Health Savings Accounts gaining in popularity

Over the last several years, Health Savings Accounts are gaining in popularity as an attractive tax advantage savings vehicle to help with retirement. A health savings account is used in conjunction with a high deductible health insurance policy that allows users to save their money tax free against medical expenses.

According to, this retirement savings vehicle allows you to set money aside on a pre-tax basis to pay for qualified medical expenses and the health savings account can only be used if you have a high deductible health plan.  If you were to purchase a high deductible health plan, you would typically have lower premiums than plans with lower deductibles.  HSA's are tax advantaged and operate similar to IRA's and 401k's.

A recent report in the Chicago Tribune, Congress seems intent on expanding the role of health savings accounts.  Every year, more and more people are becoming eligible for HSA's as they purchase high deductible health insurance plans.  Employers seem to be attracted to them as a means to shift part of their cost burden to employees.  Purchasers of HSA's should treat their account similar to an IRA and try not to make withdrawals until it is absolutely necessary, so the interest, dividends and gains can grow tax deferred.

These accounts can be a tremendous asset to senior citizens.  Even though on your 65th birthday you can apply for Medicare, you can no longer make contributions, however you can use the HSA to pay medical expenses without incurring taxes.  Another terrific benefit, you are allowed to pay your Medicare premiums after the age of 65.  As for a widow, if you inherit an HSA, you can use the proceeds even if you didn't qualify for one early on.

As for contributions to these plans in 2017, you may contribute up to $3400.00 if you are an individual, and families are allowed to contribute $6750.00, and if you are over 55, you may contribute an additional $1000.00.

To help you make good decisions and determine if a HSA is right for you, Invesopedia, offers a few advantages and disadvantages. 


  • Others can contribute to your HSA. They can come from you, your employer, relative or anyone who wants to add to your HSA.
  • Pre tax contributions. Your contributions through payroll deposit are pre tax through your employer. Your employer can also make a contribution and not be included in your gross income.
  • Tax-deductible contributions. If you make your contribution with after tax dollars, it can be deducted from your gross income on your tax return.
  • Tax-free withdrawals. As long as you withdraw from the HSA for qualified medical expenses, there are no federal income taxes due.
  • Earnings are tax free. Any interest or earnings on the account are tax free.


  • High deductible requirement. Even paying low premiums every month, it is sometimes difficult to come up with the high deductible.
  • Unexpected health care costs. Health care costs can sometimes be much greater than what you planned for and you may not have enough money in your HSA to cover them.
  • Taxes and penalties. If you withdraw from the HSA for unqualified health care expenses, you will owe taxes and face a 20% penalty. Once 65, you will owe the taxes, but not the penalty.
  • Fees. Certain institutions charge reasonable maintenance fees. Even though they may be small they can cut into your bottom line.

If you are considering purchasing a HSA, it is a good idea to always consult with a professional adviser to help determine your current tax and financial situation.


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