How I Invest My Health Savings Account

And how (and when) I expect to spend from it. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=47732&elqTrackId=93724189e06d450b892b8a287492a86c&elq=86ee3ddb43b44999b65c9805d97be49c&elqaid=47732&elqat=1&elqCampaignId=23539) [Improving Your Finances] Improving Your Finances with [Christine Benz]( [Christine Benz] When Morningstar introduced a high-deductible healthcare plan with a health savings account alongside the traditional healthcare plan about a decade ago, I was all over it. It wasn’t so much that I prefer that type of healthcare coverage. Rather, I was excited about the opportunity to invest in an HSA. I was ready to have an additional receptacle—along with our IRAs and 401(k)s—for long-term tax-sheltered retirement savings. My only reservation, if you can call it that, was whether my HSA assets would ever add up to much. While the contribution limits have edged up a bit over the past several years, they’re still less than $8,000 a year for people with family coverage, like me, and half that much for singles. Nearly a decade later, I’m happy to report that my enthusiasm for the HSA as an investing vehicle was warranted: My assets in it have quietly and painlessly compounded thanks to the genius of automatic payroll deductions and investment compounding, and I haven’t paid a dime in taxes. (I don’t intend to, either!) This week, [I wrote about how I’ve invested my HSA]( as well as how I expect that we’ll eventually spend from the account. Initially, I had thought that it made sense to earmark the HSA for long-term-care costs, should we incur them later in life. (Big long-term-care expenses are one of the biggest wild cards in retirement planning.) Most disbursements for long-term care would be tax-free, which is attractive. But on further reflection, I’ve concluded that [traditional tax-deferred assets are a better source of long-term-care funds](. Inflation seems to be ebbing of late, but the specter of rapidly escalating prices is still fresh. I appreciated [John Rekenthaler’s recent look at how inflation impacts retirees]( whether they’re receiving pensions or drawing income from their 401(k)s. Of course, most government pensions are inflation-adjusted, but the ones that aren’t look much less valuable when the long-term ravages of higher prices are factored in. Finally, Jeff Ptak and I covered inflation and much more [in our recent discussion with Northern Trust Chief Investment Officer Katie Nixon](. She weighed in on whether and when the Fed will begin easing on interest rates, the likelihood of recession, and where investors seem to be fighting the last war (hint: rhymes with halts). She’s a clear thinker and communicator; I enjoyed this one. With warm regards, Christine Benz [How I Invest My Health Savings Account]( Making choices to harness HSAs’ prodigious tax benefits. [Read More]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] [The Best Place to Save for Long-Term Care Expenses]( Counterintuitively, vehicles offering tax-free withdrawals aren’t always the best for long-term-care savings. [Read More]( [Pension vs. 401(k): Which Retirement Option Wins in an Inflationary Environment?]( Measuring the effect of inflation on fixed incomes. [Read More]( [Katie Nixon: Bringing a Blurry Market Into Focus]( The Northern Trust CIO on the case for bonds, the Fed’s fight against inflation, housing affordability, and more. [Listen Now]( [How to Calibrate Your Target Savings Rate]( Savings rate rules of thumb are better than nothing, but smart investors customize their own savings targets. [Read More]( [How to Use Cash in a Portfolio]( A look at the pros and cons of the safest asset class, plus our favorite options. [Read More]( Listen Now Get the latest investing insights and market updates with [Morningstar’s podcasts]( available on your iPhone, iPad, Android, PC, or smart speaker. Stay connected: [twitter]( [facebook]( [linkedin]( [instagram]( [YouTube]( [Apple News]( [View online]( | [See all newsletters]( | [Share your feedback]( [Unsubscribe]( from this newsletter. Or update your [email preferences](. © 2023 Morningstar, Inc. All Rights Reserved. 22 W. Washington St. Chicago, IL 60602