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NerdWallet

Nov. 9, 2021, 1:36 p.m. EST

Your HSA is not a savings account, it’s an investment account, and you can turn it into a serious nest egg

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Alana Benson

This is reprinted by permission from

It’s hard enough to motivate yourself to save for retirement, but saving for your future medical costs? How responsible does a person have to be?

Thankfully,  health savings accounts , or HSAs, are tools that make saving for future health-related expenses less painful. These accounts allow you to save money, but they also allow you to invest. With open enrollment coming up, an HSA might be something to consider.

“One cool trick is to invest the money in an HSA just like you  invest in your IRA ,” Victor Medina, a certified financial planner and founder of Palante Wealth Advisors in Pennington, New Jersey, said in an email interview.

Investing through an HSA

Think of your HSA as a home for your medical money. Just like a brokerage account or an IRA, you’ll need to put money into the account before you buy investments. Then, after you fund the account, you can start investing.

Some HSAs offer tools that help you choose your investments and provide automatic rebalancing, so your portfolio stays within your preferred allocation. Others allow you to select from specific investments, such as stocks, bonds, mutual funds and ETFs.

Whatever method you choose, investing your money through an HSA will likely allow it to grow faster than by saving alone. However, if your HSA is offered through an employer, you may have fewer options for how you can invest your money.

Take advantage of the triple tax benefit

Once you start investing through your HSA, you can begin reaping the rewards — one of the biggest being the triple tax benefit , Medina said.

“Another cool trick is that the accounts are triple tax-advantaged, which means contributions are tax-deductible, growth is tax-free and the distributions are tax-free when used for qualified medical expenses. In addition, unlike a 401(k) or IRA, you don’t have to deduct money from the account at a certain age.”

If you’re investing over the long term in your HSA, that tax-free growth can make a significant difference in the amount of money you keep.

Also read: There’s one giant thing gig workers can do to save for retirement — but most aren’t

Prepare for long-term care

According to data from insurance company Genworth Financial, the median annual cost of an in-home health aide in 2020 was $54,912; a private room in a nursing home cost about $105,850 a year. Thinking about getting older can be challenging for many reasons, not least of all because of the financial burden that can accompany aging. But investing in an HSA can allow you to prepare for those expenses in advance.

If you invested $200 in an HSA every month starting when you were 30 years old and earned the stock market’s standard 10% annual return, by the time you were 70, you could have almost $1.3 million — a significant nest egg for your golden years.

And while it may be tempting to use your HSA money along the way, Faron Daugs, a CFP and CEO of Harrison Wallace Financial Group in Libertyville, Illinois, often advises against that.

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