While it would be wonderful to be invulnerable and never get sick, most of us are not that lucky. Since we expect to encounter health problems at some point in our lives, saving for that eventuality is wise. A health savings account allows you to pay medical expenses in a highly tax-efficient manner.

Today, we will explain exactly what a health savings account is, how to select one, and if it is a good idea to maximize an HSA.

What is an HSA and how does an HSA work?

You may be able to use the funds in your HSA to pay for any medical expenses you choose. You may use your HSA funds at any time to cover medical expenses. You can also contribute to your health savings account tax-free as well, and it will grow tax-free as long as you do not withdraw that gift for a qualified medical expense.

You can earn a great deal of tax-free money by paying for healthcare expenses with pre-tax dollars. The earnings and contributions will roll over every year, so you do not have to worry about spending your earnings in a specific year.

However, not every enrollee is able to sign up for an HSA. You can only participate if you are enrolled in a plan that has a high deductible.

What can you use an HSA to pay for?

You can pay qualifying healthcare costs with your HSA. You might be surprised to find out that there are a wide variety of qualifying expenses.

Here are some expenses your HSA may cover:

As you use your HSA, you will discover that there are many more opportunities to use these accounts. Since the rules pertaining to HSAs frequently change, you should check the IRS website to learn whether an item qualifies.

Depending on your HSA, you will have a different method of paying for test kits.

One is by using a debit card that is attached directly to your HSA. With a debit card, you’ll instead pay directly from your HSA without needing to pay for an expense out of pocket.

The second option is reimbursement from your HSA for qualifying medical expenses. In this case, you must save the receipts for your medical expenses and request a reimbursement after you have paid out of pocket.

HSA pros and cons

As with any financial product, there are pros and cons to opening an HSA. Here are some key HSA pros and cons to consider.

Pros of an HSA

Let’s explore the pros of having an HSA first.

Another advantage of an HSA is that you can pay health costs with pre-tax dollars. With that you can save money on your actual costs for healthcare.

So you can contribute to your HSA with pre-tax dollars. Funds in the HSA account will continue to grow tax-free. If you would like to qualify for a tax deductible medical expense, you can benefit from this tax benefit.

Emergencies happen when we’re least prepared for them. If you need emergency medical care, then the last thing you need is to worry about how to pay your bills. With a health savings account, you’ll have the funds available to cover any medical expenses that come up. Think of it as an emergency fund, if you will.

Preparing for the future is critically important, and an HSA investment is a fantastic way to do this. It has triple tax savings, making it a great way to plan for your retirement. Plus, the money keeps rolling over and accumulates interest over the years, so it is a win-win situation for your medical expenses if you need them.

Cons of an HSA

In addition to enjoying many positive benefits, there are several drawbacks to having a savings account earmarked for medical needs.

The funds in your HSA are exclusively for medical bills. You’ll need to pay a penalty if you need to use the money for any other purpose. For example, if you are under age 65 and do not have health insurance, you may have to pay up to 20% for non-medical expenses.

HSAs may have hidden charges embedded in them. Not all HSAs have excessive fees, so it is necessary that you have a close look at all of your alternatives before you make a final decision. Find a health savings account with low fees.

Because these funds can only be used for healthcare expenses, it is critical to keep thorough records of your HSA costs. You will run into a problem if you lose track of your HSA spending.

Now that you’re aware of the HSA pros and cons, it’s time to choose the right health savings account for you!

How to choose an HSA that works best for you

Overall, HSAs are a useful way to fund your healthcare costs. If you have an HSA, you should consider contributing every January.

However, it is vital to select the best HSA for you. Find out more about the features you should look for below.

HSA Work
HSA Work

Avoid fees

Unfortunately, many investment vehicles charge fees that can be an annoyance to contributors. Many health savings accounts have hidden fees that negate some of the benefits of the contribution in the first place.

As you review the accounts available to you, look closely at the account fees so you can understand how that HSA works. Search for the lowest rates to maximize your investment return for your HSA.

Look for a range of investment options

You can use the funds you contribute to your HSA. Consider the investment options offered by your accounts. Ensure that the account you are considering is invested in your philosophy.

If you are unsure as to which kinds of investments are appropriate for you, then take our risk tolerance quiz.

Avoid investment thresholds

Several investment platforms require an initial payment of several thousand dollars. Many people are not willing to put that much money at risk just yet. To ensure that everyone can afford an HSA, ensure that the account you are considering does not require any initial investment.

