Build Huge Wealth From Your Good Health With An HSA

“Get Paid” To Be Young And Healthy

When you’re young and healthy, the last thing on your mind is probably your future healthcare costs.

But what if we told you there’s a way to take advantage of your good health right now that could save you a ton of money in the future?

A Health Savings Account (HSA) is a hidden gem that combines the best of both worlds: health savings and investment potential.

You basically save a ton of money tax free while you’re at your healthiest, invest it to grow over time, and then use it tax free for medical costs whenever you need it.

In this article, we’ll break down everything you need to know about HSAs and how you can leverage them to your advantage.

What is an HSA?

An HSA is an account which you store money in while you’re at your healthiest, invest it to grow over time, and then use it tax free for medical costs whenever you need it.

It’s super smart to do when you’re young because you’ll likely not need to touch the money, allowing it to grow like crazy.

Then one day when you’re an old fart and need that blinged out walker, you can afford it.

An HSA allows you to set aside money on a pre-tax basis to pay for qualified medical expenses.

This means that every dollar you contribute to your HSA reduces your taxable income, which is already a win.

But there’s more, HSAs are what’s known as “triple tax-advantaged,” meaning your contributions, earnings, and withdrawals (for eligible expenses) are all tax-free. That’s a rare trifecta in the world of finance.

Now, to be eligible for an HSA, you need to be enrolled in a high-deductible health plan (HDHP). Here is a list of them.

These plans usually have lower premiums, which is another plus for young, healthy individuals who don’t expect to rack up a lot of medical bills.

Essentially, you’re trading off a higher deductible for lower monthly costs, and gaining the ability to open an HSA.

Once your HSA is up and running, you can use the funds to cover a wide range of medical expenses, from doctor’s visits to prescription meds, and even some OTC items.

But what makes HSAs really cool is that you’re not required to spend the money right away.

You can let it grow year after year, just like an investment account, and that’s where the real magic happens.

Why HSAs are Perfect for Young, Healthy Guys

First off, when you’re healthy, you’re not spending much on medical bills.

This means you can let your HSA funds sit and grow, instead of dipping into them constantly.

And because HSAs roll over year to year, that money stays in your account, compounding over time.

The earlier you start, the more time your money has to grow.

To illustrate how much you can contribute to an HSA and how much it can grow over time, let's run some numbers.

• Starting Contribution: $4,150 per year (2024 individual maximum contribution)
  

• Investment Growth Rate: 7% per year (a typical average for a balanced investment portfolio)
  

• Contribution Period: 20 years
  

• No Withdrawals: All contributions and earnings remain in the HSA until after the 20-year period.

After contributing $4,150 per year to your HSA for 20 years, with an average annual investment growth rate of 7%, your HSA would grow to approximately $182,040.

This total is tax-free and can be used for any qualified medical expenses in the future.

If you start contributing to an HSA in your 20s, and you don’t need to touch it for a decade or two, you’re giving your money plenty of time to build up.

And because the earnings in your HSA are tax-free, you’re not losing a chunk of your growth to Uncle Sam.

It’s like having an extra investment account, but with the added benefit of being able to use the money for medical expenses whenever you need it.

Maximizing Contributions

Now that you know why HSAs are such a great deal, let’s talk about how to get the most out of yours.

The key? Maximize your contributions.

The more you can put into your HSA, the more you’ll benefit from its triple tax advantages…and the more you’ll have to tap into when you need it.

Every year, the IRS sets a limit on how much you can contribute to an HSA. For 2024, the maximum contribution is $4,150 for an individual and $8,300 for a family.

If you’re under 55, this is your ceiling…hit it if you can.

And remember, every dollar you contribute lowers your taxable income, which can make a big difference, especially if you’re in a higher tax bracket.

But what if you can’t afford to max out your HSA right now? Start small.

Even contributing a modest amount each month adds up over time.

For example, if you contribute just $100 a month, that’s $1,200 a year, money that’s growing tax-free and ready for any future medical expenses.

As your income grows, you can gradually increase your contributions.

One smart move is to automate your contributions.

Set up a direct deposit from your paycheck into your HSA. This way, you’re consistently funding your account without even thinking about it. Plus, since it’s pre-tax, you’re saving money every time you get paid.

Another tip: if you get a bonus, tax refund, or any unexpected windfall, consider putting a chunk of it into your HSA. This is a great way to give your account a boost without feeling the pinch in your everyday budget.

Maximizing your HSA contributions is about playing the long game. The more you contribute now, the more you’ll have growing over time, and the less you’ll need to worry about healthcare costs down the road.

And once your account starts building up, you can even start thinking about investing those funds…turning your HSA into a powerful tool for wealth growth. We’ll dive into that next.

Investing Your HSA Funds

Here’s where your HSA really starts to shine…investing your funds.

Most people think of HSAs as a savings account for medical expenses, but if you’re young and healthy, it’s so much more than that. It can be a powerful investment tool, growing your money over the long haul.

Think about it…while your HSA funds are sitting there, they could be working for you, just like any other investment account.

And the best part? Any earnings you make from these investments are tax-free, as long as you use them for qualified medical expenses.

So, how do you get started? First, check with your HSA provider to see what investment options are available.

Many providers offer a range of choices, from low risk options like money market funds to more aggressive choices like stocks and mutual funds.

The key is to choose investments that align with your risk tolerance and financial goals.

If you’re new to investing, you might start with index funds or ETFs (Exchange-Traded Funds), which are generally low-cost and provide diversification across a broad market. These types of investments can help your HSA grow steadily over time without requiring a lot of active management.

The BMM Takeaway

Don’t overlook your HSA.

Start contributing as much as you can, invest those funds wisely, and let your account grow over time.

Whether you need it for medical expenses tomorrow or as a supplement to your retirement income decades from now, your HSA can be a cornerstone of a solid financial plan.

So, if you haven’t already, it’s time to take action. Open an HSA, start contributing, and watch your financial future get a little bit brighter.