Unlocking the Hidden Potential of Health Savings Accounts (HSAs)

Health savings accounts (HSAs) offer significant tax advantages, but most account holders fail to maximize their benefits by not investing their assets. Only 19% of HSA participants invest their funds, while the rest treat their accounts like bank accounts. Financial experts recommend using HSAs as retirement accounts to cover future health costs. HSAs have a triple tax advantage, with tax-free contributions, investment growth, and withdrawals for eligible medical expenses. The optimal strategy is to hold cash equal to the annual insurance deductible in the account and invest the remainder. However, many people cannot afford to pay current medical bills out of pocket, leading them to continually draw from their HSAs instead of investing. Additionally, about 40% of employers do not offer HSA investment options, but employees can open HSA accounts elsewhere to access investments.