it for medical expenses in retirement."
Why This Works
There's no time limit on reimbursements. You can:
- Pay for a medical bill today with cash
- Save the receipt
- Reimburse yourself 20 years later, tax-free
Meanwhile, your HSA investments compound.
HSA Investment Growth
| Annual Contribution | Years | Total Contributed | Value at 7% |
|---|---|---|---|
| $4,000 | 10 | $40,000 | $55,000 |
| $4,000 | 20 | $80,000 | $165,000 |
| $4,000 | 30 | $120,000 | $380,000 |
That $380,000 can be withdrawn TAX-FREE for medical expenses—and you'll have plenty of those in retirement.
After Age 65
After 65, the HSA becomes even more flexible:
- Medical expenses: still tax-free
- Non-medical expenses: taxed like a (no penalty)
It's basically a better 401k with added medical benefits.
Common HSA Mistakes
Avoid This
- Not investing HSA funds (leaving cash earning nothing)
- Using HSA for small expenses instead of letting it grow
- Not maxing contributions if you can afford to
- Losing receipts (use an app to track them!)
- Choosing the wrong HSA provider (look for low fees, good investments)
Do This
- Max out your HSA before extra 401k contributions (after the match)
- Invest in low-cost
- Save every medical receipt (digitally)
- Think of it as a 30+ year investment
Quick Win
If you have an HDHP, open an HSA immediately if you haven't. Many employers contribute free money to HSAs too—don't miss it.