Health Savings Accounts (HSAs) are important for long-term financial planning and investing, not just for saving money for immediate medical costs.
As we move into 2024, it’s important to know how to make the most of your HSA for future investments and reimbursements. This post will go into detail about how to make the most of your HSA, with a focus on the new contribution limits for 2024.
The Long-Term Reimbursement Strategy
One special thing about an HSA is that it lets you get tax-free reimbursement for approved medical costs that happened after the account was set up, and claims never expire.
This means you can pay today and then get your money back at any time in the future, maybe when you retire and your medical costs are high. In fact, the average retired couple in 2024 might spend more than $350,000 on health care.
Benefits of Delayed Reimbursement
– Tax-Free Growth:
Contributions to HSA accounts are Tax Deductible, the growth of your HSA account is tax-free and also when you spend the money on qualified medical expenses the disbursement of funds is also tax-free.
It is the only tax investment vehicle that is completely tax free for qualified medical expenses.
The ideal strategy is to contribute the funds into the HSA, let the funds grow as long as you can. In the meantime, you pay for all the medical expenses out of pocket, but you keep the receipts.
When your HSA account has grown in value, you can submit your receipts for reimbursement, so you get the maximum benefit from the HSA account.
Record Keeping for Reimbursement
To use this approach, make sure you keep all of your medical records and receipts in a safe place, preferably with digital copies, so you can back up your claims in the future.
2024 HSA Limits on Contributions
The IRS states that a single person can put $4,150 into an HSA in 2024, and a family can put $8,300 into an HSA. People aged 55 and up can make an extra $1,000 payment to catch up.
Over time, these payments can add up to a large amount that won’t be taxed and can be used for future medical needs.
Self-Directed Investments in an HSA
Not as many people know this, but you can invest the money in different ways with an HSA, just like with an IRA.
Why Self-directing Your HSA is a Good Idea
Spread out your investments to see if you can get better returns.
– Choice of Investments:
You can put your HSA money in anything from stocks, real estate, bitcoin, gold and private equity.
– Higher Returns:
Investing your HSA can lead to higher returns, which means you’ll have more money in the future.
Self-Directed HSA Considerations
– Risk Tolerance:
Always think about how comfortable you are with the risk of investments. This is not financial advice, so please speak to your financial advisor about each investment.
– Costs and Fees:
Take into account any fees that come with self-directed investing.
– Rules and Laws From the IRS:
Follow all of the IRS’s rules for HSAs and investments.
Putting Qualified Expenses Into Your HSA
Don’t forget that HSAs can help pay for many things, like dental care, preventative health programs, and alternative treatments.
It’s smart to have an HSA, not just for now but also as a foundation for your long-term financial health.
In 2024, your HSA will be a flexible way to save money that can help you plan for your health and retirement in big ways. You can get the most out of your HSA if you use the right tactics, such as planning for long-term reimbursement and investing on your own.
Talk to a financial and tax advisor about how to adapt these methods to your unique circumstances, and make sure you are fully utilizing the benefits of your HSA.