That is a great idea! I’d also add carryover of any balances from one year to the next. (Or did I miss that? Still working on first cup of coffee here.)
HSA’s already allow the balance to carry over year to year and can invested thus potentially earn even more. If started as a young person, used carefully, employer contributes and medical expenses are normal, the person can have a substantial fund by the time they retire. It is at that age that they will need to start spending more of their account on health care.
For example:
Let say someone is 20 yr old at the start and starts with a 0 balance. Lets also assume that the person puts in $150 per month either on their own or combined with employer contributions. They purchase a $50/month catastrophic insurance plan. So a net of $100 per month goes into the account. At an average 8% return, by the time they are 30, that account grows to about 18,000.
Now about Thirty, people start having families so their monthly insurance is going to go up. Generally people also get better jobs and thus have more money to put into their plan. Lets now assume that the contribution per month, minus premiums paid leaves a monthly addition of only $25. By the time the individual is forty, the account has grown to about $40,000.
Now from forty to fifty, we are dealing with teens, braces, glasses, tonsils, etc. So we are going to assume that the individual puts just enough in to cover the cost of their insurance and that $2,400 per year ($200 / month) will be taken out of the account to cover these expenses. That would leave around $50,000 in the account by the time the person is fifty.
So from fifty to sixty-five, the kids have moved out, there are some monthly prescriptions and we are back down to a two person insurance plan. So back to adding $100 per month. At sixty-five, the account is worth about $190,000.
This then provides a pool of money to start paying against the health costs of old age and during retirement. If the person is able to make it to 75 and just cover their premiums or medical bills out of pocket (another 10 years of just earning interest) that account grows to over $400,000. That is enough to pay for or substantially defray the cost of nursing home, assisted living, etc.
Another interesting possibility, put $250 in to a child’s account when they are born. They will start their HSA with about $1,000 at 20.
So assuming the above scenario:
20 - $1000
30 - $20,000
40 - $47,000
50 - $67,000
65 - $245,000
75 - $528,000