HSAs and Ankle Sprains

Updated: Nov 15, 2021

It was a dark, stormy night.

Ok, not really. It was a bright, clear day.

We were hiking on the edge of Lake Como, Italy, last year.

There was an Italian plane show going on over the lake, and we were almost to the top of the mountain where we would have an incredible view. The weather was beautiful and we were giddy.

I picked up my pace on the trail, jogging with abandon, my head turned to the right to laugh at something my sister had said.

And that's when it happened. My right foot extended and landed on a large rock hidden in the grass, causing my ankle to roll painfully.

I heard a loud POP.

I screamed.

In that moment, I was certain I had broken my ankle.

I fell to the ground and sobbed. My sisters and husband comforted me and helped me wrap it with bandanas and sticks.

I dried my tears, laughed at the fact that my little sister happened to have her GoPro turned on (how funny it would be to watch the footage later), and limped on my merry way.

And now, over a full year later, I have spent upwards of $5,000 out of pocket on this injury.

It was, according to several physical therapists and foot doctors, the nastiest sprain they'd ever seen. I had multiple sprains on the inside and outside of my ankle and a partially torn ligament. Although I never did anything that wasn't explicitly approved by my doctors (like hiking), it never healed properly.

I finally had surgery a couple months ago, and I'm still in physical therapy to this day.

During one of my many pity parties over the last 12 months, I complained to a friend about how much money I had spent on my sprain. This friend happened to know my husband and I have well over $5,000 sitting in Health Savings Accounts (HSAs).

"Why aren't you using your HSA money?" she genuinely wanted to know.

"Oh! Well I think of it as a retirement account," I responded. She looked at me, confused.

Here's the thing: I used to think that HSAs were best used to offset current medical expenses.

But then I realized that HSAs are one of the best-kept secrets when it comes to saving for retirement.

HSAs are dope. They are designed to help people who have high-deductible health plans. And boy, do they help. Just check out all these tax benefits:

  • Money in your HSA grows tax-free.

  • You're not taxed when you take money out to pay for medical expenses.

  • Your HSA contributions lower your taxable income.

  • Any contributions your employer makes do not have to be counted as part of your taxable income.

Plus, the balance can be carried over year to year (it's not a "use it or lose it" type thing). And the funds are yours forever, even if you change jobs or leave your employer. Can I get a hell yeah?

The secret sauce: Yes, HSAs were designed to help those with high-deductible health plans offset some of their costs. BUT... that triple tax advantage means that the BEST way to use an HSA is to treat is as an investment tool for retirement. And the best way to do THAT is to never touch your HSA during your working years, and to pay out of pocket for everything instead. I mean, we are only going to have more health problems as we age, right? That's why it makes sense to save your HSA for later.

A key to making this strategy work is to max out your annual contributions and invest your HSA in the stock market. Don't just leave it sitting in cash. You want that baby to grow! Stick to long-term investments with low fees, such as index funds. (Most people don't even realize they have the option to invest their HSA... but now you know!) Think of it like a Health IRA... set it and forget it.

So: Although I complain about those pesky ankle expenses now, I'll thank myself later.

Rachel Richards is a former financial advisor and bestselling author. You can download her free budgeting and net worth worksheets here.

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