Getting started with HSAs

What's a health savings account and how does it work? Here is a quick guide to give you a well-informed start!

Updated over a week ago

What's an HSA?

A Health Savings Account or HSA is a savings account designed to reduce out-of-pocket medical expenses and serve as a retirement savings vehicle.

An HSA is like 401(k) for your healthcare but is more flexible to use.

Why get one?

Healthcare and living expenses are on the rise. With HSAs,

  • Money deposited is tax-free

  • Funds can grow tax-free. (You can invest your funds or earn interest.)

  • Eligible spending is tax-free

That's a triple-tax-advantaged account!

You can also invest and grow your HSA funds with stocks, bonds, and more for a quadruple-tax advantage. Plus,

You get to keep unspent HSA funds as long as you want.

HSAs belong to the individual – NOT the employer or health plan provider. If you leave your job or change your health plan provider, the account is still yours and goes with you.

If you lose HSA-eligible health coverage or have a disqualifying circumstance, you will not be able to deposit into your HSA, but you can still spend and invest the remaining funds for as long as you want.

HSA funds roll over each year

The most significant difference between an FSA and an HSA is that HSA funds roll over—there is no use-it-or-lose-it rule.

The sky is the limit! Well, sort of...

You need to be on a High Deductible Health Plan (HDHP) that is HSA-eligible to open an account and watch out for disqualifying circumstances to maintain eligibility.

There are also annual contribution limits that you need to follow to avoid IRS tax penalties similar to 401(k)s.

Even with some limits, HSAs are a unique, cost-cutting, savings vehicle that everyone should have!

Did this answer your question?