I have an HSA that allows me to invest the money in the account in the stock market. Any money not invested is available to be used for health expenses. I currently have ~50% of the total balance of the HSA invested, with the other ~50% on hand for expenses.

I've run into a situation where the ~50% on hand for expenses does not cover all of my current expenses. To cover the remaining costs, should I sell off my the HSA investments or should I leave those as is and use money from my savings account?

I'm trying to determine if the tax advantages of the HSA combined with the returns the invested money is seeing is worth me leaving that money alone - and instead, take the money from my savings account to cover the costs.


2 Answers 2


In an optimal HSA tax scenario, you pay all of your medical expenses out of pocket and save all the receipts. You invest all the HSA money and get decent returns. Then years later use all your saved receipts to get reimbursements from your HSA. In this situation, the contributions, growth, and distributions are all tax free.

It might not be practical/convenient to maximize the tax benefit of an HSA because it requires having other funds on hand to pay medical expenses, saving receipts can be annoying, and you'll have to keep an eye out in case they ever change the rules that allow withdrawals years later. Some HSA programs don't offer great investment options. Additionally, exposing HSA funds to market risk means potential for losses, so the strategy might not be ideal for those who anticipate withdrawing HSA funds in the near future.

If you can afford to pay medical expenses with post-tax dollars and leave the HSA invested (and the HSA investment options aren't substantially worse than other retirement accounts) then you should do so to maximize the tax benefits.

Many people put maximizing HSA contributions above all retirement investing except for employer 401k match, due to the tax advantages.

  • 1
    in other words, by postponing the reimbursements, you can use your HSA as (tax-free invested) 'Emergency Funds'.
    – Aganju
    May 6, 2019 at 7:00
  • You mention "years later use all your saved receipts to get reimbursements from your HSA." Currently in the USA, what are the limits for how long you can claim reimbursement from an HSA for medical expenses?
    – John_Henry
    May 7, 2019 at 15:04
  • 1
    @John_Henry There is no limit, as long as the expense was incurred after your HSA was opened and is a qualifying medical expense then you can delay reimbursement as long as you desire. That's why I mention keeping an eye out for rule changes, because they could change that at some point. Most likely in such a scenario you'd have a window to claim all expenses older than whatever limit they set.
    – Hart CO
    May 7, 2019 at 15:10
  • 1
    Do note, though, that there might be a nightmare scenario where they change the laws on the reimbursements.... (or change the laws on HSAs in other ways.... Haven't heard about any current politician mentioning what they want to do to the system if medicare for all passes)
    – xyious
    May 7, 2019 at 15:13
  • 1
    @xyious Yeah, typically such a change would come with a window of time for people to get the old expenses reimbursed, but it might be overlooked as it could be pretty edge-case. The nice thing is that, at worst, the HSA behaves as a traditional IRA in retirement, still nicely tax-advantaged.
    – Hart CO
    May 7, 2019 at 15:19

Adding to Hart CO's answer, another option would be to scale back your investments to fit your medical situation. That may be 60/40 or 70/30. Whatever fits best. Settle into your new situation, then work to balance it back out, through increased pay or medical improvement.

While this doesn't maximize your long term tax benefits as Hart CO explained, you would still benefit from spending pre-tax dollars.

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