Do you like paying less in taxes?
Do you like paying less for health care?

Most people would answer yes without hesitation.

What if there were a way to receive three separate tax benefits—and potentially turn health-care dollars into a long-term planning opportunity if you don’t need them right away?

That’s exactly what a Health Savings Account (HSA) can do when used correctly.

📌HSAs are one of the most tax-efficient savings vehicles available—but they’re often misunderstood and underused.

Why HSAs Deserve a Closer Look

Each fall, many people choose their health insurance for the coming year. As part of that process, we regularly meet with clients who have—or may be eligible for—HSAs to help them understand how these accounts fit into their overall financial plan.

Many people view HSAs only as a short-term checking account for medical bills. In reality, HSAs can play a much bigger role when coordinated properly.

How an HSA Works

To contribute to an HSA, you must be enrolled in a High-Deductible Health Plan (HDHP). HSAs may be offered through an employer or established individually.

Contributions

• Contributions can be made directly or through payroll deductions
• Employers may also contribute
• Limits are set annually by the IRS

2026 Contribution Limits

• Individual coverage: $4,400
• Family coverage: $8,750
• Catch-up (age 55+): $1,000

Unused HSA balances carry forward year after year—there is no “use it or lose it” rule.¹

📌HSA dollars never expire. Unused balances roll forward indefinitely and can remain invested for decades.

The “Three for the Money” Advantage

HSAs offer a triple tax benefit:

1. Tax-deductible contributions (or pre-tax via payroll)
2. Tax-free growth on invested assets
3. Tax-free withdrawals for qualified medical expenses

This combination makes HSAs unique. They share features of both Traditional and Roth IRAs, but in one account.

📌HSAs are one of the few accounts where money can go in tax-deductible, grow tax-free, and come out tax-free.²

HSAs as Long-Term Planning Tools

One of the most powerful HSA strategies is not using the account right away. If you can pay current medical expenses with cash:

• Your HSA remains invested and growing
• You save receipts for qualified expenses
• You can reimburse yourself at any future time, tax-free

There is no deadline to reimburse yourself—as long as the expense occurred after the HSA was opened and you keep documentation. The justification for the reimbursement is the qualified medical expense that you already paid for. Here is a key point – the reimbursement can in effect be taken out in the future for whatever reason (not necessarily limited to health related expenses) you need the money for at that time. That can be a powerful resource that gives you more flexibility to use it in the future when needed.³

📌Pay medical expenses with cash today.

📌Let the HSA grow.

📌Reimburse yourself later—tax-free.

What If HSA Funds Are Used for Non-Medical Expenses?

• Before age 65: Withdrawals are subject to income tax plus a 20% penalty
• After age 65: The penalty disappears; withdrawals used for non-medical purposes are taxed as ordinary income (similar to a Traditional IRA)

Qualified medical expenses remain tax-free at any age.

📌After age 65, an HSA can function much like a Traditional IRA—without required minimum distributions.

Important Medicare Rule

Once you enroll in Medicare Part A or Part B, you must stop contributing to an HSA. If Medicare begins mid-year, contributions may need to be prorated.

Why HSAs Matter in a Financial Plan

Without an HSA, unexpected medical costs often force people to:

• Sell investments
• Withdraw from IRAs
• Borrow from a 401(k)

Each option can trigger taxes, penalties, or lost growth.

📌HSAs can reduce the need to tap taxable accounts or retirement funds when health-care costs arise.

Final Thought

HSAs aren’t just health-care accounts. They are planning tools.

When coordinated properly, they can:

• Lower taxes today
• Grow tax-free over time
• Provide flexibility later in life

That’s what makes an HSA truly “Three for the Money.”

References:

1. https://rethinking65.com/health-savings-accounts-backed-by-gop-cover-fancy-saunas-but-not-insurance-premiums
2. What is a health savings account (HSA)?, Investor Bulletin, Securities and Exchange Commission, 12.10.25 email – www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/health-savings-accounts-hsas-investor-bulletin
3. https://www.kiplinger.com/personal-finance/insurance/health-insurance/health-savings-accounts/604023/the-ultimate-retirement