Hi, you may be wondering, what is an HSA? A Health Savings Account (HSA) is a tax-advantaged medical savings account from which people can pay out-of-pocket medical expenses. They are used with a high-deductible health plan (HDHP). HDHP is health insurance with lower monthly premiums and higher deductibles compared to other available health insurance plans.

HSAs have a triple tax benefit, which is contributions are tax deductible, earnings grow tax free, and withdrawals for qualified medical expenses are tax free. Money in an HSA is owned by the person who opened that plan and usually rolls over from year to year if it is not used.

Eligibility requires that a person must be enrolled in an HDHP and cannot have other coverage that pays for medical expenses before the deductible is met. Therefore, a person cannot have other health insurance such as a traditional health plan or a flexible spending account (FSA). HSAs do have contribution limits set by the federal government. In 2023, the max contribution for people with self coverage is $3,850 and the max contribution for people with family coverage is $7,750. For people 55 years or older, you are able to contribute an additional $1,000 per year to your HSA.

A major advantage of an HSAs is that people can save money for future medical expenses. You can use money in an HSA to pay out-of-pocket expenses like deductibles, copayments, and prescriptions. HSAs can be used to pay for qualified medical expenses not covered by insurance like vision and dental care. Additionally, an HSA can be used as a retirement savings vehicle. The money in the account can be invested and allowed to grow tax-free, similar to a traditional individual retirement account (IRA). However, there may be other retirement savings options available as well, which we can discuss with you.

Although HSAs can provide significant tax benefits and savings for future medical expenses, they may not be right for everyone. HSAs may not provide as much financial protection as traditional health plans with lower deductibles. Also, the high deductible nature of an HDHP may not be suitable for people with chronic medical conditions or people anticipating high healthcare expenses.

So, a Health Savings Account (HSA) is a tax-advantaged medical savings account, which you can use with a high-deductible health plan (HDHP). HSAs have triple tax benefits, such as allowing individuals to contribute tax-deductible funds, earn tax-free growth, and withdraw tax-free for qualified medical expenses. HSAs can pay out-of-pocket healthcare expenses and function as a retirement savings vehicle. However, HSAs may not provide as much financial protection like traditional health plans and may not be suitable for individuals with chronic medical conditions or high anticipated healthcare expenses.