Triple (Tax) Play HSA: Health Savings Account

October 2, 2022

You may have heard of a Health Savings Account (HSA) but are unaware of the hidden benefits it can offer. Think of it as an extra savings account, but for qualified health expenses. To be eligible for an HSA, you must be enrolled in a High Deductible Health Plan (HDHP). Not only do these plans offer a triple play tax benefit, but they also serve as an extra tool for retirement planning. In a nutshell, these accounts offer a win-win-win situation by balancing today’s savings and planning for the future.

Think an HSA might be right for you? First, let’s learn the mechanics of HSAs.

Triple Tax Advantage

A major perk of an HSA is the triple tax benefit.

  1. Contributions to an HSA are pre-tax or tax-deductible. Similar to a 401(k), 403(b), or IRA.
  2. Earnings grow tax-deferred. Also similar to a 401(k), 403(b), or IRA.
  3. Eligible medical expenses are tax-free. Similar to a Roth account!

A triple-play tax benefit that operates like a traditional retirement account on the front end and Roth on the back end!


An HSA provides additional advantages besides the triple tax benefit.

Retirement. Once you turn age 65, an HSA has the characteristics of a traditional retirement account for non-qualified expenses. An HSA is a unique financial planning tool that can supplement other retirement savings. After age 65, there is no penalty for non-qualified distributions, and you’ll owe taxes just like a retirement account. In addition, HSA funds can pay for Medicare premiums and some long-term care insurance tax-free!

Reimbursement. You can use your HSA to reimburse yourself for qualified medical expenses not previously paid with HSA money. The HSA must have been established before the expenses occurred. Be sure to keep records showing how you paid these expenses.

Investing. An HSA typically allows investments in mutual funds. This gives you the ability to take part in growth and compounding for the long term.

Rollover. It is common to compare an HSA to a Flexible Spending Account (FSA). However, unlike an FSA, the balance in an HSA rolls over from year to year. So even if you change jobs, health plans, or retire, the money remains in your HSA.

Qualified expenses. Qualified medical expenses from an HSA account include deductibles, copays, coinsurance, dental expenses, mental health, and more. You’ll also receive a debit card, making your funds accessible when you need them.

No minimum distributions. Unlike traditional retirement accounts, HSA’s do not have Required Minimum Distribution (RMD) rules at age 72.

No income limits. There are no income limitations that determine eligibility for HSA contributions.


HSA’s have many financial planning benefits. But, unfortunately, they also carry disadvantages that might impact your financial future.

Taxes and Penalties. When using HSA funds for non-qualified medical expenses before age 65, you’ll owe tax PLUS a 20% penalty.

High-deductible plan. To make HSA contributions, it’s required that you are in a high deductible health plan. In exchange for lower premiums, you’ll have a higher deductible. Meaning, if you have large unforeseen medical expenses, you may have hefty out-of-pocket expenses.

Annual Limits. The tax advantages may seem like an easy decision, but the IRS limits how much you can contribute to an HSA. For 2020, the maximum contribution is $3,550 for individuals and $7,100 for families. If you are age 55 or older, you can contribute an additional $1,000. In 2021, the limits will increase to $3,600 for individuals and $7,200 for families. The catch-up for age 55 and older will remain at an additional $1,000.


HSA’s can be a valuable financial tool in planning for medical expenses and beyond. If you are curious about how an HSA can fit into your financial plan, let’s chat!

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