How to Turn Your HSA Into a Tax-Free Money Machine (and Maybe Fund a Vacation While You’re At It)

Written by Chris Caffrey, ACNP, PMHNP ~ January 14th 2025

Picture this: you’re sipping a margarita on a beach, completely relaxed. But here’s the kicker—this vacation is paid for, tax-free, thanks to your HSA. Sounds too good to be true? It’s not. Welcome to the highly underrated world of Health Savings Account (HSA) hacks, where smart investing, saving receipts, and knowing your options can turn your health-focused account into a financial powerhouse.

A tax free money machine using the HSA!

HSAs Are More Than Just a Medical Piggy Bank

An HSA isn’t just a stash for covering prescriptions and co-pays. If used wisely, it can double as a stealthy retirement account and even fund fun things like vacations—legally and tax-free. Let’s break it down.

The Basics of HSAs

• What it is: A tax-advantaged savings account paired with a high-deductible health plan (HDHP).

• What makes it awesome:

  1. Triple Tax Advantage: Contributions are pre-tax, growth is tax-free, and withdrawals for eligible medical expenses are tax-free.

  2. Rolls Over Forever: Unlike FSAs, HSA funds don’t expire. What you don’t use this year rolls over into the next.

  3. Investable: You can grow your HSA funds by investing in stocks, bonds, or mutual funds, just like a 401(k).

How to Supercharge Your HSA

To unlock the full potential of your HSA, you need a game plan. Here’s how to make it work for you:

1. Pay Out-of-Pocket Now, Save Receipts for Later

Here’s the hack: Instead of using your HSA funds to pay for medical expenses immediately, pay out-of-pocket and keep the receipts. Why?

• Your Money Grows Tax-Free: Every dollar you leave in your HSA can be invested and will grow over time, compounding into a much larger amount.

• Reimburse Yourself Anytime: There’s no time limit on reimbursing yourself for eligible expenses. You can save receipts for years and cash out whenever you want.

Example:

You spend $2,000 out-of-pocket on medical bills this year. Instead of withdrawing from your HSA, you invest the $2,000, and it grows to $5,000 over the next decade. Then, you reimburse yourself the original $2,000 and use the remaining $3,000 for, say, a tax-free family vacation.

Pro Tip: Get a Letter of Medical Necessity (LMN)

For expenses that aren’t traditionally HSA-eligible (like gym memberships, massages or certain supplements), a Letter of Medical Necessity (LMN) can make them reimbursable. This is where Flexup Wellness PLLC comes in. Based in Massachusetts (and expanding soon!), they’ll assess your health and provide the LMN you need to maximize your HSA benefits.

2. Invest Your HSA Funds (the tax free money machine)

Most people leave their HSA funds in a boring, low-interest savings account. Don’t be like most people.

• Choose an HSA Provider That Allows Investments: Fidelity is a top choice because it offers a wide range of investment options, low fees, and even perks like cashback credit cards (2% on every purchase if deposited in an established Fidelity account).

• Start Early: The sooner you invest, the more time your money has to grow.

• Play the Long Game: Treat your HSA like a retirement account. Only withdraw for major medical expenses or reimbursing old receipts (see step #1).

Why Fidelity’s HSA Credit Card Is a Game Changer

Fidelity’s HSA comes with an optional credit card that offers 2% cashback on all purchases. Here’s why it’s brilliant:

• Double the Tax-Free Advantage: Use the credit card for everyday expenses, earn cashback, and deposit that cashback into your HSA. 

• It All Adds Up: Over time, this trick can add hundreds (or thousands) of extra dollars to your account.

• Seamless Integration: The cashback goes straight into your HSA, making it easy to grow your balance without lifting a finger.

  
  

Pro Tip:

Use this card for major expenses—groceries, gas, bills—then pay it off in full each month to avoid interest. It’s like free money for your health savings.

*Using it to pay for medical costs up front and save receipts to justify paying off the credit card in the future (regardless of purchases) is a legendary move.

How to Use Your HSA for a Tax-Free Family Vacation

By now, you’ve built up a hefty HSA balance, saved years of receipts, and are ready to cash in. Here’s how you turn those savings into a dream getaway:

Step 1: Tally Up Your Receipts

Go through your saved receipts for eligible medical expenses (co-pays, prescriptions, glasses, dental work). Add up the total.

Step 2: Reimburse Yourself

File for reimbursement through your HSA provider for the total amount of those receipts. Most providers make this process simple with online portals or apps. Y(ou can also request a checkbook from most HSA administrators and write a check)

Step 3: Spend Your Reimbursement Tax-Free

Use the reimbursed money for anything you want—flights, hotels, margaritas on the beach. Since the reimbursement was for medical expenses, it’s completely tax-free.

Pro Tip:

For traditionally non-eligible items, an LMN from Flexup Wellness PLLC can unlock even more HSA potential. Imagine funding part of your trip with reimbursements for a health-related massage or stress-reducing yoga class—legally.

Other HSA Hacks You Should Know

1. Max Out Contributions Every Year

• Contribution limits for 2025 are $4,300 for individuals and $8,550 for families. If you’re 55 or older, you can contribute an extra $1,000.

• Maxing out your contributions ensures you’re taking full advantage of the tax benefits.

  
  

2. Use Your HSA for Non-Medical Expenses After Age 65

Once you hit 65, your HSA becomes even more versatile:

• Withdraw for any expense without penalties (though non-medical withdrawals are taxed as income).

• Use it to pay Medicare premiums, long-term care insurance, or out-of-pocket healthcare costs.

  
  

3. Plan for Big-Ticket Medical Expenses

HSAs are perfect for planned expenses like childbirth, surgeries, or orthodontics. Save in advance, invest the funds, and let them grow until you need them.

Final Thoughts: The HSA is the Ultimate Financial Ninja Tool

Your HSA isn’t just a savings account—it’s a tax-free, interest-earning, life-enhancing financial weapon. By investing your funds, saving receipts, leveraging perks like Fidelity’s 2% cashback credit card, and working with Flexup Wellness PLLC to unlock hidden potential, you can stretch your healthcare dollars further than you ever imagined.

So, whether you’re saving for future medical bills, planning a tax-free family vacation, or just trying to make your money work harder, the HSA has your back. And honestly? That margarita on the beach has never tasted better.

Now, go forth and HSA like a boss.