The Most Important Things to Know About Your Health Savings Account

The Most Important Things to Know About Your Health Savings Account

The Most Important Things to Know About Your Health Savings Account


November 2021

The Most Important Things to Know About Your Health Savings Account

Unexpected healthcare expenses—even among healthy individuals—are the most common cause of sudden financial problems in the United States. In fact, despite the fact that the government spends more on healthcare per capita than anywhere else, American citizens still pay more per year for health insurance than any other nation in the world.

These sorts of statistics can, undoubtedly, be somewhat alarming for many. Even with a good insurance plan, individuals may be expected to pay up to $8,550 out of pocket—and families might end up paying up to $17,100 out of pocket, which is certainly no small chunk of change.

Because the vast majority of the population is unable to cover these sorts of unexpected expenses, many people have begun looking for ways to make their healthcare spending (and saving) a bit more manageable. Contrary to what many people initially assume, there are actually many feasible options available, including a health savings account (SA).

Opening a health savings accounts, or HSA, can help you and your family avoid sudden financial problems caused by rising healthcare expenses. Below, we will discuss the most important things you need to know about your HSA, including how to maximize your account’s total value.

What is a Health Savings Account?

A Health Savings Account (HSA), as described by, 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 a Health Savings Account to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs.”

Though an HSA usually cannot be used to pay for your monthly insurance premiums, there are still many other medical expenses that are covered by these plans. The fact that the money contributed to these accounts is untaxed makes them an extremely appealing savings option, especially for people who are in higher tax brackets. Healthcare expenses inevitably emerge, so you’ll want to have some savings set aside that can be used to pay them. When comparing different health insurance policy options, be sure to check whether the policy is considered “HSA-eligible”—that feature alone makes the policy more valuable.

How can I Maximize the Value of my HSA?

Obtaining a health insurance policy that is HSA-eligible is a clear step in the right direction. However, simply establishing the policy and corresponding savings account will not necessarily minimize your healthcare costs—you’ll also need to make sure you are utilizing the account as effectively as you possibly can.

Here’s how you can maximize the value of your HSA::

  1. Contribute as Much as You Legally Can
    Naturally, the best way to make the most of your Health Savings Account is to contribute as much money to the account as you possibly can. Because all contributions up to the legal limit are tax deductible, using an HSA is a great way to reduce your tax burden in a way using a traditional savings account cannot. For the year 2022, the maximum individual contribution you can make is $3,650 and the maximum family contribution you can make is $7,300. A health savings account is, without a doubt, among the best possible savings vehicle available in terms of flexibility and minimal taxation.
  2. Diversify Your Investments
    When people hear the term “savings account”, they frequently think of an extremely low interest-yielding account attached to a commercial bank. However, a health savings account is a bit different. Effectively, these accounts can be used as an investment vehicle—in addition to being used as a savings vehicle for health expenses—that might even grow at a faster rate than your 401(k) or other accounts. Most HSA plans offer a wide variety of different investment portfolios to choose from, ranging from low-risk investments in the bond market, to higher risk (and higher reward) investments directly in the stock market. Taking the time to compare multiple different investment options will help ensure you find the right fit for your financial needs.
  3. Make an HSA a Key Component of Your Retirement Plan
    Here’s why, at least according to Forbes, “No other savings vehicle can top an HSA”: once you turn 65, you no longer need to use the account for only qualified medical expenses. At that point, you will be able to use your savings to pay for any of your expenses, including your mortgage, travel, and whatever else you might want or need. And even once these savings are rolled over into your retirement fund, you still won’t need to pay taxes on them. The “trifecta” of tax exemptions that comes with an HSA—no taxes upon contribution, growth, or withdrawal—makes it an extremely appealing retirement savings option
  4. Maximize Employer Benefits
    One of the most common ways that people obtain access to an HSA is through their employer. Health Savings Accounts have become an increasingly popular component of company-sponsored benefit packages, especially as healthcare costs continue to rise. If your employer makes contributions to your HSA—as well as other accounts, such as a 401(k)—it will almost always be a smart idea to pursue the largest contributions you possibly can. Contributions from your employer are essential free money—be sure you don’t leave any money sitting on the table.
  5. Avoid Common HSA Penalties
    In order to maximize the value of your HSA, you will need to avoid any and all possible penalties. It is important to realize that, at least until you turn 65, you can only use these savings to pay for qualified medical expenses. This means you cannot use the savings for unqualified medical expenses, such as monthly insurance premiums, nor can use them to pay for any other type of expense. If you do choose to withdraw before 65, you will be forced to pay a 20 percent penalty, essentially eliminating the purpose of creating the account in the first place.


A Health Savings Account is one of the best ways to save for future medical expenses—as well as retirement. When utilized correctly, these accounts can dramatically improve your overall financial well-being.

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