tax-deductible and allows you to reduce the amount you pay in federal income taxes. You can keep more of your money and use it towards your wealth-building goals.
However, there are limits on how much money you can save in your HSA account every year. For 2022, you can contribute up to $3,550 (individuals), $7,100 (family coverage), and an additional $1,000 “catch-up” contribution if you’re 55 or older.
2. Tax-Deferred Earnings
As long as you have money in your health savings account, you can invest it. When your money can work for you, wealth-building is in progress. You can grow the money in your health savings account by investing in stocks, bonds, mutual funds, ETFs, and other assets. Check with HSA administrators to learn more about your investment options. The money that you accumulate year to year has the opportunity to grow tax-deferred.
3. Tax-Free Withdrawals
If you’re looking for tax-free money during retirement, having an HSA is a great way to meet this goal. Money in your HSA can be withdrawn tax-free as long as you use it for qualified medical expenses.
The key to building wealth in your HSA account is to have as much money in your account as possible that is invested and growing tax-free.
Some people choose to pay for their medical expenses out of pocket and receive reimbursement from their health savings account during that year. But you are not required to reimburse yourself for medical expenses in the year that you had those medical expenses. Knowing this allows you to be strategic about building wealth in your HSA.
You can withdraw funds from your HSA at any time to pay for qualified medical expenses so the trick is to delay your withdrawal of funds. Pay for your expenses out of pocket now and get reimbursed later for it so you can let the money in your health savings account grow.
For example, if you keep great records, you’ll be able to receive an HSA reimbursement 20 years later for qualified medical expenses that you incurred today. That means you’ll have the money in your account growing for a longer period of time!
Charlene Rhinehart is an award-winning speaker, consultant, and coach who uses digital technologies to share inspiring stories with the world. She helps others live their best life as a Financial Coach at Wealthy Women Daily, Founder of the Career Goddess Academy, and Travel & Lifestyle Writer at BlackCoupleTravels.com. Charlene recently published her first book, “Dividends Are a Queen’s Best Friend” on Amazon.