Health Savings Accounts

Three Wealth Building Strategies

By Nathan Bradley, CEBS

A Health Savings Account (HSA) is one of the most versatile, tax-favored accounts under the IRS code. Many participants use their funds as they incur expenses, while others better utilize their savings potential and tax breaks.

Below are three ways to maximize the potential of your HSA:

Pay by other means and reimburse yourself later

Qualified medical expenses incurred after the account is open are eligible for reimbursement at any time. You can pay now, using cash or with a credit card (added bonus of points, travel miles, or cash back), let the funds grow over time, and reimburse yourself at any point in the future.  This strategy allows you to invest your HSA funds to grow tax-free for the future.

HSA as a retirement account

At age 65, HSA funds can be withdrawn for any purpose and taxed at your ordinary income rate, similar to a 401(k), with no penalty. Of course, you can still use your HSA for qualified medical expenses, including Medicare premiums, and the funds are tax-free. A strong argument can be made that the HSA is the most important account to max out, even before a 401(k), as long as you have contributed enough to earn your employer match. 

Jumpstart an HSA for your adult dependents

Your HSA funds can only be used for the qualified medical expenses of your tax dependents. However, adult dependents still on your plan (assuming it’s a qualified HDHP), and no longer considered tax dependents, can open their own HSA. Since these dependents are covered by a family plan, they can contribute up to the annual family amount. This provides the opportunity for over $7,000 per year of tax-favored funds into the account, with the possibility of 40 years of growth potential.

An HSA is your personal account. You are responsible for the usage and record keeping, not your employer. It is important to maintain a record of receipts, EOBs, and provider invoices to avoid potential penalty or tax consequences for misuse.

Contact us today with additional questions on how to better utilize your Health Savings Account.


Nathan Bradley is a senior consultant at OneGroup. He can be reached at 315-413-4496 or [email protected]

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice.

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