What Is a Health Savings Account (HSA) and How Does It Help You Save Money?

A Health Savings Account (HSA) is a smart way to save for medical costs. It also helps lower your taxable income and can help you manage healthcare costs now and in the future.

Here’s what you need to know about how HSAs work, the benefits and how to maximize your savings.

What Is a Health Savings Account?

A Health Savings Account is a savings account designed to help individuals with high-deductible health plans pay for qualified medical expenses. You have various options to use your funds such as paying for doctor visits, prescriptions, dental care and vision expenses. The money in your HSA belongs to you and rolls over year to year, making it a great long-term savings tool.

To qualify, you must: 

• Be enrolled in a high-deductible health plan (HDHP)
• Not be enrolled in Medicare
• Not be claimed as a dependent on someone else’s tax return
   

Key Benefits of an HSA

HSAs offer three major tax benefits:

1. Tax-deductible contributions (lower your taxable income)
2. Tax-free growth on investments
3. Tax-free withdrawals for qualified medical expenses
    

Long-Term Savings

Unlike a Flexible Spending Account (FSA), HSA funds never expire. You can invest your balance and watch it grow, similar to a retirement account.

Flexibility

After age 65, you can withdraw HSA funds for any purpose (not just medical) without penalties. You should understand that the IRS taxes non-medical withdrawals as income, similar to how they tax withdrawals from a traditional IRA.

Your HSA stays with you even if you change jobs or health plans, making it a portable savings tool. 

2025 HSA Contribution Limits

For 2025, the IRS allows: 

• $4,300 for individuals
• $8,550 for families
• An additional $1,000 catch-up contribution if you’re 55 or older
   

How to Maximize Your HSA 

• Contribute the maximum each year to take full advantage of tax savings.
• Invest your balance once you reach the minimum threshold—many HSAs offer mutual funds or exchange-traded funds (ETFs).
• Save receipts for qualified expenses—you can reimburse yourself tax-free later.
• Use your HSA strategically by paying out-of-pocket for small medical expenses and letting your HSA grow.
   

Qualified Medical Expenses

You can use HSA funds for: 

• Doctor visits, prescriptions, lab tests
• Dental and vision care
• Chiropractic services
• Over-the-counter medications and menstrual care products
• Always check the IRS list of qualified medical expenses to ensure your withdrawals remain tax-free.
   

A Health Savings Account is an effective tool for saving on healthcare costs and building long-term wealth. You can make your HSA an important part of your finances and retirement. To do this, contribute regularly, invest wisely and use your funds smartly.

_{Bell Bank does not offer HSA accounts. Please contact your Health Insurance provider to determine if you are eligible for an HSA account, and inquire how to obtain one.}