But HSAs don’t only cover the now—they save for the future, too. High-deductible health plans with an HSA are more frequently offered as an option to employees—in 2022, HSA account balances grew by 9%, reported by Devenir Research—and many individuals do not fully understand how to utilize the account (1). Here are three additional benefits an HSA has to offer:
1. Retirement health care expenses
According to the 2022 Greenwald Workplace Wellness Survey, employees report that health emergencies are the biggest contributor to medical debt—a major problem for more than one-half of respondents (2). And, a 2023 Voya Consumer Insights and Research Survey found that only 55% of individuals understand that HSAs can be used to pay for health care expenses in retirement (3). Further, only 3% of respondents were able to correctly state all attributes of an HSA.
But HSAs are an important tool for future medical assurance. Once an individual reaches retirement age at 65, HSA funds can be used for non-eligible (or, non-medical) expenses without being fined the typical 20% penalty—similar to an IRA or a 401(k). That includes housing, food, travel, and other general living expenses. And, although individuals enrolled in Medicare can no longer contribute to the account, they can still take advantage of tax-free distributions (4).
2. Investment opportunities
An HSA operates similarly to a 401(k) in that once an individual reaches a specified balance in the account, HSA funds are available for investment. This balance can start as low as only $1,000—although it changes from plan to plan (4).
Like any investment opportunity, there are risks—so it is important to consult a financial advisor (like a team of CPAs) before choosing to invest funds. But for those who do not expect to use the money soon, this is a great plan to maximize your growth potential.
3. Emergency health care savings
Kiplinger Personal Finance states:
According to Voya data, we know that a lack of emergency savings can put one’s retirement at risk, as employees without adequate savings are 13 times more likely to take a hardship withdrawal from their retirement account (5). And, when faced with a short-term, unexpected need—such as an emergency trip to the hospital—some people may choose to dip into this account to cover the expense (4).
The choice to remove retirement funds should be considered carefully—in many cases, is not an option at all. But the money in an HSA can be used for eligible unplanned or emergency medical expenses—and the withdrawals are tax-free.
Questions? We’re here to listen.
The ins and outs of Health Savings Accounts can be complex—and we can help you navigate those financial waters. Contact our team of expert Certified Public Accounting Professionals today!
(1) 2022 Year-End Devenir HSA Research Report. (2023, March 30). Devenir Research. October 6, 2023, https://www.devenir.com/research/2022-year-end-devenir-hsa-research-report/
(2) Greenwald Research. (n.d.). 2023 Workplace Wellness Survey. Employee Benefit Research Institute. October 6, 2023, https://www.ebri.org/docs/default-source/wbs/wws-2023/wws-2023_short-report.pdf?sfvrsn=f55f062f_2
(3) Voya’s Thought Leadership Council. (2023, August). Amplify the power of HSAs to boost healthcare savings—now and in retirement. Voya Financial. October 6, 2023, https://shorturl.at/suHO7
(4) Black, N. (2023, October 5). Do You Really Know What Your HSA Can Do for You? Kiplinger Personal Finance. October 6, 2023, https://www.kiplinger.com/personal-finance/what-an-hsa-can-do-for-you
(5) Voya Financial internal data (Oct. 2020)