HSA: the only triple tax-free investment

In this video, Ben discusses the unique benefits of a Health Savings Account (HSA), which he considers his favorite account due to its triple tax-free advantages. In fact, the HSA is the only investment vehicle in the U.S. tax code that offers triple tax-free benefits:

1. Upfront Deduction: Contributions to an HSA are tax-deductible. For a married couple in 2024, the maximum contribution is $8,300, which can save about $2,400 annually in taxes at a 30% tax bracket.
2. Tax-Free Growth: Investments made within the HSA grow tax-free. Whether invested in the S&P 500 or other options, all gains are not taxed over time.
3. Tax-Free Withdrawals: Withdrawals for qualified medical expenses are tax-free. This includes a wide range of medical costs, from surgeries to routine check-ups.

Physicians and high-income earners can optimize their HSA by paying for current medical expenses out of pocket, allowing their HSA investments to grow. In retirement, they can reimburse themselves tax-free for these expenses, provided they have kept proper documentation.

The HSA can also serve as an additional bucket of tax-free money in retirement, supplementing other accounts like a Roth IRA or 401(k).