Do Your Future Self A Favor...

 ...and open and fund an HSA account. 

HSA stands for Health Savings Account. They were created in December of 2003, they allow you to take the income deduction on a contribution but not have to pay taxes on the way out when paying for qualified medical expenses. The definition of qualified is very friendly. If you take money out for non-qualified expenses then you owe tax just like you would taking money out of an IRA. One important detail is there is no time limit to take money out against a qualified medical expense. Last January, I got my colonoscopy. I have the receipt, I think I paid about $1000 out of pocket, so at some point in the future, I can take $1000 out of our HSA against that expense. 

I first funded our HSA in 2004. I've not funded it every year, we had health insurance from AdvisorShares when I had that gig and for a couple of years we had temporary insurance, which is cheap, lousy insurance that we can get away with for being healthy. We had high deductible, HSA eligible insurance for 2021 and will probably go back to the temporary insurance in 2022 for a couple of years. 

If HSA's have been around for 18 years, we've probably contributed in 13 or 14 of those years. Our HSA account comprises a little over 10%, maybe 12% of our investible assets. Our last umpteen years of receipts for medical expenses are currently nowhere near what our account balance is and hopefully they never will be but the optionality of a decent sized account that can be accessed tax free is a huge positive. 

You can contribute to an HSA until you go on Medicare, then no more. Usually you go on Medicare at 65. How many years until you get to 65? How much at $3650/yr single or $7300/yr family can you put into an HSA before you get to 65? The reason for this post was this article in Barron's. One of the comments was dismissive because of the "low" contribution amount but I disagree, it can be a meaningful part of an retirement plan. Starting at 55 you can add another $1000 catchup contribution which I did for 2021. 

If you can build up some sort of HSA balance between now and starting Medicare, you are doing the future you a huge favor. Lately, I've taken to saying that the future is here relative to any good financial decisions you made when you were young like funding your 401k every year, living below your means or taking a 15 year mortgage. If you've been funding an HSA for any long period of time, the future is here in terms of having a useful piece of money. If you're 15 years away from Medicare and you can put $8300/yr in for that 15 years and you can an unheroic average annual return of 3% you'll have close to $150,000 in your account. For most of us, that is well worth doing.