June 07, 2023

3 Mistakes You’re Probably Making With Your HSA Account, #152

13 minutes

Health Savings Accounts are one of the biggest retirement planning opportunities that get overlooked. And many who have an HSA aren’t getting the most out of it. On this episode, I’m going to cover three mistakes you're probably making with HSAs that are costing you a lot of money.

You will want to hear this episode if you are interested in...

Are you investing the money in your HSA? [2:14]
Are you contributing the maximum to your HSA? [5:19]
Do you treat your HSA like a credit card? [7:53]

The biggest HSA mistake

If you’re on a high-deductible health insurance plan, you most likely have or are eligible for a Health Savings Account (HSA). They are one of my favorite ways to save for retirement because they are the only triple tax-free savings account in the United States. Meaning, you receive a deduction when you put the money in, the money grows tax-deferred, and then when you take the money out for health-related costs, it's also tax-free. If you’ve had an HSA for a while, the contributions from you and your employer are starting to build up. Unfortunately, I’m finding that a lot of people aren’t investing that money for tax-deferred growth.

If you’re not investing your HSA money, then chances are it’s not earning any interest either. At the very least, you should investigate if your HSA has a money market option to invest the funds into as a low-risk option to start earning interest. Right now, Fidelity, Charles Schwab, and Vanguard have money market accounts paying close to or right at 5%. Do a little digging, and don’t leave money on the table!

Using your HSA to the max

Another mistake I see people make with HSAs is not contributing the maximum amount. In 2023, the maximum contribution is $3,850 for a single person and $7,750 for a family. Those limits are combined between what you and your employer contribute to the HSA account annually. If you find out that you haven’t contributed the maximum amount, you have until the tax filing deadline in April to make additional contributions and hit the limit.

Finally, one of the biggest temptations with HSA accounts is to use it like a credit card. Swiping it every time you go to the doctor is not how to get the most out of a Health Savings Account. The best method is to build up your HSA savings and invest the money for tax-deferred growth. While you wait, keep track of all qualifying medical expenses and pay for them using a regular savings account or credit card paid off before interest. Then down the road, when your contributions have likely doubled, reimburse yourself tax-free with the gains.

Resources Mentioned