Morningstar's Guide to Health Savings Accounts
Tips for evaluating and effectively using HSAs.
The health savings account might be the most tax-friendly vehicle around. Available to those participating in a high-deductible healthcare plans, the HSA is triple tax-advantaged: pretax dollars go into the HSA; the money grows on a tax-free basis; and withdrawals are tax-free as long as the money is used to cover qualified healthcare expenditures.
In addition, HSAs are more flexible than many think, and can be used in two different ways. Most frequently, an HSA is a place to set aside dollars to cover immediate healthcare costs. But the HSA can also serve as a longer term investment vehicle. Rather than using the HSA to pay for current healthcare costs, invest it. Let that money grow year over year. Then can tap into the HSA during retirement to cover in-retirement healthcare costs.
"For people with limited ongoing medical expenses, an HSA can be a great piggy bank for additional retirement savings," says Morningstar director of personal finance Christine Benz. "And the tax benefits of HSAs are so generous that even people with more significant healthcare costs might consider paying those expenses out of pocket, provided they can afford to do so, allowing the money to continue to compound in the HSA."
We've pulled together a series of videos and articles to help you figure out how to make the most of your HSA, and whether the HDHP/HSA choice is right for you.
How Does Your Health Savings Account Stack Up?
We evaluated 10 plans, and only one looks attractive for use as both a spending and investing vehicle.
How Health Savings Accounts Can Multitask
HSAs can help to cover immediate healthcare costs and can be valuable long-term investment vehicles, too, says Christine Benz.
Health Savings Account: Spend or Invest?
Higher costs of investing in HSAs can eat into--but don't entirely erode--the tax-saving benefits of the accounts.
FAQs on HSAs
As the popularity of these accounts continues to rise, more people are digging into the details.
An Overlooked Vehicle for Retirement Savings
Health-savings accounts are the only triple tax-advantaged vehicle in the tax code.
Don't Settle for a Subpar Health Savings Account
Investors have a valuable escape hatch if their employer-provided HSA comes up short.
3 Tricks for Getting the Most Out of Your HSA
Enjoy maximum tax savings while preserving flexibility.
What Happens To Your HSA in Retirement?
HSA-owning retirees need to think about asset allocation, sequence of withdrawals, and beneficiary designations.
Handling HSAs After Death or Divorce
Many health savings accounts have grown quite large and merit careful consideration in divorce or inheritance planning.