Pick a convenient withdrawal method

Most of the time, it is easiest to use a debit card directly linked to your HSA. Who wants to struggle with the paperwork trail of a reimbursement? Unfortunately, not all HSAs are set up with a debit card.

If you would rather not keep specific records for reimbursement, then you should focus on the HSA options that come with a credit card attached.

Top HSA platforms to choose from

So, finding the best HSA with the best deals is crucial for your financial plan.


Since Fidelity is one of the most trusted wealth companies, it is not surprising that their savings account is one of the best as well. There is no annual fee for Fidelity’s HSAs. This means you can save money with your money.

This program offers no minimums, no administrative fees, and free debit card use. It offers a broad array of investment options and holistic wealth planning.

HSA Bank

HSA bank has been in business for over 100 years and “serves more than 2 million customers with over $5 billion in assets.” Their focus on health accounts makes them an excellent choice to open your HSA account.

You can purchase a debit card to use any funds in your account. The debit card can be used in large cash withdrawals at ATMs all over the world. You can also use your card at regional, national, and international ATM networks.

The HSA Authority

The HSA Authority provides generous health savings accounts with a wide range of free features. There are no enrollment fees, minimum balances, or monthly service charges. You also get a free debit card and online bill pay. Plus, the TOS warehouse has an amazing selection and favorable terms.

You can contribute to your HSA with automatic deposits, mail-in service, or in person. This is a good HSA retirement account with low fees that is easy to set up.


Active offers simple and reasonably priced HSA accounts. They believe in being “transparent with their pricing and fees,” which makes it easier for you to understand your account.

There are no registration fees, sales charges, or handling fees for inmates. It’s free to open and fund an account, and accounts come with complimentary maintenance. Another benefit? There is no monetary minimum to open an account.

Bank of America

Bank of America is one of the largest financial institutions in the United States. Its health savings account offers unlimited online payments, reimbursements, and debit card transactions. However, they charge a fee of $2.50 per month for their services.

If your employer provides a paycheck deduction, you can prefund your HSA that way. Or you can simply transfer funds electronically or by post. You can access your account via the member website or the MyHealth app.

How to contribute to an HSA

How does a health savings account work with regard to donations? The IRS determines how much you are allowed to contribute to an HSA each year. In 2022, a single person is permitted to contribute $3,650 or a family can chip in $7,300.

However, not everyone is able to contribute to a Health Savings Account (HSA). In order to contribute to an HSA, you need to be on a qualified high deductible health care plan. You may be able to have these funds placed into a health savings account directly from your paycheck if your HSA is provided by your employer.

You can automate your savings that way. Unfortunately, few employers offer HSAs. If you cannot provide to your company, you may donate funds electronically or with a personal check.

How to put your HSA to work and withdraw the funds

How does an HSA function when it’s time to use the funds? The point of saving money is to cover any healthcare costs that crop up throughout your life. So, let’s explore how to withdraw your funds from an HSA.

1. Debit card

For some accounts, you will receive a debit card that can be directly linked to your emergency fund. If you have a qualifying medical expense, you can use this debit card to pay for the bill right away.

Be sure to keep all receipts for any expenses you incur with regard to this card. Otherwise, you may be required to pay a penalty on your purchases.

2. Reimbursement

If your account doesn’t have a debit card, you will have to pay for reimbursement yourself. If you qualify for a medical expense, you must submit itemized bills. If you have paid, you can submit your receipt to your HSA provider to receive a reimbursement.

3. Keep records

It is important that you keep detailed records of your medical expenses if you are eligible for HSA reimbursements. Without these records, it may be very difficult to qualify for reimbursement.

4. The funds will roll over

Don’t feel pressured to use your HSA funds by the end of the year. The funds stored in this account will carry over into the following year. There is no need to deplete the account in order to save the funds.

Instead, only use these funds when a beneficiary is eligible. If you have a lengthy history of good health, you could be amazed at how quickly your HSA will accumulate funds.

Should I max out my HSA?

Now that you know how a health savings account (HSA) works, you can decide to max it out. HSAs cover your healthcare costs and are also advantageous from a tax standpoint. Plus, the incentives make an HSA a very worthwhile option. Personally, I believe maximizing your HSA is a good idea. However, the details of your specific situation might change things.

For example, if you don’t have a sufficient emergency fund, then you should save money for that purpose first. This savings account is for medical expenses only, so you should have other savings for other purposes.

Put an HSA to work for you!

An HSA investment is a wise way to prepare for future medical expenses. It offers significant tax benefits, and your earnings will grow without being used. Shop around for an HSA that suits your needs.


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