3 thoughts on “What is a Health Savings Account (HSA)?

  1. We’ve had an HSA for several years. Ours currently has around 26k in it. About four years ago, we started paying all healthcare expenses out of a separate (taxable) account. This allows our HSA to grow tax free. In effect, it’s another roth IRA (only better since the money goes in pre-tax).

    We store ours at Alliant FCU. They pay one of the best rates I’ve found on HSA savings (currently 2%… which is over 3% in taxable equivalent yield).http://www.alliantcreditunion.org/depositsinvestments/healthsavings/

    Our thinking is that this will be a nice little health care earmarked nest egg for retirement.

    One other thing that’s important to realize. Currently, you’re allowed to save your healthcare receipts from previous years, and withdraw from the HSA for those receipts in future years. So… if we retire before 65, we’ll be able to withdraw a big chunk from our hsa (up to the amount we have in receipts), if we choose to. This is one thing that I suppose could change with future tax policy, but my understanding is that this is how it works today.

    To me, HSAs seem like they are even better than a Roth (since the money goes in pre-tax and it and the earnings on it are NEVER taxed). The only problem is the lack of investment options (but I’m reading where Fidelity and some brokers are beginning to allow trading in stocks and funds from within an HSA account).

  2. Incidentally, it’s pretty easy to join Alliant if you have kids. You just need to be a member of the PTA in whatever school district you’re in. As I understand it, Alliant is the public school teachers credit union.

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