5 Things to Know About HSAs

1. Think of an HSA as an “IRA for healthcare”

Health Savings Accounts (HSAs) were created in the U.S. in 2003 as a way to set money aside for medical expenses. The big idea: save for healthcare the way you save for retirement—except HSAs come with some seriously good tax perks. 

2. You only get an HSA if you’re in a High-Deductible Health Plan (HDHP)

HSAs are tied exclusively to HDHPs. HDHPs usually mean lower monthly premiums… but higher deductibles. That’s the tradeoff. The HSA is the “plan” for when you actually have to pay that deductible. 

3.  HSA’s are Triple  Tax Advantaged 

1. Contributions are tax-friendly (often pre-tax through payroll; if you contribute after-tax, you can generally deduct it). 
2. Growth is tax-free if you can invest the balance (depends on your HSA provider). 
3. Withdrawals are tax-free when used for qualified medical expenses. 

4. HSAs  don’t disappear

Unlike FSAs, HSA balances don’t evaporate at year-end. They roll over year after year, and they’re portable; if change jobs or health plans and the HSA can follow you. Convenient! 

5. Use it smart: cash for the deductible, invest the rest 

A good rule of thumb is keeping enough in cash to cover your deductible, then considering investing anything beyond that for longer-term use. And HSAs can pay for way more than people expect—things that diagnose, cure, mitigate, treat, or prevent a condition. That can include prescriptions, OTC meds, sunscreen, birth control, first aid supplies, glasses/contacts, massage guns, and more

And with a Letter of Medical Necessity, the list can expand to things like gym memberships, fitness trackers, bikes, and even service dogs! Who saved who (the most in taxes)? 

An HSA  won’t  be the best fit if you… 

1. Don’t have access to an HDHP 
2. Expect consistent, high medical costs (an HDHP may not be your best option) 
3. Don’t have extra room in your budget to save right now 
4. Actually enjoy paying taxes 

If you ever want help thinking through HSAs or your broader financial picture, give one of us at Shepherd Financial a call, we’re always happy to help.