Health Savings Accounts (HSA)

A Health Savings Account (HSA) is one of the most tax-advantaged ways to save for medical costs — but only if you're enrolled in a qualifying High Deductible Health Plan (HDHP). An HSA gives you three tax benefits: contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses are tax-free.

To open an HSA, you must be enrolled in an HDHP, have no other disqualifying coverage like most traditional plans or Medicare, and not be claimed as a dependent on someone else's tax return. Your HDHP determines your out-of-pocket structure, and your HSA holds money you can use for deductibles, copays, prescriptions, and many other qualified expenses.

There are annual limits on how much you can contribute. For 2026, the limits are $4,150 for individual coverage and $8,300 for family coverage, with an additional $1,000 catch-up contribution if you're 55 or older. Your contribution must be prorated if you're only covered by an HDHP for part of the year.

Funds in an HSA roll over year after year — there's no 'use it or lose it' like a Flexible Spending Account. The account is portable too: it moves with you if you change jobs or plans. Many people treat their HSA like a retirement account, paying current expenses out of pocket and letting the balance grow tax-free for years.

If you use HSA funds for non-qualified expenses before age 65, you'll owe income tax plus a 20% penalty. After 65, you can withdraw for any reason without the penalty (though non-medical withdrawals are still taxed). Because the funds can be invested, an HSA can meaningfully grow over time.

An HSA isn't right for everyone. It works best when you can comfortably cover your deductible and want long-term tax savings. If your income qualifies and your budget allows, pairing an HDHP with an HSA funded to the limit can be one of the most powerful coverage moves available.