The Stealth Wealth Vehicle: Why We Love The HSA (Under Three Strict Conditions)

In the world of financial planning, we often obsess over asset allocation, tax-loss harvesting, and Roth conversions. However, one of the most potent vehicles for wealth accumulation is frequently disguised as a boring insurance decision: The High Deductible Health Plan (HDHP) paired with a Health Savings Account (HSA).

At Rigden Capital, we often see clients shy away from HDHPs. The acronyms alone can be inducing, and the concept of a "high deductible" sounds antithetical to security. The prevailing wisdom suggests that "better" insurance means lower deductibles and predictable co-pays.

We disagree—but with a major asterisk.

We love the HDHP/HSA combination, but not as a standardized solution for everyone. We view it as a specialized financial instrument that only works if you can execute a specific strategy. It is not just health insurance; it is a "Stealth IRA" on steroids.

We recommend this strategy enthusiastically, but only if the following three conditions are met.

Condition 1: YOU Must Max Out the HSA Every Year AND HAVE A RUNWAY

The first condition is non-negotiable. An HSA is worthless to your long-term financial plan if it is treated merely as a pass-through account for buying contact lenses and aspirin. The power lies in the contribution limits and your time horizon. If you are set to retire next year, your runway for funding is short, and thus, you will likely want to shy away from starting an HSA plan.

An HSA is the only investment vehicle in the United States tax code that offers a Triple Tax Advantage:

1. Tax-Deductible Contributions: Money goes in pre-tax (lowering your taxable income today).

2. Tax-Free Growth: Interest and investment gains within the account are not taxed.

3. Tax-Free Withdrawals: Money comes out tax-free, provided it is used for qualified medical expenses.

   
   

Even a Roth IRA only gives you tax-free growth and withdrawals; you still pay taxes on the income before you contribute. The HSA beats the Roth.

However, this advantage is wasted if the account isn't funded. To make this strategy viable, you must have the cash flow discipline to hit the maximum contribution limit every single year.

• Note: As we look toward 2026, the contribution limits are climbing again. For 2026, individuals can contribute up to $4,400 and families up to $8,750. If you are 55 or older, you can add a $1,000 catch-up contribution.

If you are choosing an HDHP solely to save money on premiums, but you aren't redirecting those savings into the HSA to hit the cap, you are missing the point. You are taking on risk without capturing the reward.

Condition 2: The Household Must Be "Medically Boring" (With Strategic Exceptions)

This is the risk management portion of the equation. The HDHP strategy is an arbitrage play: you are betting that your medical expenses will be lower than the premium savings and tax benefits you accrue.

Therefore, this strategy is generally only viable when the household is in a "utilization valley." You go to the doctor for your annual physical (which is usually 100% covered as preventative care), perhaps one urgent care visit, and the occasional dental cleaning.

If you require monthly specialist visits, expensive maintenance medications, or frequent imaging, a traditional PPO with low co-pays is likely the mathematically superior choice. In those scenarios, the "insurance" part of health insurance takes priority over the "investment" part.

Planning for Life Events: The "Baby and Surgery" Clause

A common misconception is that having an HSA means you can never have a baby or get surgery. That is not true. However, the timing of these events is critical to the strategy.

The "Runway" Concept Ideally, you want to avoid pulling from your HSA during the first 3 to 5 years of the account’s life. These are the "accumulation years." If you open an HSA in January and have a baby in November of the same year, you will likely drain the account to pay the hospital bills. This kills the compounding effect before it even begins.

Once the account has a balance of $20,000 or $50,000, a single pregnancy or knee surgery won't deplete the principal entirely, allowing the remaining capital to keep growing. But in the early years, the account is vulnerable.

Strategic Switching We recommend reviewing your health status annually during Open Enrollment. You can—and should—switch strategies based on your life phase:

• The "Delivery Year" Strategy: If you are planning to get pregnant, do the math. Often, it makes sense to pause the HDHP strategy for one year. Switch to a traditional PPO/HMO with a lower deductible and predictable hospitalization co-pays for the year of delivery. Once the baby is healthy and home, switch back to the HDHP/HSA the following year.

• Elective Surgeries: If you need a knee replacement or a shoulder repair, you have the advantage of foresight. Switch to the plan with the best surgical coverage for that calendar year, get the procedure done, and return to the HSA strategy once you have recovered.

• Unexpected Events: If an unexpected major medical event occurs (like an appendectomy), this is where understanding your Max Out-of-Pocket is vital. You must have cash reserves outside the HSA to handle this "moat" (more on this below) so you aren't forced to raid your HSA investment portfolio during a market downturn.

The HSA strategy works best when your medical life is boring. When your medical life gets exciting (babies, surgeries), we often pause the strategy to prioritize coverage over investment.

