The Only Account the IRS Never Taxes Going In, Growing, or Coming Out: 3 ETFs That Belong Inside It

The Health Savings Account (HSA) offers a unique triple tax advantage: deductions on contributions, tax-free growth, and tax-free qualified medical withdrawals. A recent analysis identified three low-cost ETFs that can be integrated into an HSA to form a comprehensive, long-term investment portfolio: the Vanguard S&P 500 ETF (VOO), the Schwab U.S. Large-Cap Growth ETF (SCHG), and the iShares Core MSCI Total International Stock ETF (IXUS).

VOO mirrors the S&P 500, providing exposure to approximately 500 of the largest U.S. companies with an expense ratio of just 0.03%. Over the past decade, it has delivered a return of 313.91%, outperforming inflation in an HSA. SCHG, on the other hand, focuses on high-growth U.S. large-cap stocks, including tech giants like NVIDIA, Apple, and Microsoft, achieving a 445.43% return over the same period, thanks to its growth tilt and zero tax drag within an HSA.

IXUS expands the international reach of the portfolio by tracking the MSCI ACWI ex USA IMI Index, tapping into developed and emerging markets. It has seen a 16.33% return year to date and a 26.57% gain over the past year, further diversifying the HSA's international exposure. While most HSA custodians require a minimum cash balance before investing the remainder and may impose monthly fees, it's crucial to verify these conditions with your chosen provider.

Additionally, HSA funds should be used to cover medical expenses initially, as selling investments during market downturns could forfeit the tax benefits. To build a robust retirement fund, a cash buffer outside the HSA is recommended before investing in VOO, SCHG, and IXUS.