A Guide to Health Savings Accounts

By Nicole Young on April 30, 2024

A Guide to Health Savings Accounts By Carrie Shoener, MSF

What is a HSA?

A HSA, or a Health Savings Account, is a tax-free account for qualified medical expenses. Individuals and families are eligible to use a Health Savings Account when they opt into a high deductible health plan. Because these plans have higher deductibles, Health Savings Accounts offer a way for people to save for medical expenses that are not covered by their insurance.

How does it work?

Both individuals and employers can contribute to HSAs on the employee’s behalf. Contributions, earnings, and distributions are not taxed if they are used to pay for qualified expenses. These savings can be even more powerful because once the account reaches a certain balance, it can be invested in securities of your choice. In this way, Health Savings Accounts operate similarly to a Roth IRA that is specifically for medical expenses.

When can I use it?

While many people contribute to an HSA and use the funds for expenses that are incurred within the same year, there is another way to use these savings to your advantage. If your cash flow allows, we recommend contributing the maximum to your Health Savings Account and paying for your medical expenses with cash on hand. Through recurring contributions and investment performance, the balance of your Health Savings Account has great potential to grow throughout your career. Then, it can be used to fund medical expenses in retirement.

What can I contribute?

In 2024, the maximum allowable contribution to an HSA is $4,150 for an individual and $8,300 for a family. Individuals aged 55 or older can contribute an additional $1,000. Please note that you are not eligible to contribute to an HSA if you have another health plan or are enrolled in Medicare.

How do I know if it’s right for me?

While Health Savings Accounts can be a great option to save for medical expenses, a high deductible plan may not be the right choice for everyone. When making your benefit elections, be sure to consider the details of each plan and your family’s situation before coming to a firm decision. Your financial planner can walk you through analysis to determine which option is best for you.

Article written by, Carrie Shoener, MSF, Private Vista Advisor

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