How to Compound Your HSA While You Are Young, My New Financial Goal!

The answer to how to compound your HSA while you are young has a couple of different factors to it. For starters, it is important that you take advantage of your annual contribution limit to the HSA, as well as get all of the free rewards that your HSA plan allows on top of your initial employer match. Add to this the fact that you will need to be enrolled in a High Deductible Health Plan in order to take advantage of this, and you have got yourself a decent recipe to follow if you want to stack up your Health Savings Account numbers. I have a few different financial plans that I am following, with three big accounts that I have goals of really getting higher in terms of the amount of money in them, they are:

My Ally High Yield Savings and CD Account

I am up to around $40,000 in liquid cash in this account currently, allocated between CDs, a High Yield Savings Account, and an interest checking account. My new favorite thing to do is to stack up money by doing rewards events in my HSA, and to allocate the funds in my High Yield Savings Account to more interest bearing accounts. It is so satisfying to me to see the amount if interest that I am getting each day, each week, each month, and year increasing month after month as I save part of my salary.

My 401k Plan Account

My 401K plan is an account that I have somewhat neglected over the last 2 years of employment at my current job. I have around $1500 saved up in there currently, and it all fully vests in the next 14 months. After stacking up another year or so of liquid cash, I am going to hit this hard and try to get it to around $10,000 to $15,000 in the next two years, it would be awesome to have some market exposure at only like 28 years old, as it would really compound a huge amount once I retire.

My Health Savings Account

This is one that I am really getting into now. One of my deepest fears is that I won’t have enough money saved up in case a health emergency ever happens, either for myself, my family, or my future family (I’m single but time goes on). The HSA can help to really quell this fear. You can, with the plan I have with my office also, invest all of the funds in the account over $1,000.00. So with $1,000 in cash in that account, and with a tiny amount of interest that I’m getting on that, I can throw the other $19,000 into say 10% Tesla and the rest into the S and P 500 (live a little I guess). With a little luck, in 21 years, mathematically, this should be at something like $120,000 worth of funds in my Health Savings Account! You can use this money to pay premiums, to pay for any type of health care expense, to pay co-pays, and the whole 9 years, it is really a huge arrow in your quiver for building wealth and for securing yourself for a lifetime!

Bonus** – My Future Business Account

This is something I’m working on in the future. These websites aren’t making any money yet, but it would be big to have another income stream to be able to really make some investments come to light.

My Plan for My HSA, How to Compound Your HSA While You Are Young

So my plan is to start putting $300 per month, the max allowable contribution by the IRS, into the account each year starting in 2022, for the next 5 years. This should give me $25,000 or so in the HSA after compound interest and the $1,000 per year employer match that goes into that account. Even if I just don’t touch it for the next 35 years, $25,000 at a 7% annual compounding rate will double 3 times, for an 8x multiple when I’m 65, this is $200,000.00 in an HSA if I can manage to not touch it!

Final Thoughts on How to Compound Your HSA While You Are Young

And that’s my plan for my HSA and 401K wealth building goals. If I can make it work, I might be able to crack $200,000 in net worth by age 30, but lets get through tomorrow first shall we! Till next time, you heard it first right here at Inflation Hedging.com.

Cheers!

*Inflation Hedging.com

Sources:

https://www.bankrate.com/banking/cds/cd-rates/

https://money.cnn.com/data/markets/

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