What Is A HSA (Health Savings Account)
The Money Class You Never Got in School
What Is an HSA?
An HSA (Health Savings Account) is a special savings account you can use to pay for medical expenses—tax-free.
You can only open an HSA if you’re enrolled in a High Deductible Health Plan (HDHP), which usually has lower premiums but higher out-of-pocket costs.
Why HSAs Are a Big Deal
HSAs are the only savings tool that gives you a triple tax benefit:
- Tax-free contributions (lowers your taxable income)
- Tax-free growth (invest it and grow it like a retirement account)
- Tax-free withdrawals (when used for medical expenses)
$4,150 for individuals
$8,300 for families
+$1,000 if you're 55 or older
What Can You Use It For?
Pretty much anything health-related:
- Doctor visits
- Therapy and mental health
- Prescriptions and lab tests
- Dental, vision, and contacts
- Acupuncture, chiropractic care, medical devices, birth control, and more
Check out HSAstore.com for a list of approved items and services.
Spend It or Stack It?
You can use your HSA now for out-of-pocket medical expenses—or you can treat it like a stealth retirement account and let it grow.
How to Use an HSA the Smart Way
- Contribute automatically: Set up payroll deductions or monthly deposits.
- Pay for medical bills with cash now: Then save your receipts.
- Invest the HSA money instead: Most HSAs let you invest once you reach a $1,000–$2,000 balance.
- Reimburse yourself later: You can pull money out in 5, 10, even 20 years tax-free—as long as you keep those receipts.
Should You Invest Your HSA?
Absolutely—if you can afford to pay for your medical costs out of pocket now. Letting your HSA balance sit in cash is like parking it in a savings account with no growth. Investing it means it can compound over time just like a 401(k) or Roth IRA.
Sample Growth: Invested vs. Not Invested
| Scenario | Years Contributing | Annual Contribution | Value at 20 Years (7% Return) |
|---|---|---|---|
| Used as Cash Account | 20 | $3,000 | $60,000 |
| Invested in Index Funds | 20 | $3,000 | $123,000+ |
That’s more than double—for doing nothing extra but choosing to invest it.
What Happens If You Don’t Use It?
- You can use it at any time in the future for qualified medical expenses.
- After age 65, you can withdraw the money for any purpose—you just pay regular taxes (like a traditional IRA).
- If you use it for medical expenses, it's tax-free forever.
Bottom Line
If you're offered an HDHP and an HSA, it can be one of the most powerful wealth-building tools available—especially when you're young.
Spend it now for prescriptions, or stack it and invest for future health (and financial) wins.
And as always, use YNAB (You Need a Budget) to track your HSA contributions, expenses, and investment goals—all in one place.
Try YNAB free with my link here
You’re in MoneyMode now. And now your HSA is, too.
