Health Savings Accounts Explained

Eric Mischler |

Healthcare costs are an important part of many households' financial lives. While most people think of a Health Savings Account (HSA) as a way to pay for medical expenses, these accounts can offer additional benefits that make them worth understanding within the context of a broader financial plan.

Whether you're currently enrolled in an HSA-eligible health plan or simply exploring your options, understanding how HSAs work can help you make more informed financial decisions.

What Is an HSA?

A Health Savings Account (HSA) is a tax-advantaged savings account available to eligible individuals enrolled in a qualifying High Deductible Health Plan (HDHP). Funds contributed to an HSA can generally be used to pay for qualified medical expenses, and unused funds may remain in the account from year to year rather than being forfeited.1

Why Are HSAs Often Discussed in Financial Planning?

  • Tax Advantages
    • HSAs are often recognized for their favorable tax treatment. Eligible contributions may be tax-deductible, investment earnings can grow tax-deferred, and withdrawals used for qualified medical expenses are generally tax-free.1
  • Flexibility and Ownership
    • Unlike some employer-sponsored benefits, an HSA belongs to the account owner. If you change jobs, switch health plans, or retire, the account generally remains yours.2
  • Potential for Long-Term Savings
    • Depending on the HSA provider, account holders may have the opportunity to invest a portion of their balance. This means funds that are not needed for current medical expenses may have the potential to grow over time and be available for future healthcare costs.3
  • HSAs and Retirement Planning
    • Because unused balances can generally remain in the account and continue to grow, some individuals view an HSA as a resource for future qualified healthcare expenses.3

Important Considerations

Eligibility requirements apply, annual contribution limits are established by the IRS, and withdrawals used for non-qualified expenses may be subject to taxes and additional penalties depending on an individual's circumstances.1

Sources

  1. Internal Revenue Service (IRS). [URL: https://www.irs.gov/publications/p969]
  2. HealthCare.gov [URL: https://www.healthcare.gov/high-deductible-health-plan/]  
  3. Congressional Research Service, 2026  [URL: https://www.congress.gov/crs_external_products/R/PDF/R45277/R45277.11.pdf]

Disclosures 

This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. Investing involves risk including loss of principal. No strategy assures success or protects against loss.