Wouldn’t it be nice if someone offered to refund all of the unused insurance premiums paid on your behalf over the last year? I can’t wave a magic wand and make that happen, but I can help you plan to keep control of your unused health dollars in the future. This new investment tool is the Health Savings Account (HSA).

Here’s how it works. HSAs serve as a pre-tax and pre-FICA fund that you can use to save for the day you actually have medical expenses. The account is your money and is under your control. If the funds are not used, the money will continue to grow over time. And, it gets better. These funds grow through the accrual of tax-free interest.

The HSA is proving itself to be a wise investment tool, not only for health care needs, but also for long-term retirement planning. The HSA fund is tax-deductible, compounds tax-free interest, and is tax-free to withdraw for medical bills, in comparison to IRA distributions that are always taxable. Further, folks aged 55 to 64 can make additional contributions called “catch-up payments” to their accounts to accelerate the rate of savings before turning into a pumpkin at age 65 when you can no longer contribute to this kind of account.

Statistically, Americans spend less than $500 per year on health care, so for most people any money over about $500 that can be socked away in the HSA becomes a powerful investment tool for the future. Maximum allowable contributions enhance this opportunity further, particularly for those investing at a younger age.

And since any HSA can be invested in the market just like a 401(k), with – don’t forget – taxfree interest, the opportunity for long term growth is exponential.

Why, might you ask, would our government opt for such a program without getting something out of the deal? Well, in actuality they do. Consumer-driven financial tools like HSAs encourage the development of families and communities that are incentivized to better manage health expenditures. This in turn, facilitates a focus on healthier lifestyle choices, which ultimately takes some of the burden off of our stretched health care system. It only works because individuals and families have something to gain financially that also leads to living a longer, healthier life.

At any income level, a savings account that simultaneously drives participants to save money, live a healthier lifestyle, and make better health care decisions is a truly valuable resource. HSAs are wise investment tools that effectively fund health care needs now and in the future. It’s a win-win for consumers and our community.

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