Open enrollment brings HSA opportunity

As open enrollment season gets underway, health savings accounts deserve consideration for far more than paying medical bills. They can grow for decades with powerful tax advantages.

Financial planners rank HSAs highly

John Bell, a certified financial planner and founder of Free State Financial Planning, calls HSAs sneaky-good and very underrated investment tools. He generally puts maxing out an employer-sponsored HSA near the top of saving priorities.

“sneaky-good and very underrated”

HSA priority ranking

Bell ranks maxing out an HSA just behind getting the full employer match in a four-oh-one-k, and ahead of funding a Roth IRA or taxable brokerage account.

Health plan choice comes first

You should not choose a health plan just to get access to an HSA's investment potential. Whether an HSA-eligible plan makes sense depends first on your healthcare needs and the costs and coverage available.

HSA versus FSA differences

To contribute to an HSA, you must generally be enrolled in a high-deductible health plan.

HSA advantages over FSAs

HSAs stay with you if you change jobs and do not come with a use-it-or-lose-it rule.

Triple tax advantage explained

An HSA combines the best parts of traditional and Roth IRAs through a triple tax advantage.

“the best parts of traditional and Roth IRAs”

Few people invest HSA money

Just eleven percent of HSAs held investments as of midyear twenty twenty-six, according to Devenir, an HSA research and investment firm. This is despite unusually generous tax advantages for investors.

Healthcare costs in retirement

A sixty-five-year-old retiring in twenty twenty-six can expect to spend an average of one hundred eighty-five thousand five hundred dollars on healthcare and medical expenses over the course of retirement, according to Fidelity Investments.

Delayed reimbursement strategy

There is no time limit on when you can withdraw money from an HSA to cover a past qualified medical expense.

Contribution limits for twenty twenty-seven

For twenty twenty-seven, you can put up to four thousand five hundred dollars into an HSA if you have self-only coverage, or nine thousand dollars if you have family coverage.

Tax penalties for early withdrawal

While HSA money can ultimately be used for purposes other than healthcare, doing so before age sixty-five generally means paying income tax plus a twenty percent additional tax.