When it comes to investing, there are three magic words that can make a huge difference in your long-term wealth: tax deductions, tax deferral, and tax free. These terms describe how your money is treated by the IRS before, during, and after you invest it. The more of these benefits you can get, the more you can save and grow your money over time.
Unfortunately, most investment vehicles only offer two out of the three magic words. For example, a traditional IRA gives you a tax deduction when you contribute and tax deferral while your money grows, but you have to pay income tax when you withdraw it. A Roth IRA gives you tax deferral and tax free withdrawals, but you don’t get a tax deduction upfront. Both of these options are better than a taxable account, which gives you none of the magic words, but they still leave something to be desired.
But what if I told you there is one investment vehicle that gives you all three magic words? That’s right, a health savings account (HSA) is the only type of account that allows you to enjoy tax deductions, tax deferral, and tax free withdrawals, as long as you use the money for qualified medical expenses. This makes an HSA the ultimate way to save and invest for your future health care needs, as well as a powerful tool to boost your overall wealth.
