How to Make the Most of Your Health Savings Account

health savingsIt’s that time of year again: You feel the tickle in the back of your throat, think you’re coming down with something, and visit the local urgent care. They ask for a copay, and you pay it. But have you given any thought to how you pay for medical expenses?

Enter the health savings account. HSAs can be a powerful tool to help save and pay for qualified medical expenses. If you’re one of many Americans enrolled in a high-deductible health plan (HDHP), you have access to one of the most tax-efficient savings options available.

If this is news to you, you’re not alone: Research from Fidelity Investments finds that more than half of Americans are unfamiliar with the features of HSAs. Here’s what you need to know to start unlocking the potential of your HSA:

1. Leverage the triple-tax advantage.1

Navigating the health journey can be incredibly complicated, and rising health care costs don’t make it any easier. The triple tax-advantaged nature of HSAs can offer some help by reducing your taxable income: The money you contribute to the account goes in tax-free, you can withdraw your HSA funds to spend on qualified medical expenses with no tax penalty, and all the money in the account can grow tax-free as well.

“With such a strong link between health and financial wellbeing, HSAs can play an important role in your overall financial plan,” said Karen Volo, head of health and benefit accounts at Fidelity. “Having a dedicated, tax-advantaged way to pay for both anticipated and unexpected health costs can bring greater peace of mind.”

2. You can pay for a lot more than just doctor visits.

Qualified medical expenses that apply to an HSA run the gamut from copays and deductibles to more niche services you might not expect. Things like medical equipment, family planning services, acupuncture or even lead-based paint removal may fall under this umbrella if certain requirements are met.

3. Your employer may make contributions.

Many employers actually help their workforce pay for health care costs through contributions to their HSA. If you’re enrolled in a high-deductible health plan through your employer, make sure you check to see if this benefit is available to you.

“Think of this like an employer contribution for your health,” said Volo. “You won’t get a tax deduction on what your employer contributes, but you will be able to spend it on qualified expenses tax-free or give it the potential to grow over time by investing it.”

4. You can invest funds held in your HSA.

The money you contribute to your HSA is tax-free, and it can be invested to potentially grow over time, which is an especially valuable contribution to your retirement nest egg. That’s great news for your wallet when you consider that the average 65-year-old retiring in 2023 can expect to spend $157,500 in health care costs throughout retirement.2

5. Your HSA is yours to keep.

According to Fidelity, 46% of Americans believe they’ll have to forfeit the money in their HSA at the end of the year if they don’t use it. Thankfully, that isn’t the case.

“Remember, unlike a flexible spending account, there are no use-it-or-lose-it rules in your HSA,” explained Volo. “The account is always yours, even if you change employers, and the money you contribute can be used now and in the future.”

Is an HSA right for you? If you’re eligible and interested in opening an account, consider a Fidelity HSA, named the #1 HSA by Morningstar for 2023.3

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.

The information provided here is general in nature. It is not intended, nor should it be construed, as legal or tax advice. Because the administration of an HSA is a taxpayer responsibility, customers should be strongly encouraged to consult their tax advisor before opening an HSA. Customers are also encouraged to review information available from the Internal Revenue Service (IRS) for taxpayers, which can be found on the IRS Web site at They can find IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, and IRS Publication 502, Medical and Dental Expenses (including the Health Coverage Tax Credit), online, or you can call the IRS to request a copy of each at 800.829.3676.

1 With respect to federal taxation only. Contributions, investment earning, and distributions may or may not be subject to state taxation.

2 Fidelity Investments 2023 Retiree Health Care Cost Estimate based on a single person retiring in 2023, 65-years-old, with life expectancies that align with Society of Actuaries’ RP-2014 Healthy Annuitant rates projected with Mortality Improvements Scale MP-2020 as of 2022. Actual assets needed may be more or less depending on actual health status, area of residence, and longevity. Estimate is net of taxes. The Fidelity Retiree Health Care Cost Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, original Medicare. The calculation takes into account Medicare Part B base premiums and cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by original Medicare. The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care.

3 Morningstar Research, “The Best HSA Providers of 2023.”