Health savings accounts (HSAs) have grown a reputation as a powerful financial tool for navigating healthcare expenses. With their triple tax advantages and flexibility, HSAs offer many benefits to individuals and families seeking to manage medical costs effectively. HSAs continue to be an excellent resource for individuals and businesses as part of their group benefits strategy.

Before we get into the top 8 reasons to use HSAs, let's quickly run through the requirements you must meet before you can open one.
· Must be enrolled in a High Deductible Health Plan
· Don't have any other Major Medical Insurance
· Are not enrolled in Medicare
· Not being claimed as a dependent on someone else's tax return

Now, here are the top 8 reasons to use Health Savings Accounts.

1. Pre-Tax Payment of Medical Expenses
With HSAs, you can pay for qualified medical expenses, including dental and vision costs, using pre-tax dollars. This perk offers significant savings compared to deducting medical expenses on your tax return, which you can only do for expenses exceeding 7.5% of your income.

2. No "Use It or Lose It" Provision
Unlike flexible spending accounts (FSAs), HSAs don't have a "use it or lose it" provision. Unused funds roll over from year to year, allowing for long-term savings and investment growth.

3. Backup Retirement Account
You can treat it like a retirement account thanks to HSAs not having a "use it or lose it" provision. Like traditional IRAs, HSAs allow individuals to use funds for non-medical expenses after turning 65 without incurring the 20% penalty. This rule makes HSAs a versatile tool for retirement planning.
And like IRAs, you can name beneficiaries for your HSA so that if you were to pass away, it will go to your heirs. Depending on who you name as a beneficiary, they may have to pay taxes on the amount received. Spouses will be able to inherit HSAs tax-free and continue to use the account as their own.

4. No Income Limit for Contributions
Unlike IRAs, there's no income limit for deducting HSA contributions. Anyone with an HSA-qualified high deductible health plan (HDHP) can contribute pre-tax, regardless of income level.

5. Investment Options
HSAs offer a range of investment options, from basic interest-bearing accounts to stocks, bonds, or mutual funds. This flexibility allows account holders to customize their investments and base them on their personal risk tolerance and financial goals. Investment gains and interest earned within the account are tax-free.

Note that if you have an HSA through your employer, their custodian may not give you this option. If you have a qualifying HDHP, you can get one through any HSA custodian. We can help you find one that matches what you're looking for.

6. Portability
If you have an HSA through your employer, the funds belong to you, even if you change jobs. You can transfer your HSA to a new custodian or continue using it independently. Since the IRS calls this a transfer, not a Rollover, you can move it as much as you'd like.

7. Flexibility in Reimbursement
There's no deadline for reimbursing yourself from your HSA for qualified medical expenses. You can reimburse yourself years or even decades later, allowing your funds to grow tax-free over time.

8. Long-Term Care Fund
HSAs can serve as a long-term care fund for those in good health. Unused funds can be utilized to cover future long-term care insurance costs and qualified long-term care services.

Conclusion
The increasing popularity of HSAs emphasizes their effectiveness as a financial tool for healthcare planning and retirement savings. With their tax advantages, investment opportunities, and flexibility, HSAs offer individuals and families a practical way to navigate healthcare costs and secure their financial future.

Click here to see our HSA overview with FAQ's and examples of qualified medical expenses.

Check out our three-part series on Health Savings Accounts featured on our Coffee & Coverage show.