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What is a HSA account?

LP
Len Perroots
Updated 6 months ago
A Health Savings Account (HSA) is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in an HSA to pay for deductibles, copayments, coinsurance, and some other expenses, you can lower your overall healthcare costs. HSAs are only available to folks who have a High Deductible Health Plan (HDHP).

The beauty of an HSA doesn't stop at tax savings. The funds in your HSA roll over year to year if you don't spend them. There's no "use it or lose it" policy, which is a common feature of Flexible Spending Accounts (FSAs). Plus, the interest and earnings on the money in the account grow tax-free. After the age of 65, you can withdraw funds for any purpose without penalty, though you'll pay income tax if the withdrawal is not for qualified medical expenses. This makes HSAs a powerful tool for saving for healthcare costs in retirement, in addition to their immediate tax benefits.
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