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Health savings accounts (HSAs) are one of the most underrated tools in financial planning, especially from a tax savings standpoint. There aren’t many vehicles that give you deductible contributions, tax-free growth, and tax-free withdrawals.

In this episode of Money Wisdom, Jake Doser, CFP®, CPWA® and Nicholas J. Colantuono, CFP® break down the three tax benefits of an HSA. They also offer strategic ways to use HSAs both before and during retirement.

Triple-Tax Advantaged

An HSA is one of the most tax-efficient accounts you can have. Contributions are tax deductible, the money grows tax-free, and withdrawals for qualified medical expenses are also tax-free. That’s what we call the triple-tax advantage, and it’s the only account that offers all three.

Contribution Limits and Eligibility

Each year, you can make HSA contributions up to the annual limit. For 2025, an individual can contribute up to $4,300, and a family can contribute up to $8,550. Once you reach age 55, you can make an additional $1,000 catch-up contribution.

Only those enrolled in high-deductible health plans (HDHPs) can contribute to an HSA. That’s the trade-off: You pay higher deductibles, but you get to grow your money in a tax-free vehicle.

Two Smart Ways to Use an HSA

Option one: Use your HSA like a checking account. You withdraw funds as you have medical, dental, or vision expenses. Remember to keep your receipts in case you ever need to prove the expense.

Option two: Use your HSA as an investment vehicle. You contribute the maximum amount, pay medical expenses out-of-pocket, and let the money grow until retirement. Once you turn 65, you can use your HSA to pay for Medicare premiums. Or you can repay yourself for past qualified expenses without any penalty.

Why Consider an HSA

HSAs have many benefits, one of which is flexibility. Your options include investing your HSA balance, rolling over old accounts, and deciding how much to keep in cash versus the market.

If you’re eligible, talk with your advisor about opening an HSA. They can be one of the best tools out there for building tax-free money in retirement.

Want clarity about your tax situation? Get your free Are You Paying Too Much in Taxes in Retirement? guide by texting “OFFER” to 800-757-0436.