Condition 3: We Allow the HSA to Invest for the Long Term (The "Shoebox Strategy")

This is the step that separates the average saver from the strategic investor.

Most people treat their HSA like a checking account. They go to the doctor, get a bill for $200, and swipe their HSA debit card. We advise against this.

To maximize the power of the HSA, you must treat it as a long-term retirement account, not a spending account. We utilize a tactic often called the "Shoebox Strategy."

The Workflow

1. Incur the medical expense. (e.g., A $200 urgent care visit).

2. Pay for it out of pocket. Use your standard checking account or a rewards credit card (paid off immediately). Do not touch the HSA funds.

3. Invest the funds inside the HSA. Leave that $200 in the HSA and ensure it is invested in low-cost index funds (S&P 500, Total Stock Market, etc.).

4. Save the receipt. Digital storage is best. Keep a folder in your cloud drive labeled "HSA Reimbursements."

Why Do We Do This?

There is currently no statute of limitations on when you can reimburse yourself from an HSA. The IRS only requires that the HSA was established before the expense occurred.

You can incur a medical expense in 2025, pay cash for it, and let that money grow in the market for 20 years.

Let’s look at the math: Imagine you have a $5,000 medical bill today.

• Scenario A (The Spender): You pay the bill with your HSA. The balance drops by $5,000. That money is gone forever.

• Scenario B (The Investor): You pay the $5,000 with cash from your savings. You leave the $5,000 in the HSA invested at a hypothetical 7% annual return.

  • In 20 years, that $5,000 has grown to roughly $19,300.

  • In the year 2045, you can reimburse yourself for the original $5,000 expense tax-free.

  • The Result: You put $5,000 back in your pocket, but you still have $14,300 of tax-free growth remaining in the account to pay for Medicare premiums or long-term care in your senior years.

This strategy turns your current medical bills into future tax-free wealth. However, it requires that you have enough liquidity in your personal checking/savings to pay for medical needs without tapping the HSA.

The "Moat": Respecting the Deductible and Out-of-Pocket Max

While the long-term strategy is compelling, we must respect the mechanics of the insurance policy. An HDHP places a "moat" between you and your insurance benefits. You must cross this moat with your own cash before the insurance company begins to pay.

The Deductible

In an HDHP, you pay the negotiated rate for all medical care until you meet your deductible (which is growing by the year). You need to ensure you have an emergency fund or cash buffer distinct from your long-term investments to cover this.

The Out-of-Pocket Max (OOP Max)

This is your catastrophic safety net. It is the absolute most you will pay in a year for covered services. For 2026, limits are rising to roughly $17,000 for families.

Knowing your OOP Max is vital for risk assessment. If you were to get into a severe accident tomorrow, could you write a check for the OOP Max without destroying your financial stability? If the answer is no, the HDHP is too risky, regardless of the HSA benefits.

The Bottom Line

At Rigden Capital, we view the HSA not merely as a way to pay for healthcare, but as a retirement vehicle that rivals the 401(k). By maxing it out, investing the balance, and paying current expenses with cash, you are building a tax-free healthcare endowment for your future self.

However, this requires discipline, liquidity, and good health. If you check those three boxes, the HDHP with an HSA is a clear winner. If you don't, it’s simply a high-risk plan with a high price tag.

Do you need help analyzing your open enrollment options or setting up your HSA investment strategy? Let's review your current health liquidity and ensure your plan aligns with your broader wealth goals.

Contact Us

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About Rigden Capital Strategies

Rigden Capital Strategies was founded on a simple belief: financial advice should be personal, transparent, and centered around your goals—not built on generic models or product-driven sales. With decades of combined industry experience, we’ve developed a process grounded in three core values: value, integrity, and progress.

As a fee-only fiduciary, we provide personalized, goals-based wealth planning services designed to adapt with your life. Our services include investment management, retirement and tax planning, and estate coordination. We use a mix of active and passive strategies to help clients navigate market changes with clarity and confidence.

We believe in building real relationships and delivering clear, actionable strategies—focused on long-term planning and aligned with your objectives.

Your goals, our strategies. Together, let’s make your goals happen.

Disclosure: This content is for informational and educational purposes only and should not be interpreted as financial, legal, or tax advice. While we strive for accuracy, we do not guarantee the completeness or reliability of the information provided. Investment decisions should be based on individual circumstances, and we recommend consulting a qualified professional before implementing any financial, legal, or tax strategies. Past performance is not indicative of future results, and all investments carry risks, including potential loss of principal. No investment strategy can guarantee success or protect against loss in all market conditions. Investors should carefully consider their risk tolerance, investment objectives, and financial circumstances before making investment decisions.