A health savings account (HSA) can help you lower your taxes, pay for health care more easily and even save for retirement.
HSAs are only available with high-deductible health plans. You can use HSA funds to pay for eligible health care expenses and for out-of-pocket costs your health plan doesn’t cover. To see if an HSA is right for you, visit Further (formerly SelectAccount®).
1. Save on taxes
Your HSA contributions go into your account before taxes. The money you save to your HSA lowers your taxable income – so you may pay less in taxes.
You’re a college student
Your tax bracket: 10%
Your HSA contribution: $25/month ($300/year)
You save: $30 year in taxes (10% of $300 = $30)
You’re a young professional
Your tax bracket: 15%
Your HSA contribution: $100/month ($1200/year)
You save: $180 year in taxes (15% of $1200 = $180)
You’re a retirement-bound professional
Your tax bracket: 25%
Your HSA contribution: $300/month ($3,600/year)
You save: $900/year in taxes (25% of $3,600 = $900)
2. Save on your medical expenses
Use your HSA funds to pay coinsurance, copays and your deductible (all tax-free). You can also use HSA funds to pay for some costs your plan doesn’t cover, like dental care, orthodontia contacts and eyeglasses. See eligible health-related expenses– Opens in a new window.
If you use HSA money for non-eligible expenses, you will pay taxes and a penalty on the money you took out . The penalty no longer applies starting at age 65.
3. Your money works harder in an HSA
- Money in your HSA account earns tax-free interest.
- Any unused HSA funds roll over to the next year.
- You can spend your HSA dollars on eligible health care expenses, or save and investment them for the future.
4. You’re in control
You decide when and how to spend or save the money in your HSA. The money is yours forever. It doesn’t expire, and you can take it with you if you change jobs or switch to another high-deductible health plan.
5. An HSA is an investment
You can invest a portion of your HSA balance in mutual funds, stocks and bonds. Generally, this option is available only when you maintain a certain account balance.
6. Save for retirement
You can use your HSA to save for retirement. At age 65, you can use the funds for any purpose without a penalty. The money you take out to pay for eligible health care expenses continues to be tax free. You also can take money out for other reasons without paying a penalty.