Compound It! Why I'm happy to go back to an HDHP

After two years of being on a high-deductible health plan (HDHP), in 2018 I switched over to a no-deductible health plan. With lower out-of-pocket costs, I was eager to make the most of my health insurance.

The thing was, 2018 turned out to be a year of health. No painful -- and expensive -- eye injuries, no trips to the ER. Just my annual checkup, routine lab work, and a single trip to urgent care to check out a suspicious-looking spider bite. (It turned out to be a false alarm.)

So for 2019 I'm back to an HDHP. This time around, I'm on a PPO. Here's why I'm happy to hop back to an HSA-qualified HDHP:

Triple-tax savings

One of the most attractive features of an HSA is the trifecta of tax savings:

  • The contributions you make to your HSA are tax-free. Just like how contributions to your 401(k) retirement account, traditional IRA or other interest-bearing account is tax-deductible. The lower your adjusted gross income (AGI), the lower your taxable income.
  • The interest you earn on the money in your HSA grows tax-free.
  • When you make withdrawals for qualified medical expenses, those withdrawals are also tax-free.

As a money nerd, I can attest that there are few things greater than getting a bit of a tax-savings advantage.

Use as an investment vehicle

Fact: You should be making health your top priority and not let the cost get in the way of your seeking treatment. What's the point of aggressively saving for your golden years if you aren't well enough to enjoy them?

But if you are healthy, and you have some money tucked away to cover your deductible should the need arise, then consider using your HSA as a way to save for retirement. (If you're an aspiring member of the FI/RE Movement, an HSA can even help you reach early retirement.) That's how I've decided to use my HSA funds for the time being. Some HSA administrators offer brokerage accounts, and you can choose to invest through these accounts.

Monthly premium savings

To me, the year I was on a non-HDHP plan felt a bit wasteful. I can only speak for myself, but every month as I paid my premium, I wondered if that money could be better spent elsewhere.

Because I'm single and healthy, the wee bit of money I'm saving each month on an HDHP can go toward my living expenses and saving goals. I'm about to tuck away a bit more each more toward retirement, an emergency fund, vacation, and what-have-you.

While I'm not exactly saving a small fortune on my health insurance premiums every month, my lowered living expenses helps me stress out less about my finances. And as a freelance writer, whose income can move up and down in any given month, it helps me freak out less about my income situation.

Who knows what the future might bring. I might one day opt to hop back to a non-HDHP and enjoy no annual deductibles. But for now, I'm more than happy to be able to contribute the $3,500 a year as a single person into my HSA.


Compound It! is your weekly update of achievable, effective, no-nonsense HSA saving and investment advice, delivered by people who make it work in their own lives. For the latest info about your health and financial wellness, be sure to check out the HSA Learning Center, and follow us on Facebook and Twitter.

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