What is a HSA?

Health Savings Account (HSA) is like a 401(k) for medical expenses. It enables you to set aside money from your paycheck pre-tax into a savings account used for eligible expenses and have the interest grow tax-free.

You can also invest a portion of your HSA savings in a variety of investment options. Like Flexible Spending Accounts (FSA), participants use pre-tax funds deposited into an account to pay for out-of-pocket, eligible healthcare expenses. Unspent money is portable and rolls over into the next year to cover expenses or to continue earning interest tax free. HSAs also differ in that you can take your money with you if you switch employers, or even if you change health insurers.

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How do I save money with a HSA?

An HSA can help you save in three ways.

 

First, as you add funds into your account, your contributions reduce your annual taxable income.

Second, the funds you withdraw to pay for qualified medical expenses remain untaxed.

Third, you save again when funds in your HSA accounts earn interest tax free.

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Can I withdraw the funds from my HSA account at any time?

Yes, however, if the funds are withdrawn for any expense other than a qualified medical expense, the IRS will impose a 20% penalty tax.

After you reach age 65 you can withdraw the funds without penalty but the amounts withdrawn will be taxable as ordinary income.

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