HSA Strategy Guide
These tax-privileged accounts make most health expenses 100% tax-free and can even grow year after year, helping to protect your retirement savings from hefty medical bills.
But to truly maximize the value of your HSA investment, a bit of strategic planning goes a long way.
In this guide, we’ll walk you through simple yet effective strategies to get more from your HSA contributions, year after year.
From maximizing your deposits to investing for tax-free growth, you’ll learn how to make your healthcare dollars work harder for you.
In This HSA Strategy Guide [Key Takeaways]
- HSAs are tax-advantaged accounts where you can deposit pre-tax money to save for future health expenses.
- Making the maximum annual HSA contribution can significantly boost your account’s earnings and long-term value.
- Investing your HSA funds, once eligible, can grow your savings tax-free for greater returns over time.
- Limiting HSA withdrawals to qualified medical expenses keeps your money 100% tax-free, maximizing the benefits of your account.
- Delaying reimbursement for healthcare expenses allows your HSA funds to compound and grow tax-free, giving you more financial flexibility in the future.
Compare Pricing on the Best HSA Plans Available
What is a Health Savings Account (HSA)?
HSAs are tax-advantaged investment vehicles that can be used to put away pre-tax payroll money to pay for future health expenses.
All HSA contributions grow year-after-year, and as long as the funds are only spent on qualified expenses, they remain tax-free upon withdrawal.
HSAs can be used to pay for everyday health expenses, including:
- Acupuncture
- Ambulance service
- Birth control treatment
- Flu shots
- Physical therapy
- Vaccines
- Vasectomies
- Crutches
- Prescription Drugs
- Insulin
- Lab fees
- Medical Alert bracelets
- Psychiatric care
- Orthodontics
- Over the counter (OTC) medicines
- And much, much more!
HSA Strategy: How do I Maximize My HSA Benefits?
To make the most of your Health Savings Account, follow these strategies and watch your savings grow.
Here’s how to maximize your HSA benefits and ensure you’re getting the most value out of your contributions year after year.
Make Your Maximum HSA Contributions
The more money in your HSA, the more it will earn over time.
By the time you retire, you could have a significant amount of tax-free money saved up in your HSA to pay for medical needs.
Seeing as how the average couple retiring in 2025 is on track to spend as much as $350,000 on healthcare in retirement, the tax-advantaged power of an HSA is a truly unmatched investment.
Avoid Non-Qualified Expenses
The money in your HSA is yours, which means that you can spend it however you like.
However, using your HSA funds for non-qualified expenses will eliminate the tax benefits.
Try to keep your HSA dedicated to health expenses, and if at all possible, limit your withdrawals, so your money can grow faster.
Making a One-Time Transfer from an IRA to Your HSA
If you’re just starting with an HSA or preparing for retirement, a lump sum transfer from an IRA or Roth IRA can be a smart move.
Thanks to a once-in-a-lifetime rule, you can transfer funds from your IRA into your HSA without facing any penalties.
While the annual contribution limits still apply, this strategy can give your savings a significant boost, especially if you’re setting up a new HSA or looking to maximize your account before retirement.
Grow Your HSA with Tax-Free Investments
If your HSA balance meets the minimum requirement, usually around $2,100, you could be eligible to invest some of your savings.
Investing your HSA funds can help you build wealth tax-free, giving you a valuable resource for covering healthcare costs both now and in retirement.
Any investment gains stay tax-free if used for qualified medical expenses. Keep in mind, not every HSA offers investment options, so check with your provider to see if you have access to this benefit.
Consolidate Multiple HSAs for Greater Growth
If you have more than one Health Savings Account—perhaps from switching employers—consolidating them into a single account can be beneficial.
Combining your HSAs can help you meet the minimum balance required for investment, allowing you to accelerate the growth of your savings.
Plus, managing a single account simplifies your financial planning and ensures you’re maximizing your HSA’s earning potential.
Delay Reimbursement to Capitalize on Tax-Free Account Growth
One of the unique advantages of an HSA is the flexibility the IRS provides regarding reimbursement timing.
There’s no required timeframe to reimburse yourself for qualified healthcare expenses, which means you can effectively “bank” your receipts and choose to pay yourself back later.
Here’s how it works: You pay for healthcare expenses out of pocket, save the receipts, and allow the funds in your HSA to continue growing tax-free through investments and earned interest.
By delaying reimbursement, you maximize the compounding growth of your account, potentially letting your money work for you over decades. When you finally decide to withdraw, you can access those funds tax-free, even if it’s 20 or 30 years down the line.
Just remember, it’s crucial to keep all your receipts and documentation. If the IRS ever audits your account, you’ll need proof of past expenses to avoid income tax and penalties.
Go Deeper: Subscribe to Our Free Monthly HSA Strategy Newsletter
Our ongoing newsletter, Maximize Your HSA, is a monthly resource for HSA holders that is packed with ways to get the most out of your contributions.
No advertisements, no sales pitches. Just no-nonsense expert experience aimed at protecting your hard-earned healthcare dollars.
Subscribe to the newsletter and gain access to our entire catalogue of Maximize Your HSA.
Maximize Your HSA FAQ – Frequently Asked Questions
Q: Who Can Use a Health Savings Account?
A: Health Savings Accounts are only available to individuals who are enrolled in an HSA-qualified health plan. This can be a High Deductible Health Insurance Plan (HDHP), or a Health Sharing Plan that’s paired with minimum essential coverage.
Q: What is the 2025 HSA Contribution Limit?
A: The 2025 HSA contribution limit is $4,150 ($4,300 in 2025) for an individual and $8,300 ($8,550 in 2025) for families. The annual catch-up contribution for individuals between 55 and 65 is an additional $1,000.
Q: Can I Use my HSA to Pay for Someone Else?
A: The only time that you can use your HSA to pay for someone else’s medical costs is if they are a spouse or are listed on your most recent tax return as a dependent.
Q: What are the HSA Withdrawal Rules?
A: In order for HSA withdrawals to remain tax-free, the funds must be spent on qualified medical expenses. Many HSAs come with convenient options like a debit card or checks for easier access. However, if you withdraw money for non-qualified expenses before age 65, you’ll owe income tax on the amount, plus a 20% penalty.
2025 HSA Qualified Expenses.
Q: Can I delay taking money out of my HSA, so the account has more time to grow tax-free?
A: Yes! Leaving the money in your HSA will allow you to take full advantage of the tax-free growth. Just make sure you save your receipts, and you can reimburse yourself years later if you like.
Q: What Expenses Are Not Covered by an HSA?
A: Some examples of non-qualified expenses include vacations, vitamins (some supplements can be HSA-eligible), maternity clothes, child care, and elective cosmetic procedures.
Need an HSA-Qualified Health Plan? We’re Here to Help
If you don’t have an HSA, the first step is enrolling yourself in an HSA-qualified health plan.
For most, this means a high deductible health insurance plan (HDHP). For others, it could be a more affordable health sharing plan, specially configured to work with an HSA.
Whatever type of health plan you need, we’re here to make it easy, and get it done fast.
Click here to schedule your free consultation, or call the office at 800-913-0172.
Here are some additional articles on Health Savings Accounts:
- 2025 HSA Contribution Deadline – What You Need to Know
- Which Nutritional Supplements You Can’t Pay for From Your HSA
- Turbocharge Your HSA: An Introduction to Self-Directed HSA Investing
- How Much Could Your HSA be Worth One Day?
Here are some additional pages related to this article:
