HSA: A Health Savings Account (HSA) is a tax-advantaged savings account designed to help individuals save for and pay for qualified medical expenses. HSAs are available to individuals enrolled in a high-deductible health plan (HDHP). FinStream offers several free personal finance videos explaining the benefits of Health Savings Accounts.  Here’s an in-depth look at HSAs:

Key Features of HSAs

  1. Eligibility: To open an HSA, you must be enrolled in a high-deductible health plan (HDHP). For 2024, an HDHP is defined as a plan with a minimum deductible of $1,600 for individual coverage or $3,200 for family coverage.
  2. Tax Advantages:
    • Pre-Tax Contributions: Contributions to an HSA are tax-deductible, or if made through payroll deductions, they are made with pre-tax dollars, reducing your taxable income.
    • Tax-Free Earnings: Interest and investment earnings in the HSA grow tax-free.
    • Tax-Free Withdrawals: Withdrawals for qualified medical expenses are tax-free.
  3. Contribution Limits: For 2024, the contribution limit is $4,150 for individuals and $8,300 for families. Those aged 55 and older can contribute an additional $1,000 as a catch-up contribution.
  4. Portability: HSAs are owned by the individual, not the employer, so the account stays with you if you change jobs or retire.
  5. Rollover: Unlike FSAs, HSA funds roll over year to year, so you don’t lose unspent money at the end of the year.

Qualified Medical Expenses

HSA funds can be used for a wide range of qualified medical expenses, including but not limited to:

  • Doctor visits and hospital services
  • Prescription medications
  • Dental and vision care
  • Over-the-counter medications (with a prescription in some cases)
  • Health insurance premiums during periods of unemployment

Investment Options

Many HSA providers offer investment options similar to retirement accounts, allowing account holders to invest their funds in stocks, bonds, mutual funds, and other assets to potentially grow their savings over time.

Benefits of an HSA

  1. Triple Tax Advantage: Contributions, earnings, and withdrawals (for qualified expenses) are all tax-free.
  2. Flexibility: Funds can be used for a wide range of current and future medical expenses.
  3. Retirement Savings: After age 65, you can use HSA funds for non-medical expenses without a penalty, though they will be subject to income tax, similar to a traditional IRA.

Considerations and Limitations

  1. High-Deductible Requirement: You must be enrolled in an HDHP to contribute to an HSA, which means higher out-of-pocket costs until the deductible is met.
  2. Record Keeping: You must keep receipts and records of qualified medical expenses for tax purposes.
  3. Penalties for Non-Qualified Expenses: Withdrawals for non-qualified expenses before age 65 are subject to income tax and a 20% penalty.

Example of Using an HSA

Suppose you are 40 years old, enrolled in an HDHP, and decide to contribute $3,000 to your HSA in 2024. Here’s how you might benefit:

  • Contribution: $3,000 (reduces your taxable income)
  • Earnings: Suppose you invest part of your HSA funds and earn $100 in interest or investment gains, which is tax-free.
  • Qualified Expenses: You use $1,500 for medical expenses, such as doctor visits and prescription medications, tax-free.

The remaining $1,600 in your HSA rolls over to the next year, continuing to grow tax-free.


An HSA is a powerful tool for managing healthcare costs, offering significant tax advantages and the ability to save for future medical expenses. It provides flexibility, portability, and the potential for long-term savings growth, making it an attractive option for individuals with high-deductible health plans.

Watch these free videos on FinStream TV to learn more about HSA’s.