Our founder Jorge Newbery recently wrote about Health Savings Accounts (HSA), which are special tax-advantaged savings or investment vehicles meant to help pay for medical expenses. The story was suggested by an AHP investor, Tim Shively, a pediatric anesthesiologist who currently resides in Hawaii.
HSAs have been around since 2003, when President Bush signed the Medicare Prescription Drug, Improvement, and Modernization Act into law. There’s been a lot of buzz about them in recent years, no doubt because of the national debate around healthcare.
As the Republican-controlled legislature tries to revamp America’s broken healthcare system, they have made it clear that they will be looking to HSAs as a vehicle to provide care to many Americans.
How HSAs work is pretty simple: if you qualify, you put money in, either pre-tax through your employer or tax-deductible when made as an individual contribution. You can then use the funds to pay for medical needs including dental, vision, and medication (with a prescription). Until the funds are utilized, interest or returns accrue tax-deferred, and money withdrawn to pay for qualified medical expenses remains completely, 100% tax-free.
It’s the ‘returns’ part that concerns us. Because this is a termed a Health Savings Account, many do not realize that the funds do not need to remain in a savings account at a bank. Rather, the monies can be invested in stocks, bonds, and funds. That means your HSA could be invested in American Homeowner Preservation and accrue 12% returns* completely tax-free.
HSAs aren’t for everyone – they require a high-deductible insurance policy, and people who have a lot of medical needs may be better served by lower-deductible plans with higher premiums. But for the young and healthy with low out-of-pocket healthcare needs, investing with an HSA can be an excellent vehicle to help build a safety net for retirement, or for those unforeseen medical expenses that sooner or later happen to almost everyone.
*2015A+ has paid 12% returns to investors to date. Past performance is no guarantee of future results. Please see our 2016 audit and 2017 1-SA report for more information.
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