SO: How did you find out about HSAs? How have they benefited you?
I’ve worked at three different companies now–all startups. One of my colleagues at my second company came from the banking industry. He was very familiar and savvy with HSAs. We were all pretty early on in our careers and wondered what to do, and he said we should go down the HSA route. You can invest in it.
I didn’t really follow his lead until later on, when I spent more time thinking about health insurance. That was about 4 to 5 years ago. Our company got acquired. They offered a pretty nice HSA package and matching. I started taking advantage of HSAs about two and a half years ago.
SO: Did you do any research or learning on your own? Or was this friend with a financial background a forcing function of you signing up for your HSA?
My friend and I talked about it a few times. He said the benefits were that it was incredibly flexible, it can outlive the company, you can take it from Point A to Point B, and you can continue investing in it. You can invest your money into the market itself and have it be used. Also, it works like a debit card. So he planted the seeds. But when I signed up for the HSA myself, I did the research.
However, I did not do a lot of research, and HR didn’t provide a lot of material. It was one of those things where I got stuck in a 50-page onboarding presentation. I wish I had done more research because it would have been valuable.
SO: The way you use your HSA is like a tax beneficial medical account for medical care?
The analogy I would use is that I had a pre-tax benefits card for the subway. I used to live in New York, so I’d save $30 to $40 dollars by using it. I use the HSA similarly–it’s like a purpose-built expense account. It’s a good user experience because it helps delineate between my expenses. Having a separate card for different expenses. As a millenial, it’s nice to keep things simple.
SO: How do you use your HSA? Do you see it as part of your retirement strategy?
I haven’t had any major medical expenses, so I haven’t had to make a ton of use out of my HSA. That’s been a good thing. Mostly, I use it for basic expenses. Every year, I go to the optometrist to get my vision checked and to pay for my contacts. I also had some general doctor’s visits before COVID. There was some lab work that was done, so I used it for my co-pays.
Until recently, I didn’t really have a plan regarding my HSA. Now, I’m thinking about investing in it and will continue contributing to it as much as I can. And have it become a part of my investment strategy because it’s another investment vehicle–there’s my 401(k), my portfolio of assets and stocks, real estate, etc. Why not have health be another investment? I’m not super analytical about it. I don’t have a spreadsheet where I’ve modeled everything out, but I’m generally thinking about it in those terms.
SO: What advice would you give to people who are just starting out on their HSA journey?
Read the Perspectives. Read about people or talk to people who have used an HSA. Understand how you can use it: you can invest in it, you can contribute to it yearly, you can save in it. What are all the capabilities it has?
Specifically, I would say, each year, contribute and then invest that money into the market and have a match with your employer contribution–that’s critical. Max everything out. Just like your 401(k) and other matching programs. If it’s a capability that your employer is offering, then take advantage of it.
SO: Were there any mindset barriers that you had to overcome when you were starting to invest?
A big barrier for me when I was starting to invest was ignorance. Whenever you’re ignorant of something, it becomes overwhelming, and you don’t do it. Then it becomes this negative feedback loop. Even knowing something about it gives you this quick access point, and once you get in there, it just compounds.
When you look at savvy investors, and you wonder how they became that way, it’s because they just started doing things. They learned about it, and they became less ignorant. So awareness and education are just general feedback I’d give for investing at large.
SO: What advice would you give to someone to get into the proper mindset of investing long term?
As with anything, start with doing something. It could be as simple as doing a google search or talking to someone you know that has an HSA or invests. Anything you can do that can lower that mental barrier to entry for yourself, so you can start learning about it.
Knowledge is the ultimate compounding interest. Which then results in resource compounding interest. To keep it simple: Take that first step with a goal in mind like “I want to make money” or “I want to retire.” Learn. And go from there.
Note: These are edited excerpts from the conversation. In some cases, stock photos and only first names or initials have been used to protect identity.