When it comes to tax-advantaged savings vehicles, Health Savings Accounts (HSAs) stand out as one of the most underutilized and misunderstood tools — yet they offer unparalleled advantages for those who qualify.
If you’re covered by a high-deductible health plan (HDHP), an HSA might just be your most powerful tax-saving ally.
HSAs offer what’s called “triple tax” benefits — a rare combination in the financial world. First, your contributions are tax-deductible. Second, the money in your account can grow tax-free. Third, as long as distributions are used for qualified medical expenses, withdrawals are also tax-free. That trifecta sets HSAs apart from even popular accounts like Roth IRAs, which only offer two of those benefits.
In 2025, individuals can contribute up to $4,300 to an HSA, while families can contribute $8,550. Those aged 55 or older can add a $1,000 catch-up contribution. That means a couple over age 55 could potentially contribute $9,550 — and reduce their taxable income by the same amount.
Unlike flexible spending accounts (FSAs), HSAs don’t follow a “use it or lose it” rule. You can let your HSA balance grow year over year, creating a nest egg for future healthcare expenses — or even long-term care. For individuals with adequate cash reserves, paying for medical costs out of pocket and letting the HSA grow untouched may be a smart long-term strategy. Some advisors, including those at Financial Enhancement Group, are choosing not to use their HSA funds now so they can build a substantial balance for future needs 20–30 years down the road.
Here’s why HSAs deserve attention:
- Contributions reduce your taxable income today.
- Growth within the account is not taxed annually.
- Withdrawals for qualified medical expenses are completely tax-free.
- Funds roll over year to year — no expiration or forced use.
- HSAs can be used as a future resource for long-term care expenses.
And there’s more:
- After age 65, non-medical withdrawals are allowed — they’re taxed as ordinary income, but no penalty applies.
- HSAs transfer tax-free to a spouse upon death.
- HSAs offer strategic advantages to high-income earners looking for additional tax shelters.
A common misconception is that if your employer doesn’t offer an HSA, you don’t have access to one. That’s simply not true. As long as you have a qualifying high-deductible health plan, you can open your own HSA through a custodian such as Schwab or Fidelity. Your employer doesn’t have to sponsor the account — you just need to show proof of your coverage and get the account set up. Even your payroll company can direct contributions to it on your behalf.
So, if you’ve heard, “We have a high-deductible plan, but no HSA,” the truth is — you do. You just need to take the next step on your own. For those wanting to optimize their financial strategy, this account is too valuable to ignore.
HSAs combine flexibility, growth potential, and tax savings in a way few other accounts can. Whether you’re planning for today or building for tomorrow, don’t miss the opportunity to put this powerful tool to work.
Financial Enhancement Group is an SEC Registered Investment Advisor.
