HSA
A Health Savings Account—a tax-advantaged account for people with high-deductible health plans to save for qualified medical expenses.
A Health Savings Account (HSA) is a tax-advantaged savings account available to individuals enrolled in a qualifying High-Deductible Health Plan (HDHP). Contributions are tax-deductible (or pre-tax via payroll), growth is tax-free, and withdrawals for qualified medical expenses are also tax-free—making the HSA uniquely triple-tax-advantaged. For 2024, the contribution limit is $4,150 for individual coverage and $8,300 for family coverage.
Unspent HSA funds roll over year after year—there is no "use it or lose it" rule. At age 65, funds can be withdrawn for any purpose without penalty (though non-medical withdrawals are taxed as ordinary income, similar to a traditional IRA). This makes the HSA one of the most powerful long-term savings tools available when funds can be invested in index funds within the account.
To be HSA-eligible, your HDHP must have a minimum deductible of $1,600 (individual) or $3,200 (family) and maximum OOPM of $8,050 or $16,100 (2024 figures). You cannot contribute to an HSA if you are enrolled in Medicare or claimed as a tax dependent.
Real-World Example
By maxing her HSA at $4,150 annually and investing it in a total market index fund for 20 years, the 45-year-old accumulated over $150,000 to cover health expenses in retirement.