What's an HSA? Health Savings Accounts (HSA) allow you to save and invest pre-tax funds, then recoup those funds, including investment growth, tax free for medical expenses. This type of account appeals to those with expected and unexpected medical bills looming in retirement. We recently discussed the benefits and considerations of an HSA on our podcast, Frugal Living.

Benefits of an HSA

  • Deposited pre-tax to reduce expenses
  • Can be invested for tax-free growth
  • Untaxed when used for qualifying medical expenses

Note that not everyone qualifies for an HSA. A person must have a high-deductible health insurance plan to open an HSA. So what is a high-deductible health insurance plan? According to Healthcare.gov, it's a plan with an individual deductible of $1,400 or more. Qualifying family plans have deductibles of $2,800 or more.


While, by definition, these plans have higher deductibles than other insurance plans. They often also have lower monthly premiums. Lower premiums, paired with the ability to save money through a tax-advantaged health savings account, make these insurance plans much more palatable for some investors.

HSA Considerations

  • Only available with a high-deductible insurance plan
  • Can only be used for qualifying medical expenses
  • Annual limits on contributions
  • Some have monthly account fees

Some HSA administrators charge monthly account fees and some waive fees once the HSA reaches a specific account threshold. Make sure to check your documentation when you sign up. Some unscrupulous providers hide or fail to disclose their fees, so it makes sense to ask, in writing, for a fee breakdown before you sign up.


According to SHRM, the contribution limit for 2022 was increased to $3,650 for individuals and $7,300 for families. Note that adults over 55 may contribute an extra $1,000 as a "catch up contribution" to the plan.


One of the most common questions about these types of accounts is: How do HSAs differ from FSAs? While both accounts sound similar, they couldn't be more different.

Some workers use a flexible spending account (FSA) to collect pre-tax dollars for use on qualifying medical expenses in a single year. They choose how much to fund in their FSA, and the funds must be used before the end of the year. Unused funds are forfeited. That leads some people to spend on unneeded items at the end of the year so they avoid losing their savings.

What are the limitations an FSA?

  • Lose funds at the end of the year
  • Cannot invest funds

How does an HSA compare?

  • Funds remain in the account
  • Funds can be invested

Health savings accounts need to be used on qualifying medical expenses, but they don't need to be used this year. In fact, workers can invest their unused HSA funds. Those funds may grow each year until the worker retires. Then, they can use the funds for medical expenses as they get older. Unlike Series I bonds, HSA funds may only be used for medical expenses. Funds withdrawn for unapproved expenses face additional fees.

increasing piles of currency with sprouting plants

Should I Get an HSA?

The value of an HSA depends on a few factors. To evaluate its worth, calculate the amount spent on annual health expenses. These expenses include monthly insurance premiums and overall deductible. Then, consider the benefits of an HSA. For those with medical expenses during retirement, an HSA plan may offer surprising benefits.