We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover.
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
Written by
Libby Wells
Libby Wells covers banking and deposit products. She has more than 30 years’ experience as a writer and editor for newspapers, magazines and online publications.
Edited by
Mercedes Barba
Mercedes Barba is a seasoned editorial leader and video producer , with an Emmy nomination to her credit . Presently, she is the senior investing editor at Bankrate, leading the team’s coverage of all things investments and retirement. Prior to this, Mercedes served as a senior editor at NextAdvisor.
Bankrate logoAt Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity , this post may contain references to products from our partners. Here's an explanation for how we make money .
Bankrate logoFounded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our banking reporters and editors focus on the points consumers care about most — the best banks, latest rates, different types of accounts, money-saving tips and more — so you can feel confident as you’re managing your money.
Bankrate logoBankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Here is a list of our banking partners.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information.
Bankrate logoYou have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey.
Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service.
A health savings account, or HSA, is a tax-advantaged savings account for paying medical expenses that is available to consumers with high-deductible health insurance plans. Unlike a flexible spending account, an HSA has no deadline for spending the funds and money can be held for years. It can even be stashed away for health care costs in retirement.
Here’s what else you need to know about health savings accounts.
An HSA offers a triple tax advantage for Americans saving for healthcare:
The tax advantages of an HSA are available only if it is used to pay qualified out-of-pocket medical expenses such as payments for doctor’s office visits, prescriptions, ambulance service, eyeglasses and more. The IRS has a list of qualifying medical expenses. Money that is used for non-qualified expenses is subject to a 20 percent penalty in addition to taxes on the withdrawal.
The federal government sets the ceilings for out-of-pocket medical expenses for high-deductible healthcare plans. For 2023, the most an insured individual can be required to pay out of pocket in a year is $7,500; the limit is $15,000 for a family. Once the insured party has met the out-of-pocket maximum, the insurance company must cover the rest. In 2024, these limits jump to $8,050 and $16,100, respectively.
Other features of an HSA include the following:
If you’re 65 or older and enrolled in Medicare, you can no longer make contributions to an HSA, but you can still use the money you’ve built up in the account to pay out-of-pocket medical expenses.
Plus, some people use an HSA as a retirement account. Once you turn 65, any money in the account is no longer subject to the 20 percent bonus penalty. Rather, withdrawals are subject only to ordinary income taxes. In other words, after age 65, an HSA functions like a traditional IRA, but perhaps a bit better because it does not have a required minimum distribution.
To qualify for an HSA, you must be enrolled in a high-deductible health insurance plan and have no other health insurance. You cannot be claimed as a dependent on someone else’s tax return nor eligible for Medicare.
The IRS sets the thresholds for what is considered a high-deductible health plan. For 2024, a qualifying insurance plan has a deductible of at least $1,600 for an individual or $3,200 for a family. Not all plans with a high deductible are eligible, so when shopping for an HSA look for plans that say “HSA-eligible.”
Your employer may offer an HSA, but many financial institutions offer these accounts, too. BMO Harris Bank and Bank of America offer HSAs, for example, as do Fidelity Investments and Charles Schwab. You must fill out an application and provide basic information, such as your Social Security number, date of birth, physical address, phone number and a valid email address.
You can use HealthCare.gov to find HSA-eligible plans and websites such as HSASearch to compare HSA providers.
With an HSA, you can decide how much you want to contribute, up to the annual limits set by the IRS. If you have an HSA through your employer, you can set up automatic contributions to the account from your paycheck.
In 2023, the maximum HSA contribution is $3,850 for individuals and $7,750 for families. In 2024, the maximum contributions increase to $4,150 for individuals and $8,300 for families. If you are 55 or older at the end of the tax year, you can contribute an additional $1,000.
How much you should contribute to your HSA depends on your personal financial situation. Ideally, you would contribute the maximum allowed each year by the IRS, says Juli Erhart-Graves, certified financial planner and president of Worley Erhart-Graves in Indianapolis.
If you can’t afford to contribute the maximum, try to contribute the amount you expect to pay for qualified medical expenses for the year. “Since you have to pay the medical expenses anyway, send them through the HSA so you don’t have to pay taxes on those amounts,” Erhart-Graves says.
There are a number of benefits to an HSA, with tax perks being among the most significant:
The tax benefits are the best thing about an HSA, which offers a threefold tax benefit:
Despite its big tax advantages, an HSA does have a few drawbacks.
HSAs are portable accounts. So, if you switch insurance, change jobs or retire, you’ll still have access to your HSA. “It’s yours. You can move it to a different bank or custodian if you want,” Erhart-Graves says.
You can also keep contributing to it as long as you meet the federal rules for eligibility.
If you no longer have medical insurance that qualifies for an HSA, your existing HSA sits there until you use it, move it or invest it, Erhart-Graves says.
All or part of the funds in health savings accounts can be invested in mutual funds, stocks, bonds and other investment products. It’s a tax-free way to grow your HSA to pay for medical expenses in retirement.
But investing in risky products may mean that your money may not be there when you need it to pay for health care. Fortunately, you can also put your money into safe but lower-yielding investments such as a money market fund.
The choice of HSA investment tools differs among plan custodians. Some HSAs are merely savings accounts that do not earn much interest, while accounts at traditional brokers offer the potential to invest in high-return assets. Shop around for a top HSA plan with quality investment options and low costs.
Remember that FDIC-insured savings accounts are protected up to $250,000, but stocks and other investments don’t have that safeguard.
HSAs and FSAs have similarities and differences. Here is a comparison of the two to help you decide which option is more suited to your needs and goals.
If you have a high-deductible health plan, getting a health savings account is a smart financial move. The tax benefits are big, and it’s a great way to build up money for health care costs.
Arrow Right Former Contributing writer, Credit Cards
Libby Wells covers banking and deposit products. She has more than 30 years’ experience as a writer and editor for newspapers, magazines and online publications.
