My Health Is Great. Should I Still Open an HSA?

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An HSA could benefit you down the line, even if you don’t have many healthcare bills today. 

Healthcare can be a big expense at any age, so it’s important to have money set aside to cover medical bills. But you don’t necessarily have to limit yourself to a savings account for that purpose. In fact, if you’re enrolled in a high-deductible health insurance plan that’s compatible with a health savings account, or HSA, then it pays to participate in one.

The money in your HSA can be used to cover a wide range of healthcare expenses, from medical copays to eyeglasses to orthodontics for your kids. But if your health is great, and so is that of your family, then you might think you shouldn’t bother with an HSA.

After all, why set money aside for healthcare expenses when you don’t anticipate having many in the near term? But because of the flexibility that HSAs offer, it pays to open and fund one even if you don’t expect to spend money on healthcare anytime soon.

You can benefit from an HSA down the line

If you’re familiar with flexible spending accounts (FSAs), you might know these plans require you to spend your plan balance year after year or risk forfeiting funds. HSAs work differently, though.

With an HSA, you can carry your money forward indefinitely, all the while investing funds you don’t need to use right away. This means you can fund an HSA this year, and even if you don’t incur any medical expenses, that money won’t disappear on you. You’ll have the option to carry it forward — all the way into retirement even. And at that point in life, when your healthcare costs are likely to climb, having a pile of medical savings could come in really handy.

Do you qualify for an HSA?

The one drawback of HSAs is that they’re not open to everyone. To participate in an HSA, you must be enrolled in a high-deductible health insurance plan, and the definition of what that is can change from one year to the next.

In 2023, your plan is considered HSA-compatible if you have an individual deductible of $1,500 or more, or a family deductible of $3,000 or more. Your plan’s out-of-pocket maximum also cannot exceed $7,500 if you have individual coverage, or $15,000 for family-level coverage.

But if your plan renders you eligible for HSA contributions, it pays to make them. Those contributions, like FSA contributions, will go in tax-free. Then, if you invest your money in an HSA, gains in your account will be tax-free as well, similar to the gains in a Roth IRA. And HSA withdrawals are always tax-free as long as that money is used for qualified healthcare expenses.

You may not need the money in your HSA anytime soon. But chances are, you’ll need it down the line. And at that point, you’re apt to be very grateful for it.

Also, while your health (and that of your family) might be excellent right now, accidents can happen at any time. You never know when you might get hurt and land in the emergency room with a $1,500 bill to tackle as a result. So even though you might think you won’t need your HSA funds anytime soon, you may be unpleasantly surprised to wind up tapping that account earlier than planned.

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