HSA (Health Savings Account).
In plain English
An HSA is a savings (and investment) account specifically for qualified medical expenses. To contribute, you must be enrolled in a High-Deductible Health Plan (HDHP). HSA contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses are also tax-free. After age 65, you can withdraw for any reason and only pay regular income tax, making it function like a Traditional IRA for non-medical use.
01Why it matters
The HSA has unusually strong tax treatment in the U.S. tax code, few other accounts combine a deductible contribution, tax-free growth, and tax-free withdrawals (when used for qualified medical expenses). Many financial educators rank maxing the HSA among the higher-priority retirement savings moves for those who are eligible. The 2026 contribution limits are $4,400 (self-only HDHP coverage) and $8,750 (family HDHP coverage), with a $1,000 catch-up for age 55+.
02The math, step by step
A 30-year-old contributes $4,400/year to an HSA, invests it (most HSAs allow investment after a small cash threshold), and earns 7% annually. Over 35 years, that grows to roughly $635,000, tax-free if used for medical expenses, which most retirees have plenty of. Even if used for non-medical reasons after 65, it's just taxed like a 401(k).
03What this is NOT
An HSA is yours forever, money rolls over year to year, and you keep it if you change jobs. An FSA is generally 'use it or lose it' within the plan year and is owned by your employer's plan. HSAs are also investable; FSAs almost never are. They look similar from the outside but behave very differently.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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