Unlock the power of HSAs: 5 smart strategies for health and wealth

Health Savings Accounts (HSAs) are increasingly valuable in today’s economic landscape, primarily due to their triple tax advantages: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are also tax-free. With rising healthcare costs and high-deductible health plans becoming more common, HSAs provide a crucial safety net for managing out-of-pocket expenses. Additionally, as many individuals face economic uncertainty, having an HSA allows for strategic savings that can be used not only for immediate healthcare needs but also as a long-term investment vehicle for future healthcare needs. This flexibility makes HSAs a powerful tool for financial planning and health management in challenging times. 

HSAs are highly beneficial for employees. They are portable, staying with employees even if they change jobs or retire, and offer investment options to grow savings. By taking advantage of HSAs, employees can enhance their financial wellbeing, especially in retirement, by covering medical expenses without additional tax burdens. This makes HSAs a smart choice for long-term financial planning. 

Here are 5 tips you can share with employees about HSAs: 

1. Contribute as much as you can
   The IRS determines the maximum allowed contribution each year. For 2025, the limits are $4,300 for individuals and $8,550 for families. If you’re able, contribute the maximum allowable. If not, contribute as much as you can. You don’t have to worry about what happens to the money if you don’t use it all – it's yours to keep.  

2. Utilize catch-up contributions 
   As people age, they’re more likely to have additional medical needs and higher medical costs. Making catch-up contributions to an HSA is a great way for employees age 55 or older to set aside even more money to pay for medical expenses now or in retirement. Employees age 55 or older can make an additional $1,000 catch-up contribution over the IRS annual limits.  

3. Plan ahead for retirement  
   People enrolled in Medicare are no longer eligible to contribute to an HSA, and there are tax and financial penalties if employees continue to contribute to an HSA when they are not eligible. To reduce the risk of these penalties, the Centers for Medicare and Medicaid Services and the IRS suggest employees stop contributing to their HSAs before they turn 65 or more than six months before they enroll in Medicare if they are delaying Medicare enrollment until after age 65. After age 65, you can use HSA funds for non-medical expenses without penalty (though you’ll pay income tax). This makes your HSA a versatile tool for retirement planning, supplementing your other retirement accounts. 

4. Invest and grow HSA funds further 
   Many HSAs offer investment options similar to a 401(k) or IRA. Investing your HSA funds can help grow your savings tax-free over time, especially if you don’t need to use the funds immediately for medical expenses. 

5. Save receipts for future reimbursements  
   You can reimburse yourself for qualified medical expenses at any time in the future, as long as you have the receipts. This allows your HSA funds to grow tax-free while you pay out-of-pocket for current expenses. 

You’ve likely informed your employees about the tax benefits of this valuable financial tool. Now, it’s time to take it further by ensuring they understand how to maximize their HSAs to safeguard their families, build wealth, and plan for a secure retirement. On Health Savings Accounts (HSA) Day (October 15), employees and employers are encouraged to explore the advantages of HSAs, including tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. This day is a good day to remind employees to review their healthcare savings strategy and see how an HSA can fit into their financial plans. Participating in HSA Day helps employees learn how to maximize their HSA benefits, whether for immediate healthcare needs or as a long-term investment. It’s a great chance to educate employees about proactive health savings and financial planning.