3 Tips To Make The Most Of Your Health Savings Account


Health Savings Accounts (HSAs) are becoming very popular lately but many people don’t know how to make the most of them. HSAs are much more than just another way to pay for Health Savings Accountsyour medical expenses. If an HSA is used correctly, it can be a valuable vehicle for retirement savings.

What is an HSA?

An HSA is a savings account that works in tandem with a high deductible health plan. It can be established by and individual or family to help pay for qualified medical expenses. HSA’s combine the features of a traditional retirement account such as your 401k and allows you to deposit funds and get a 100% tax deduction on your contributions up to the limits established by the IRS.

All contributions to your HSA remain in your account until you use them – there is no use it or lose it rule. Any interest you earn on your account accrues over the years and grows tax-deferred. HSA funds that are used to pay for qualified medical expenses can be used tax-free and there is no penalty for early withdrawals. Add it all up, an HSA allows you to avoid taxes as your pay for your healthcare.

Here a 3 ways to make the most of your Health Savings Account

1. Make Your Maximum HSA Contributions.

The maximum contributions for 2015 as deemed by the IRS are $3,300 for a single and $6,650 for a family. If you’re 55 years or older you can contribute an additional $1,000 per year to your HSA. You can make your contributions in a lump sum anytime during the year or have your contributions automatically deducted directly from your paycheck.

2. Appreciate The Benefits of HSAs

Contributions to your HSA, up to the annual limit, are tax deductible. Your employer can also make pre-tax contributions on your behalf and are excluded from your gross income which could reduce your Adjusted Gross Income (AGI) or the taxes you pay. The funds in your HSA can be used to pay for qualified medical expenses for you, your spouse, or your children and the account stays with you even if you change employers.

3. Understand What Qualified Medical Expenses Are.

Qualified Medical Expenses are determined by The IRS (IRS Publication #502) and as long as you use your HSA funds to pay for qualified medical expense, the withdrawals are tax-free. You can use your HSA money to pay for out-of-pocket medical expenses that your current health plan does not cover. Such as, co-pays, co-insurance, deductibles, and even your prescription drugs. HSA funds can even be used to pay for dental and vision care.

How about the downside? Well, HSA funds don’t pay for all forms of health care. For example, you can’t pay for over-the-counter drugs with HSA assets unless they are prescribed by your doctor. In the worst-case scenario, if you get seriously ill while you’re enrolled in a high-deductible health plan you could lack enough money to pay medical expenses. If you use HSA funds for non-medical expenses, you are required to pay taxes on the withdrawal, plus a 20% penalty before age 65.


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