Can you use an HSA to save for retirement?

Medical files

Last time, I talked about the health savings account (HSA), and how it offers an unprecedented triple-tax advantage: the money you contribute for qualified medical expenses is tax-free, grows tax-free, and can be withdrawn tax-free.

It’s like your own little shell company in the Cayman Islands.

This photo was taken from offshore…get it? Source

Now, the important point here is that the HSA must be used for qualified medical expenses. If you don’t use it that way, say if you raid the account to pay for a trip to the Cayman Islands, you will have to pay income taxes on the withdrawal, and most likely also a 20% penalty.

So if you took out $5,000 from your account, and had a median household income, you’d have only about $3,000 after all was said and done.

So don’t do that, obviously.

But even saying that, can you use an HSA, with all of its tax-advantaged goodness, to save for retirement?

The answer is: sort of.

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The investment hat trick: The health savings account (HSA)

Hats rodeo

When I started my new job, one of the items on my list was to sign up for an FSA (flexible spending account).

Now I’ve talked about the FSA before. An FSA is great, in that you can put money away pre-tax to be used for healthcare-related expenses, and really frustrating, because you need to predict with clairvoyance how much you’re likely to need during the upcoming year.

I’ve always had the option of using an FSA, for better or for worse. So it was with some surprise that I was told that my company doesn’t offer an FSA.

What? Why not?

The answer, as I later found out, is because I have the ability to sign up for a health savings account (HSA).

Which, as it turns out, appears to be superior in almost every way.

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This is why I don’t pick stocks

I’ve often said that my one big stock tip is don’t invest in stocks. There’s too much volatility, too much risk, and not enough gain.

We often say that if we had only invested in Apple in 1995, or Amazon in 1997, or Google in 2204, then we’d be rich beyond our wildest dreams.

Right, and if we had Gray’s Sports Almanac like Biff did in Back to The Future 2, we’d be filthy rich too.

But here’s the thing: we didn’t. Just like how the Next Big Thing is flying right under our radar right now, and we’re not going invest in it. By the time we hear about it, the party has likely ended.

Even still, you might think that you understand where things are heading, so you might be tempted to invest in that direction.

Don’t. (Unless you’re a professional, in which case, you probably don’t need to be reading this site.)

Here’s a cautionary tale of hubris.

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If you don’t understand it, don’t invest in it

Cryptic Crossword

I took a new job last month, as I mentioned previously. While it is not in the finance industry, it’s in a space such that people often talk about financial transactions, venture capital, and especially about future developments in tech.

It’s a heady space, a strange mix of wonkery and Burning Man-esque fervor.

And lots of people are talking about the Next Big Thing, the new thing that you have to invest in.

Now, I’m not immune to temptation, of course. And I’m not immune to good ideas well presented and argued.

But I can’t get on board with a new company or idea mainly because on one fundamental investing tenet, one that you would be wise to keep in mind: Don’t invest in anything you don’t truly understand.

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The three questions to ask yourself before you gamble (on anything)


(Note from after this post was written: Oy, what terrible timing to write about Las Vegas. My heart breaks for everyone affected by the horrors that transpired there this past week. There may not be any justice or sense in what happened, but let’s at least take a moment to be grateful for everyone special in our lives.)

There are many opportunities to separate you from your money. Some of them are swift and cataclysmic, while more often they are slower and insidious. (I would put debt in the latter category.)

And one of the easiest ways to part with your money is through gambling.

But it’s not so simple, because one of the other easiest ways to part with your money is by spending it on things you enjoy.

And these two can intersect.

For example, you may love going to Las Vegas. You may love the devil-may-care attitude, the garish opulence, the adult fun-zone-ness of it all. I get it. I went to Vegas earlier this year, and I thought it was wild fun (though maybe only for a few days).

Flamingo Hotel


Also, you might like the idea of speculating on penny stocks or other high-risk financial products.

