Health Savings Accounts (HSAs) continue to grow in popularity. The latest research from Devenir shows that there are 30+ million active HSAs, and 1 in 5 Americans younger than 30 are current members.

Clearly, people recognize the value of HSAs and are finding ways to take advantage.

HSAs bring the potential for tax savings, healthcare savings, retirement savings—and so much more.%>.1 In fact, you can use tax-free money in your Health Savings Account to pay for qualified medical expenses, including thousands of items you use every day.

Check out everything you can buy at the HSA Store.2

Now, let’s jump in. This article counts 10 ways to use an HSA. Below you’ll find insights to get the most from your Health Savings Account.

We include simple illustrations and lots of examples, so you can see the power of an HSA and confidently determine how you can maximize your savings opportunity. The truth is that HSAs aren’t complicated but there are little tricks that can make a world of difference.

#1 Get lower health plan premiums

HSA eligibility requires enrollment in an HSA-qualified health plan, often called a “consumer choice” or “high-deductible” health plan. If you’re not enrolled in one of these health plans, you can’t make HSA contributions and take advantage of the associated tax-saving benefits.

The good news is that, in many cases, HSA-qualified health plans offer much lower premiums compared to traditional Preferred Provider Organization (PPO) health plans. Check your plan documents: You might find the savings on premiums alone can be thousands each year.

That’s less money out of your paycheck and more money in your pocket.

Here’s an example for illustration.3

Be sure to read our article on high-deductible health plans for more information.

#2 Reduce your annual tax bill

Contributions to your HSA are tax deductible, which means that every dollar you contribute can reduce your annual taxable income. If your employer offers an HSA, then typically you can sign up to make pre-tax payroll contributions. But even contributions you make on your own are tax-deductible.

You can always view the latest IRS contribution limits at this page.

You won’t pay federal income taxes, nor will you pay FICA payroll taxes. Depending on where you live and your unique tax situation, that can translate into substantial tax savings on those HSA contributions.

Let’s say your effective federal tax rate is 20 percent and you contribute $7,000 for the year. You could see $1,400+ in tax savings, since that is $7,000 on which you won’t pay any taxes at all.4

Learn more about HSA basics with our on-demand webinar.

#3 Grab your employer HSA contribution

Many organizations may offer HSA contributions just for choosing HSA-qualified health plans. In other words, companies may contribute directly into your account. Some even offer an HSA contribution match, just like with a 401(k).

The total contribution could equal thousands of dollars each year. Be sure to review your plan documents to see if an employer HSA contribution is available. Keep in mind that employer contributions count toward annual Internal Revenue Service (IRS) contribution limits.

Some organizations offer $1,000 or more just for choosing an HSA.

#4 Maximize your spending power

Because HSA contributions are tax deductible, you get to keep 100 percent of every dollar you contribute. That means when you use your HSA to pay for qualified medical expenses, every dollar in your HSA stretches further than, say, the post-tax dollars in your checking account. In other words, your HSA gives you an instant boost on money to pay for thousands of everyday healthcare expenses.

Image shows increased spending power using health savings account vs checking account.

There are literally thousands of qualified medical expenses that you can pay for with an HSA, including over-the-counter medications and doctor visits.

Want to see all the things you can buy with your HSA? Visit the HSA Store.5

#5 Create a healthcare emergency safety net

According to a survey by ValuePenguin, 61 percent of Americans have been surprised by an unexpected medical bill. But your HSA can help you be ready for the unexpected.

One of the biggest differences between a Flexible Spending Account (FSA) and an HSA is that unused FSA funds eventually expire and are forfeited back to your employer. By contrast, money in your HSA rolls over each year, every year—even if you change employers, health plans, or retire.

This enables you to save for unplanned, future medical expenses.

Think of your HSA as an extension of your emergency fund. The same way you keep extra savings for an unexpected home repair or car accident, your HSA lets you keep extra savings for a healthcare emergency.

Don’t get caught by surprise.

#6 Invest your HSA in low-cost mutual funds

Some members have hundreds of thousands of dollars saved in their HSA. How do they do it? They invest their HSA to capitalize on potential compounding returns and tax-free account growth.6

At HealthEquity, you can invest in a powerful lineup of low-cost mutual funds.

The chart below illustrates the power of HSA investing compared to a low-yield savings account.7 For the sake of illustration, let’s assume $2,000 annual contribution and a modest return of 6% each year for 24 years. For context, according to a recent article from Investopedia, the S&P 500 has on average returned 10% annually since its inception in 1926.

Graph shows investing brings the potential to double your money compared to a simple savings account.

#7 Save for healthcare expenses in retirement

When it comes to retirement, the 401(k) may be more well known. But your HSA can be one of the best accounts for saving for retirement. Not only can you invest your HSA and potentially capitalize on tax-free growth, but your HSA also delivers powerful tax advantages you can’t find anywhere else.

According to recent estimates from Investopedia, the average couple will need $300,000+ to cover out-of-pocket medical expenses in retirement. So, retirees will need all they help they can get.

That’s why more Americans than ever are investing in their Health Savings Account (HSA) to build long-term retirement healthcare savings.

As you can see from the table below, your HSA brings all the tax efficiency of a 401(k) along with additional extra bonuses. For example, 401(k) contributions are subject to payroll taxes, while HSA contributions are not. So, HSA contributions go further than 401(k) contributions and can help you save faster.







Not taxed

FICA taxed


Not taxed

Not taxed

Distribution for qualified medical expenses

Not taxed

Taxed (As ordinary income)

Distribution for non-qualified medical expenses

Taxed (As ordinary income
after age 65)

Taxed (As ordinary income
after age 59-1/2)

Required minimum distribution


Yes (age 72)

In addition, HSAs do not have required minimum distributions. Plus, members age 65 and older can take taxable HSA distributions for any expense—just like a 401(k). And, of course, distributions are always tax-free when used for qualified medical expenses.8

Considering how much you’re likely to spend on healthcare in retirement, those advantages can translate into significant savings.

#8 Delay reimbursement to capitalize on tax-free account growth

One thing that makes your HSA uniquely flexible is that the IRS does not stipulate a required reimbursement timeframe. This creates opportunity to effectively “bank” your receipts and save them to pay yourself back down the road.

How it works

  • Step 1: Pay for healthcare now out of pocket

  • Step 2: Save your receipt

  • Step 3: Let the money in your HSA grow

  • Step 4: Reimburse yourself whenever you want

Delayed reimbursement allows you to compound any investment and interest earnings. Then, you can take money from your HSA whenever you need it—even if you wait 20 or 30 years from now.

The key is that you absolutely must save your receipts. If you get audited by the IRS, you’ll need to document past expenses, otherwise you could be subject to income tax and penalties.

#9 Gift health savings to your heirs

The IRS allows you to designate a beneficiary to your HSA, so in the event of death your account will transfer to whomever you designate.

When we say your HSA stays with you no matter what, we mean it!

You can roll over your HSA for the rest of your life and gift the money in the account to your heirs. In fact, right now you can log into your HealthEquity account and designate a beneficiary.

So, go ahead. Designate the beneficiary of your hard earned health savings.

#10 Impress friends and family with your personal finance savvy

HSAs are popular, no doubt about it. But there are still too many Americans unfamiliar with HSAs and their power to build health savings.

Tell your friends and family about your HSA and its triple-tax advantage. They’ll value your perspective. Plus, they’ll be impressed with how much you know about personal finance.

You’ve taken the step toward connecting health and wealth. Now, let’s encourage others to join the movement.

Have questions? Visit our Help Center.

Ready to shop? Visit the HSA Store.9