Question for the forum. What’s the benefit of a HSA? Single guy, no real medical expenses. Don’t see the need for if. But have seen advice recommending having one. Thoughts?

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HSA is the best way (financially) to save for medical expenses. The money you contribute is exempt from income tax, and it’s yours forever. Even if you leave your employer, the HSA goes with you, and of course the balance rolls over from year to year. Many employers contribute some amount to an HSA for you as well.

You do have to use it exclusively for medical expenses while you’re under age 55, other wise the money spent will get taxed like income. However, after age 55, you can spend the money on whatever you want without the tax hit, so if you’re healthy, you can treat the HSA like an additional tax-free retirement savings account.

Finally, you can invest the account balance in stocks, funds, etc., once the balance is high enough. I believe that amount is determined by each individual bank that operates an HSA, but for reference, ours is 10k.

For me, an HSA is the best healthcare savings tool, especially if you’re already a healthy person.

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This info is inaccurate. If you contribute it is tax deferred. Because contributions from your paycheck are considered optional payments to a “cafeteria plan” under the Internal Revenue Code it has the effect of exempting the entire amount from social security and Medicare payroll taxes—permanently. This is a very unique benefit of the HSA that a 401k-type plan does not enjoy. If your annual salary is below the Social Security wage limit then this is a 7.65% raise. Additionally, the amounts contributed by you can be used for heath care expenses completely tax free. If you withdraw the funds for other purposes you will pay both income tax and a penalty on the withdrawal. However after you reach age 65, not 55, you can withdrawal the funds for non health expenses without the tax penalty. But you still pay income tax on any distribution not used to pay for health care. This makes it similar to a 401k plan except the age is 65 not 59 1/2 —it is tax deferred, not “tax exempt.” The best deal of course is using it for medical expenses because it truly is tax exempt. And since a ton of your expenses when you are old and retired will be medical, that’s what a lot of your 401k money will be used for anyway so the HSA just makes tons of sense.

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When you will have a need for it, you have money that come from out of pocket and you won't get taxed on it.

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Booz Allen contributes to your HSA. The money is untaxed in and out for qualified medical expenses. Most HSA providers allow the money to invested. There is no limit on when you have to take the money out.
I max mine out every year and never use it for expenses so the investment account will keep accruing.

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My employer helps contribute to it and you could invest the money if you’re not using it.

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And lower monthly out takes for HsA so you can use the money for other things

Ok so it rolls over. Can grow through investment. And isn’t taxed. Makes more sense now

@SA1. Don’t understand your comment. Can you use the money for things other than medical expenses

You can use the money for other things, but it becomes regular income and is taxed at your normal rate.

@A1. Thank you so much. That was great

Hi OP! So what I do is get the cheapest insurance option (high deductible) and max out my HSA. The money comes out before I get my paycheck, so it feels like I’m 100% insured. :)

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