While the most prudent advice is (like I say with the lottery) “please don’t“, I’ll expand the field, and ask three questions about the potential activity.

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Are you investing or just speculating?

Gold lights

The economics of the household aren’t great. Not only do you need to keep a reasonably good-paying job for at least four decades, but also you need to plan for a period of your life, say the last third of it, where you may not be able to earn a good living and have to live off what you have saved.

It’s hard enough to fund one You, but you need to fund two of them: Current You and Future You.

You can’t just put money under your mattress either; you’ll never have enough. Instead, you have to put it to work. And the method with the longest positive track record is investing in the stock market. (Though not actual stocks.)

It’s not an exciting prospect. Investing 15% of your money and returning a long-term average of between 6-8% for 30+ years isn’t exactly a page-turner of a story.

If only there was something better, easier, faster, some way where you could shorten the duration. A way to grow your money 200%, 300%, 500%.

This is an understandable desire. But it’s important to know that you’re moving away from investment and into the heady world of speculation.

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Maybe don’t freeze your credit just yet

Frozen twig

Since the Equifax dumpster fire breach, I’m still on the fence about freezing my credit.

Perhaps this is surprising. After all, now that my information, along with 143 million others, has likely been taken by who-knows-who for who-knows-what purpose, it might seem like an obvious move to try to restrict what can be done with it.

But hasty decisions are not helpful here. The proverbial horse has left the barn here. Your information is already stolen. Yes, it’s possible that someone is gearing up to take out a giant loan in your name right now, but with 143 million accounts to choose from, there’s just as much chance that you’re just somewhere in the queue.

Also, as I don’t trust the credit agencies, I don’t want to pay them for something that shouldn’t need to be paid for.

Luckily, there’s a small chance that we might not have to soon.

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Get your credit reports all at once or spread them out?

Space trail

If you’ve been thinking that I’ve been silent about the Equifax breach because I haven’t cared, you’d be wrong.

Instead, I’ve been feeling a mix of fear and despair, not unlike what I felt on November 9th this past year, a realization (or maybe a refresher) that supremely incompetent people are running the show, and we are at their mercy.

We can hope to change some regulations surrounding the obligations these companies have to protect our information (that we never really gave them permission to hold on to in the first place), but I wouldn’t hold your breath on this.

One thing you can do, need to do, stop everything to do, is to get your credit report.

(Don’t get confused, I’m not talking about your credit score. Don’t worry about that.)

One conversation that has come up a bit recently, in light of all the recent incompetence, is how often to get your credit report. There are at least two camps. Let’s look at each.

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Why signing up for promotions you don’t think you’ll use is a good idea


I’m not into extreme couponing. I find that I don’t need 27 cans of tomato sauce or 40 boxes of cereal. I live in a relatively small place, and I barely can rationalize a Costco membership, much less having a second refrigerator.

But don’t get me wrong, I love deals. I was quite taken by Jet‘s ability to get Amazon Prime-level service without paying for Amazon Prime. I love using Costco’s rental car portal to save hundreds of dollars, pretty much every time I rent anything.

And, as I’m sure you know, I love love love frequent flyer miles.

Every once in a while you can find these excellent frequent flyer mile deals, like the time I mailed 94 index cards to get about $500 worth of hotel stays. That was pretty cool.

But you know what’s even cooler? Getting miles and points for things you didn’t even know you did.

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Why a new job might be best treated as an emergency


I just got a new job! (Don’t worry, I’m not shutting down this site.)

Getting a new job is an exciting and terrifying time, one of the big life transitions. As it’s not a stretch to say that we spend a good third of lives working at a job, changing it can make a large difference in your life. To me, it’s up there with moving (which I hope not to do for a long time).

Everything is good on my end, with no concerns at all. And yet, I’m considering my situation of moving from one job to the next an emergency. And if you’re in a similar situation, it might be a good idea for you to do the same.

Why? I never thought you’d ask.

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