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Build your retirement savings with HSA investing

If you were to start investing the money sitting in cash in your HSA, you could have a sizable sum by the time you retire. That’s because the investment feature of your HSA offers tax-free growth potential that can help build your health care savings and prepare you to live the retirement you want.

See the difference investing can make

Let’s look at the potential impact of investing $20,000 of your HSA dollars compared to leaving that money in cash. In a cash account, the $20,000 earns an interest rate of 0.7% and would grow to $22,994 over a period of 20 years. If those same funds were invested in mutual funds earning a 5% rate of return, the funds could potentially grow to more than $53,000 in 20 years.

A savings strategy with tax benefits

Investing in your HSA is the most tax efficient way to grow your wealth thanks to its triple tax advantage: Federal tax-free contributions, tax-free growth and tax-free withdrawals for qualified health care expenses. For these reasons, an HSA can play an important role in your long-term savings strategy.

A graphic showing what you could have after 20 years if you invest $20,000 of your HSA dollars, compared to leaving that money in cash. A small bar shows an amount of $22,994 in Cash, assuming an interest rate of 0.7%, while a larger blue bar shows an amount of $53,066 in Investments, assuming a 5% rate of return.

Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than their original cost. Scenario assumes a beginning balance of $20,000 with a 5% rate of return on investments and 0.7% interest rate for cash account for 20 years. Scenario does not take into consideration any additional deposits over 20 years, to illustrate the potential impact of investing.
Investing involves risks. There is always the potential of losing money when you invest in securities.

The long-term impact of HSA investing
Example: How it works for Brad

HSA contribution strategy: Brad has been contributing the maximum allowed to his HSA each year and spending only about half of his balance on health care expenses, a strategy that helped him accumulate $20,000 in his account.

man sitting in a kitchen and smiling at a woman who has her back to the camera

“AHA” MOMENT

Brad realizes he has quite a large sum just sitting in cash and that he might be missing out on an opportunity to do more with his money. He decides to take advantage of his HSA’s investment feature to give his balance the potential to grow tax-free and build his wealth for retirement.

Outcome: If Brad continues to maximize his annual HSA contribution, keep withdrawals to a minimum and invest his balance, he could potentially have $163,418 in his account in 20 years, assuming a 5% rate of return. That’s about $70,000 more than if he would have kept his money in cash. His tax savings will also add up, as he won’t have to pay taxes on payroll contributions, any earnings and withdrawals that he makes from his account for qualified health care expenses.

A graphic showing how Brad’s balance could potentially grow over 20 years. A shorter red bar representing HSA dollars in cash only assuming an interest rate of 0.7% shows a total of $92,766 after 20 years, while a longer blue bar representing HSA dollars invested assuming a 5% rate of return shows a total of $163,418 after 20 years.

Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate, and when redeemed the investments may be worth more or less than their original cost. Scenario assumes a beginning balance of $20,000 with a 5% rate of return on investments and a 0.7% interest rate on the cash account over 20 years.
Investing involves risks. There is always the potential of losing money when you invest in securities.

Give your retirement savings the chance to grow

You’ve worked hard to accumulate a healthy balance in your HSA, now invest that money so it can work hard for you.
Set up your investment account today.
Go to Home > Accounts > Investment Summary > Start Investing

Investing involves risks. There is always the potential of losing money when you invest in securities.

Bank of America, Merrill, their affiliates, and advisors do not provide legal, tax, or accounting advice. Clients should consult their legal and/or tax advisors before making any financial decisions. This material should be regarded as general information on health care considerations and is not intended to provide specific health care advice.

State and/or local income tax treatment of payroll contributions may vary. Participants may wish to consult with a tax advisor regarding the state income tax treatment of such contribution.

Potential Tax Advantages: You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax, unless an exception applies. Any interest or earnings on the assets in the account are federal income tax-free. You may be able to claim a tax deduction for contributions you, or someone other than your employer, make to your HSA directly (not through payroll deductions). In addition, HSA contributions may reduce your state income taxes in certain states. Certain limits may apply to employees who are considered highly compensated key employees. Bank of America recommends you contact qualified tax or legal counsel before establishing an HSA.