Reader GP writes in this week asking about HSA’s:
I’ve got a pretty substantial HSA balance now and I need to know how to invest it.
Simple and to the point, I like those types of questions. As you may or may not know, HSA’s are my favorite investment vehicle of all time. I probably won’t stop writing about them until everyone in America has one. The reason why I love HSA’s so much are because they encompass two things close to my heart: they stick it to the insurance industry and they allow you to completely avoid taxes.
HSA’s force you to consider the cost of medical procedures and insurance only comes into play when you truly need it(ie a catastrophic event). There’s no point in insuring things like simple doctor visits and routine check-ups since we know we’re going to need those. Involving a third party in something like that is only going to make it more expensive: that’s ECON 101.
There are lots of reasons to not like paying taxes but an HSA is the only answer I’ve found to truly(and legally) avoiding taxes. The money you put into an HSA is tax free, the money you take out is tax free and your investment gain is tax free. Do I need to say more? [Continue reading]