Is an HSA Right for Me?

Many people don’t think health savings accounts (HSAs) are “for someone like me.” So who are they for, then? We’ve got a simple answer to that question but first, some context …

Through consumer research and within focus groups on HSAs, we consistently come across two groups of people: those who believe they’re indestructible and thus have no need for an HSA (“Those accounts are for older, sicker people”) and those who are timid and don’t think they’re sophisticated enough for an HSA (“Those accounts are for smarter, richer or more organized people”).

As the cost and complexity of healthcare has skyrocketed, it’s no surprise that Americans are increasingly confused by the whirlwind of benefits-related acronyms and misperceptions about what health coverage is best for us. If you’re not familiar with the benefits of an HSA, you’re not alone.

So, which people are best-suited for HSAs? And are you among them?

If you’re young and generally healthy…

For younger Americans — healthy, active and more likely than ever to pursue multiple career opportunities — an HSA can offer tremendous flexibility and savings while also providing you with a valuable financial tool to jump-start your nest eggs. HSAs are portable and easily move with you from job to job. However, don’t necessarily rule out an HSA if you have a chronic condition like asthma, diabetes, depression or heart disease. In 2019, the IRS expanded its list of preventative care for HSA participants to include certain care for chronic conditions.

If you’re middle-aged and career- and family-minded…

Chances are if you’re in your 30s and 40s, the need to save money for things like your children’s college and your own retirement weighs heavy on you. It’s important to know that an HSA gives you some of the very same long-term advantages and benefits as your other investment accounts, i.e., a 401(k). In fact, the HSA is superior to a 401(k) when it comes to saving for retirement. HSAs have all the same advantages of a 401(k) — and more. Just like with a 401(k), you can contribute to an HSA until Medicare coverage starts. But while you’ll be taxed and penalized if you withdraw funds from your 401(k) for any reason before age 59.5, you can withdraw funds for qualified health expenses from your HSA at any time, and without penalty. 

If you’re nearing retirement…

Getting prepared to wrap up your time in the workforce? An HSA can be used to offset your medical expenses after retirement and, if you retire prior to age 65, can be used to help bridge the gap to Medicare eligibility. Among other things, in retirement you can use your HSA to cover Medicare premiums and long-term care expenses. And you can even use it to pay for nonqualified medical expenses (once you hit 65), although you will be required to pay taxes on those distributions.

Is an HSA for you? Probably so. The HSA is a solution that aligns remarkably well with the healthcare coverage needs of many Americans. Proven to help ease your concerns about your financial future, an HSA gives you “skin in the game” and a way to build long-term savings for the substantial healthcare expenses you can expect to face in retirement. Further, a spectrum of tools, resources and information make HSAs easy for nearly everyone to self-administer, control and monitor.

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