You’ve probably heard of a Health Savings Account (HSA). In fact, you might even have one. It’s THE BEST account out there.

Money goes into it tax free.

It can grow tax free.

You withdraw from it tax free.

Believe me, the government gets their hands on pretty much every other investment account in some way. The HSA is a rare, tax-free gem (when used for medical expenses).

Standard HSA Behavior

Most people treat their HSA like a debit card. And by most people… I mean me. I am thinking about changing, so this blog is for me, too!

Whenever a medical expense comes up, I swipe my HSA card. It’s nice because I already have money in my HSA account that is “out of sight, out of mind.” So, when a healthcare expense comes up, it’s not coming from my bank account.

I like that! BUT…

Here’s the problem:

When you treat your HSA like a debit card, you miss out on a BIG benefit – the tax-free growth.

If your HSA is a revolving door of cash going in and expenses going out, it never has the chance to grow!

If you maxed out your HSA for just 5 years AND DIDN’T TOUCH IT, you could have at least $18,000 in there! Think about how much that could compound if invested. Better yet, it gets to compound tax free!

We are robbing ourselves of potentially THOUSANDS by not letting our money grow.

So, what do you do?

The HSA hack is paying for your healthcare expenses out of your own pocket.

Here’s the key though:

SAVE ALL OF YOUR RECEIPTS. After you retire, you can reimburse yourself from your HSA. The IRS has no time limit on when you must reimburse yourself by. You just need to be prepared to prove your expenses if you are audited.

I do have some tips on organization, if you need it.

Then, you can get the cash you need in retirement via reimbursements while having enjoyed years and years of compounding growth beforehand.

Another Little-Known Secret

“Hey, Jessica. What if I don’t have enough medical expenses in retirement to use up my massive HSA I accumulated. Then what?”

Well, more than likely you will have plenty of health care expenses in retirement to use up your HSA. However, you can use your HSA for non-medical expenses, but there is a 20% penalty. BUT! If you are over the age of 65 you don’t owe the penalty. It then becomes very similar to a 401(k) or IRA minus the fact you won’t have a Required Minimum Distribution!


This might seem a little unappealing right now. It’s a classic example of debating the value of more cash now vs. more cash later. So, do what’s best for you, but definitely be aware of this huge benefit!

Note: only those who have high deductible health insurance plans can fund an HSA. Be sure that the health care reimbursements you submit only occurred after you opened your HSA.