Spend or Save Your HSA?

Become a Saver and Invest Your HSA Funds for Long-Term Growth

When it comes to a health savings account, what’s the ideal way to take advantage of the “savings” feature? It’s a common, and extremely important, question that cuts to the core of what HSAs were fundamentally designed for. So, do you save your HSA funds for the future or use them immediately for your qualified medical expenses?

The short answer is—there’s no one “right” answer.

Probably not what you wanted to hear, but honestly, the answer differs based on your specific financial situation. But if you can afford to save your HSA funds by paying out of pocket now to maximize your investment potential and long-term account growth, you’ll be uniquely positioned to enjoy a bright financial future. And who wouldn’t want that?

So the bigger question is, how do you become an HSA “saver?” It all starts with a mindset shift and a solid strategy.

Your HSA is More than a 12-Month Account

With an HSA, you have the unique opportunity to plan for today while saving for tomorrow—and for years to come.

But even if you’re financially able, it’s not always easy to focus on future planning when you’re incurring expenses right now. In fact, when that’s the case, it’s easy (and understandable) to look at your HSA as a basic transactional account ideal for paying for your immediate healthcare expenses. You simply use your HSA as a 12-month savings account that you spend down each year on your medical expenses.

While there’s still merit to any HSA usage, the 12-month spenddown approach can end up limiting the overall benefits of long-term, tax-free growth. An HSA can be seen as another retirement fund, with the exception that it can be used without an age requirement if needed.

This is where the mindset shift comes into play. Shift your perspective and view your HSA as the flexible, tax-advantaged, long-term financial tool that it is—one that can not only help you fund your current and future healthcare expenses, but also serve as a long-term investment vehicle to build you real wealth.

Pay Out of Pocket Now, Reap the Financial Rewards Later

With your mindset shifted, it’s time to lock down your HSA saver strategy.

Obviously your exact strategy will vary based on your specific situation and circumstances, but the basic premise is that if you’re able to, you can pay for your current healthcare expenses out of pocket to give you the best long-term investment growth.

1. First, you need to maximize your triple tax savings by maxing out your annual HSA contribution
   If possible, it’s best to contribute the maximum annual limit to your HSA so you get the most significant tax savings upfront, while also having the most money added to your HSA to save and invest for the long term.
   
   For 2020, that means you can contribute up to $3,550 if you have individual coverage, or up to $7,100 if you have family coverage. Not to mention the $1,000 catch-up contribution you can add into the mix for either coverage option if you’re 55 or older. Just remember, those annual maximum contribution limits include all contribution sources. So if you have an employer or anyone else who contributes to your HSA, you’ll need to adjust your own contributions accordingly so you don’t exceed the annual contribution limit.
   
   And don’t forget, if your HSA is through an employer-sponsored plan, be sure to contribute via payroll deduction to save the 7.65% on FICA taxes.
2. From there, you need to save your HSA funds and pay for your medical expenses out of pocket
   It might feel a bit odd not tapping into your HSA immediately when you incur a qualified expense, but by paying for all your healthcare expenses upfront out of pocket and leaving your HSA funds untouched, your account continues to grow uninterrupted and tax-free. Remember, the power of compound growth is a beautiful thing.
   
   With this approach, you need to be sure you have a solid HSA provider, like Bend, that provides a variety of cost-effective investment opportunities and the ability to invest and change funds as often as you’d like.
3. All the while, be sure to save your receipts and other documentation so you’ll be ready for future reimbursement
   This might seem like a daunting task when you’re thinking about months and years of expense tracking—but it doesn’t have to be if you partner with the right HSA provider. With Bend HSA’s next generation platform, you can link your personal spending accounts to your Bend HSA and let our Bend Advisor track all your eligible expenses for you so they’re saved for future reimbursement. You can also easily add receipts to your online shoebox for safe recordkeeping, and view all your unreimbursed and reimbursed expenses anytime on demand with a simple widget available right on your account dashboard.
   
   With Bend HSA, you never miss out on an eligible expense—no matter how long you choose to defer reimbursement.
4. Then, once you turn 65, you’ll be able to use your HSA just like an IRA or other retirement account, for both medical expenses and any other expenses you choose
   By staying savvy and implementing the HSA saver approach for the long term, you’ll have maximized your tax savings and investment growth and will enjoy a bright and stable financial future.

Never Fear, Your HSA is Always Here

So you’re ready and financially able to be an HSA saver. But what if while letting your funds build, something unanticipated happens or your circumstances change? There’s no need to panic—you can always submit your qualified expenses at any point now and in the future if you want to be reimbursed through your HSA.

In fact, that’s just another awesome element of health savings accounts—with an HSA, there’s no time limit on reimbursement as long as the expense is HSA-eligible and was incurred while your HSA was open. That’s it. No red tape or hoops to jump through. Just your money there for you when you need it.

And remember, with all the resources and tools you get with your Bend HSA, you never have to worry about missing out on an eligible expense, even if you don’t request reimbursement right away. Everything is available at your fingertips and will be in order at a moment’s notice when you need it.

Even if You Can’t Save Now, Work Toward the Long Game

Even if you’re not in a position to implement an HSA saver strategy currently, with planning and diligence, you can stay committed to taking the steps to get there. It might mean starting small and bumping up your HSA contributions slightly. Or perhaps starting to pay for smaller qualified expenses out of pocket, like any low-cost prescriptions. No matter what, there’s always something you can do to chart your course to a brighter financial future with the help of your HSA. And Bend is here to help you every step of the way.

In our next blog post, we’ll look at the flipside of this topic and how even if you’re on the complete opposite end of the HSA spectrum and need to spend your HSA funds without investing, your HSA is still beneficial to you in many ways. And we’ll explore even more options on how to transition from a spender to saver strategy. So stay tuned.

Choose Bend to Make the Most of Your HSA, Now and in the Future

With Bend, you don’t have to be a financial expert to maximize your HSA. We’re here to teach you as you go and provide you with the helpful resources and tools you need, not to mention multiple investment options to turn your HSA saver strategy into a financial success.

Saver, spender or somewhere in-between—no matter who you are, we’re here to help you make the most of your health savings account.

Connect with us today and let’s get you on the path to an even brighter financial future.