Here's Why I Added $3,000 to My Savings Account Early This Year

For many years, my family and I were quite spoiled in that we had a health insurance plan that wasn't subject to an in-network deductible. But our health insurance plan changed late last year, and as a result, we're now looking at a $3,000 deductible we have to meet before our insurer will pick up the tab for our care. 

Because I have kids and we tend to see a host of medical bills, I had a feeling we'd be meeting that deductible at some point during the year (I believe we actually hit it in June). And it's for this reason that I specifically added $3,000 of my earnings to my savings account earlier in the year. I wanted to make sure we had the extra money to cover our deductible. 

Here's the thing, though. I actually have more than $3,000 sitting in my HSA. And since I'm allowed to tap that account at any time to cover qualified medical bills, I technically didn't need to add that $3,000 to my savings. But here's why I did so anyway.

It's all about reaping the long-term benefits

HSAs allow you to invest money you don't need immediately so you can grow your balance into a larger sum over time. And investment gains in an HSA are tax-free, just like gains in a Roth IRA. That's a huge benefit. 

Because of this, my goal is to leave my HSA untapped as long as possible. The way I see it, if I'm able to pay for near-term medical expenses by taking money out of my savings, I can continue to invest my HSA and enjoy tax-free growth. My goal is to carry a balance with me into retirement, because medical costs tend to increase during that stage of life.

Now, by taking money out of my savings account, I do forgo interest on that sum. And right now, I'm earning over 4% interest on my money, so it's not a negligible amount.

However, over the past 50 years, the stock market's average return has been 10% before inflation, as measured by the S&P 500. So if I'm able to get that same return in my HSA, then it makes sense to take money out of my savings and leave my HSA untouched. 

Even if I don't manage to score an average yearly 10% return in my HSA, I might get close. And I'd rather earn, say, 8% on my money than the 4% I'll get from my savings account.

Plus, the IRS is going to tax me on the interest I earn in my savings account. It won't tax me on HSA gains, which is one of the main benefits of having one of these accounts in the first place.

A strategic decision

Adding an extra $3,000 to my savings earlier this year meant having to take on more work and sacrificing some free time. It may seem silly that I did that given that I have money sitting in an HSA. But clearly, I have my reasons for wanting to leave my HSA alone as long as possible. And if you have an HSA, you may want to take a similar approach.

Of course, if you don't have the money in savings to cover a medical bill and you have HSA funds at your disposal, then it's far better to take a withdrawal than charge your expense on a credit card and accrue interest on it. But if you're able to comfortably withdraw from your savings to cover a medical bill, then it often pays to leave your HSA untapped.