Utilizing your HSA as a savings tool for to and through retirement
Factors to consider when spending or saving your HSA
If you have an HSA, you may or may not be aware that you can invest a portion of your balance once it reaches a specific cash threshold*. As health care costs continue to rise and Americans are living longer,1 investing your HSA can be an important option to consider.
Did you know: For a healthy 65-year-old couple, considering inflation, they face an additional $85,917 in retirement health care expenses over the next 20+ years2
An HSA can be a great tool to help you accumulate your savings on a tax-advantaged basis to pay for eligible out-of-pocket medical expenses. When you invest your HSA funds, you give your money a chance to grow. It’s important to remember that as with any investment, there are risks. Be sure to fully explore those risks before choosing to invest your balance.
So, does it make sense to invest? Or save.
*Investment threshold is determined by your employer.
Here's how much of a difference it potentially could make if you invested an annual contribution of $7,7503 vs. simply saving it:
Investing: $649,463
Not investing: $232,500
For illustrative purposes only. Assumptions: 30-year investment timeframe; annual contributions of $7,750; 6% annual return on investment; Interest compounded annually; 0% return on cash; no withdrawals. This hypothetical example does not represent the performance of any particular investment and is not a guarantee of future results. The illustration does not consider investment fees or expenses that would lower performance. Actual rates of return will fluctuate. All investing involves risks of fluctuating prices and the uncertainties of return and yield inherent in investing. All security transactions involve substantial risk of loss.
If you decide to invest, there are two ways that you can invest a portion of your HSA balance. Automatic transfer or manual transfer.
Automatic transfer: When you establish an automatic transfer, your HSA dollars will be automatically moved to and from your investment account based on the frequency you determine. The transferred amount is then allocated to the investments you’ve chosen. You can update your preferences, realign your portfolio or update your allocations at any time.
Manual transfer: You can also manually move HSA dollars to and from an investment account by initiating a one-time transfer. When you manually move HSA dollars, you will select the account and amount you want transferred and the allocation to specific mutual funds.
If you aren’t sure whether you should invest your HSA dollars, check with your financial professional and they may be able to help you decide.
This information is provided by Voya for your education only. Neither Voya nor its representatives offer tax or legal advice. Please consult your tax or legal advisor before making a tax-related investment /insurance decision
Sources
1 https://hvsfinancial.com/wp-content/uploads/2020/12/2021-Retirement-Healthcare-Costs-Data-Report.pdf
2 https://hvsfinancial.com/wp-content/uploads/2022/03/HVS-Data-Report-Brief-0312222.pdf
3 2023 family contributions limit
Health Savings Accounts offered by Voya Benefits Company, LLC (in New York, doing business as Voya BC, LLC). Custodial services provided by an approved HSA custodian as indicated in the applicable custodial agreement.
This highlights some of the benefits of a Health Savings Account. If there is a discrepancy between this material and the plan documents, the plan documents will govern. Subject to any applicable agreements, Voya and WEX Health, Inc. reserve the right to amend or modify the services at any time.
The amount saved in taxes will vary depending on the amount set aside in the account, annual earnings, whether or not Social Security taxes are paid, the number of exemptions and deductions claimed, tax bracket and state and local tax regulations. Check with a tax advisor for information on whether your participation will affect tax savings. None of the information provided should be considered tax or legal advice.
Investments are not FDIC Insured, are not guaranteed by Voya Benefits Company, LLC (in New York, doing business as Voya BC, LLC), and may lose value. All investing involves risks of fluctuating prices and the uncertainties of return and yield inherent in investing. All security transactions involve substantial risk of loss.
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