HSA Tools: Avoiding Inflation, Catch-Up Contributions, and the Receipt Loophole

Health Savings Accounts (HSAs) offer incredible tax advantages that can significantly boost your retirement savings. However, common mistakes can hinder their potential growth. This blog post will focus on three critical strategies to help you get the most out of your HSA: avoiding the impact of inflation on idle cash, maximizing catch-up contributions for couples over 55, and leveraging the receipt loophole.

The Hidden Cost of Inflation on Idle HSA Cash

The Problem: Many HSA owners keep their funds in cash, fearing unexpected medical expenses. While it seems safe, this approach significantly diminishes your HSA's potential growth.

The Impact of Inflation: Keeping your HSA funds in cash means you are not taking advantage of tax-free growth. Worse, inflation—especially medical care inflation, which often rises faster than general inflation—erodes the value of your money over time. Even if you invest in a money market account to match normal inflation, it won't keep up with the higher rate of medical care inflation.

The Solution: Invest your HSA funds in a diversified portfolio. Stocks, in particular, have historically outperformed cash and bonds over the long term. By investing, you not only protect your funds from inflation but also allow them to grow tax-free, maximizing the long-term value of your HSA.

The HealthyWealth Advantage: Our platform is the only investment-first HSA platform - we make investing easy with a design that focuses on your ability to customize a long-term investment strategy.

Maximize Catch-Up Contributions for Couples Over 55

The Problem: Couples over 55 often miss out on additional contributions by maintaining only one HSA.

The Opportunity: The IRS allows individuals over 55 to make an additional $1,000 catch-up contribution annually. If a couple only has one HSA, they are limited to one catch-up contribution.

The Solution: Open separate HSAs for each spouse. This way, both can make the $1,000 catch-up contribution, effectively doubling the extra tax-advantaged savings each year. This strategy can significantly enhance your HSA’s growth potential, leading to greater tax deductions and a larger retirement fund.

The HealthyWealth Advantage: Our AI tool, the HealthyWealth Advisor, will offer strategies based on your life situation and events. We'll also alert you to age-related strategies automatically.

The Power of the Receipt Loophole

The Problem: Many HSA owners don't utilize the option to reimburse themselves for past medical expenses.

The Receipt Loophole: From the time you start an HSA, any qualified medical expense you incur can be reimbursed at any point in the future. This means you can pay for medical expenses out of pocket, save the receipts, and allow your HSA funds to continue growing tax-free.

The Strategy: Save all receipts for medical expenses and reimburse yourself later. For instance, if you incur a $4,000 medical expense today and pay it out of pocket, you can keep that receipt. Years down the line, when your HSA has grown substantially, you can withdraw $4,000 from your HSA tax-free by reimbursing yourself for that past expense. This allows your HSA funds to remain invested longer, benefiting from compound growth.

The HealthyWealth Advantage: Our Receipt Miner tool will collect, tabulate and manage your receipts from e-mail, purchases via the HealthyWealth Store and credit card purchases for all HSA-reimbursable products and services. This tabulation will be presented in a running total we call ReadyCash - which tells you how much you can withdraw, tax and penalty-free, from your account at any time on the strength of those stored receipts.

By avoiding the impact of inflation on idle cash, maximizing catch-up contributions for couples over 55, and leveraging the receipt loophole, you can significantly enhance the value of your HSA. These strategies ensure your HSA funds grow more efficiently, providing a more substantial tax-advantaged asset for your retirement. Take proactive steps today to optimize your HSA and secure a financially healthy future.