Why the “savings” in health savings accounts?

I have had a Health Savings Account for 15 years. About 10 years ago I was doing our taxes and spent a lot of time searching for a money market statement I needed. The small money market fund was our “emergency” fund. If an appliance broke or home repairs were needed, that was fund we used to take care of the expense. While searching for the statement the thought occurred to me that if I spent that money on a health expense and kept the receipt, it would be like transferring it to my HSA. I could take it out anytime for an emergency but it would be earning interest tax-free in the meantime. So that is exactly what we did.

A Health Savings Account (HSA) is an incredible savings vehicle. No tax on the contribution, no tax on the growth (interest/investing), and no tax when paid out for qualified expenses.

If I buy mutual funds outside my qualified retirement plan I have to pay capital gains when I sell. The more money I make on growth the more tax I pay. That’s not true with an HSA. I will never pay capital gains on my HSA investments.

Additionally, when I’m 65 and want to spend my HSA on a vacation or new boat, I will pay income tax just as if I take the money out of my retirement plan. However, if I had saved receipts for healthcare expenses (medical, dental, vision, and hearing) I can take that amount out tax free. Since I paid for those expenses with after-tax money and saved the receipts, any amount I take out, up to the amount of the receipt total, is tax free.

Put your savings in your HSA, it can be one of the best vehicles for long-term saving.