The Stealth IRA: Maximizing the Health Savings Account (HSA)
The Stealth IRA: Maximizing the Health Savings Account (HSA)
It’s better than a 401(k). It’s better than a Roth. Why the HSA is the “Triple-Tax-Advantaged” crown jewel of the US tax code, and why you should never spend it on healthcare today.
Executive Summary
- The Holy Trinity of Taxes: Traditional IRA offers tax deductions but taxes withdrawals. Roth IRA offers tax-free withdrawals but no deduction. The HSA offers BOTH.
1. Tax Deduction on Contribution (Input).
2. Tax-Free Growth (Process).
3. Tax-Free Withdrawal for Medical (Output). - The “Shoebox” Strategy: Most people use the HSA debit card to pay for doctor visits. Don’t do this. Pay cash for medical expenses today, keep the receipts in a digital “shoebox,” and let the HSA invest in the S&P 500.
- Delayed Reimbursement: There is no deadline for reimbursement. You can pay a $1,000 hospital bill in 2025, let that $1,000 grow to $10,000 in your HSA by 2055, and then reimburse yourself the original $1,000 tax-free whenever you want cash.
Eligibility Check
To open an HSA, you must have a High Deductible Health Plan (HDHP). Once you turn 65 and enroll in Medicare, you can no longer contribute to an HSA, but you can still invest and spend the accumulated balance tax-free.
Mechanic: Why HSA Beats Roth
Triple Adv
In, Growth, Out
No RMDs
Keep Growing
FICA Saver
Payroll Deduction
Receipts
Keep Records!
Simulation: Spender vs. Investor (30 Years, $4k Annual Contrib)
Account Balance at Retirement
| Feature | Traditional 401(k) | Roth IRA | HSA (Invested) |
|---|---|---|---|
| Tax Deduction | Yes | No | Yes |
| Tax-Free Growth | Yes (Deferred) | Yes | Yes |
| Tax-Free Exit | No (Taxed) | Yes | Yes (for Medical) |
“Treat your HSA not as a spending account, but as a specialized retirement account for your future healthcare costs. Since you are guaranteed to have medical bills when you are old, it is effectively a tax-free 401(k).”
Essential Resources
INTERNAL
BMT Playbooks
EXTERNAL
Primary Sources
Tax-Strategies > HSA”
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