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HSA investing offers potential to build tax-free wealth

If you have been diligently contributing and saving to build your Health Savings Account (HSA) balance, you might have a healthy sum right now sitting in your cash account. While that’s a great first step in planning for your health care needs, there’s something more you can do to make that money work harder for your future. Investing your HSA offers potential for tax-free growth over time—and could be an important part of your long-term savings strategy.

Do more with your balance

Determine how much you may need to keep in cash to pay for your short–term health care expenses—and then consider investing the rest. Check out the potential impact of HSA dollars invested over the long term compared to keeping all of your balance in cash.

Bar chart shows comparison of HSA dollars in cash and investments. With a beginning balance of $10,000 and a .07% interest rate the cash balance is $10,141 after 20 years and, assuming a 5% rate of return, the investment balance is $26,533.
Bar chart shows comparison of HSA dollars in cash and investments. With a beginning balance of $20,000 and a .07% interest rate the cash balance is $20,282 after 20 years and, assuming a 5% rate of return, the investment balance is $53,066.

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. Scenarios assume a beginning balance of $10,000 and $20,000 with a 5% rate of return on investments and 0.07% 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.

A saving strategy with tax benefits

Investing in your HSA could be one of the most tax efficient ways to grow your wealth thanks to its triple tax advantage1 : 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.

It’s easy to get started

You can set up the automatic investment feature at any time, allowing funds from your cash account to automatically transfer to your investment account for potential growth over time, while maintaining a minimum balance in your cash account to pay for qualified expenses.

Make your HSA part of your wealth strategy

Don’t stop making smart choices now—enroll in your HSA’s investment feature to help boost your savings and fuel your goals for the future.

1 About triple 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. Any interest or earnings on the assets in the account are tax free. You may be able to claim a tax deduction for contributions you, or someone other than your employer, make to your HSA. Bank of America recommends you contact qualified tax or legal counsel before establishing a HSA.

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.