A Quick Glance At Health Savings Accounts

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A QUICK GLANCE AT health savings accountS

By Emily Forst,CFP®

April 8, 2024

The cost of affordable healthcare has been a topic front of mind for many Americans lately.  As such, businesses and individuals are on the hunt for the most financially savvy ways to save and pay for not only the cost of healthcare, but also medical procedures, prescriptions, and doctor’s visits.  One option to help you save for health care costs, reduce taxes, and potentially increase retirement savings, is a Health Savings Account (HSA).   

In order to qualify for a HSA, one must first be enrolled in a High Deductible Health Plan (HDHP).  If the plan is offered through your employer, both you and your employer may contribute on a pre-tax basis.  These monies can also typically be invested in a predetermined list of funds, similar to a 401(k) plan.  The accounts generally include a debit card feature, so that you can pay healthcare costs directly.  Or you can let the money accumulate for future healthcare costs. 

The contribution limits, a total that can be split between you and your employer, is subject to change annually.  For the 2024 tax filing year, single filers may contribute $4,150, while a family’s limit is $8,300.  For those over the age of 55, an extra $1,000 may be contributed.  These contributions can be made through Tax Day of the following year, typically April 15.  Be careful though, as you can no longer contribute after you enroll in Medicare, although the funds may still be used after that point.

The tax rules applied to HSAs are very similar to those applied to other tax-advantaged retirement savings accounts.  Dollars are contributed on a pre-tax basis, and as long as they are spent on qualified medical expenses, can be distributed tax free as well.  Qualified medical expenses include deductibles, copayments, and prescription costs to name a few.  In some instances, your HSA account could even be used to help pay for Long Term Care insurance costs.  While these funds can also be withdrawn and used for non-medical related expenses, a 20% penalty is assessed if you are pre-age 65, and the distribution counts towards your ordinary income.  If post-age 65, the 20% penalty is waived on non-qualified medical expenses, although the distributions do still count towards your ordinary income. 

While the most tax benefit is realized when using these accounts for qualified medical expenses, they can also be an additional vehicle for retirement savings for those looking for added ways to contribute on a pre-tax basis.  Your trusted TMG advisor, with the support of our Tax Specialists, is here to help explore the benefits of utilizing HSAs as well as strategies for incorporating them into your overall financial plan.   


The Mather Group, LLC (TMG) is registered under the Investment Advisers Act of 1940 as a Registered Investment Adviser with the Securities and Exchange Commission (SEC). Registration as an investment adviser does not imply a certain level of skill or training. For a detailed discussion of TMG and its investment advisory services and fees, see the firm’s Form ADV on file with the SEC at www.adviserinfo.sec.gov, or on the firm’s website at www.themathergroup.com. The opinions expressed, and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The opinions and advice expressed in this communication are based on TMG’s research and professional experience and are expressed as of the publishing date of this communication. TMG makes no warranty or representation, express or implied, nor does TMG accept any liability, with respect to the information and data set forth herein. TMG specifically disclaims any duty to update any of the information and data contained in this communication. The information and data in this communication does not constitute legal, tax, accounting, investment, or other professional advice. Investing involves some level of risk. Past performance does not guarantee future results.

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