How To Maximize Your Health Savings Account (HSA)

Keith Wetjen |

Whether you have healthcare expenses to cover right now or you’re planning for the future, it’s crucial that you have money stored away for these costs. This is because even with medical insurance, you’ll need funds to cover what insurance doesn’t.

This is especially important in retirement. A report by the Center for Retirement Research at Boston College found that a substantial portion of retirees’ income goes toward medical costs. In fact, a 2022 report from Fidelity found that the average 65-year-old retired couple can expect to spend around $315,000 on healthcare expenses during their retirement.

A Health Savings Account (HSA) allows you to save for healthcare costs in a smart, tax-efficient way. However, it’s important to understand exactly how to use your account, to get the most out of it. 

In this post, we’ll explain how an HSA can benefit you and show you how to use it to your advantage. 

What Are the Benefits of an HSA? 

HSAs can help you save money to cover healthcare costs that you face both now and in the future. The biggest advantages of HSAs are the tax-related benefits that they bring. 

The three main tax advantages are as follows: 

  1. Any money you contribute is exempt from federal income tax.
  2. Your earnings can accumulate and gain interest over time tax-free. 
  3. When you withdraw from your HSA for eligible medical expenses, you avoid federal income tax. 

Before deciding on your strategy with regard to your HSA, you first should assess your current wealth management plan and what your needs are likely to be, now and in the future. We’ll look further into that now. 

5 Ways To Use Your HSA to Your Advantage

When thinking about the ways you can get the most out of your HSA it’s important to understand how this kind of investment account is composed and how your situation and healthcare needs fit into that. 

Within an HSA, you can hold both a cash balance and an investment balance and you get to decide how to structure it. This will depend on your individual circumstances and needs.  

For example, if you know that you have an upcoming procedure to pay for like a knee replacement or a child’s orthodontic treatment, you may want enough in your cash balance to cover this while still leaving a sizable amount in your investment balance. 

If you have health issues, it may also be a good idea to have a larger cash balance that you can easily draw on. However, if you’re generally in good health and are saving to cover healthcare costs in retirement, your investment balance may need to be higher and your cash balance lower. 

Beyond deciding how to structure your funds, here are 5 other ways you can use and make the most of your HSA. 

  1. Contribute the maximum amount 
  2. Pay for smaller medical expenses out of pocket 
  3. Use funds for a medical emergency 
  4. Boost your retirement funds
  5. Consider catch-up contributions 

Let’s go into these further. 

1. Contribute the Maximum Amount

If you are in a position to, you should consider contributing the maximum amount to your HSA. This will allow you to make the most of all three of the tax benefits we stated earlier. Funds also roll over from year to year in an HSA, allowing you to build up funds for the future. 

For 2024, the maximum individual contribution is $4,150 and the maximum contribution for a couple or family is $8,300.  

If you are choosing to max out your contributions, it’s a good idea to sit down with your advisor and make sure you have an investment plan in place for these funds. 

2. Pay For Smaller Medical Expenses Out of Pocket

Depending on your current situation, it might make sense to pay for any current healthcare expenses out of pocket. You can then invest the funds within your HSA and take advantage of tax-free investment earnings.

Another benefit of an HSA is that in the future you can pay yourself back for these out-of-pocket expenses using tax-free savings from your HSA. 

3. Save Funds for a Medical Emergency

An important function of an HSA is to have money available to you should a medical emergency occur and you need financial assistance to cover it. The big advantage of using HSA funds to cover an incident like this is that you won’t incur any penalty when you withdraw for qualified medical usage and the money remains tax-free. 

4. Boost Your Retirement Funds

Your healthcare expenses are likely to be at their highest once you retire. Therefore it’s essential to have money set aside to cover your needs. Due to the tax advantages, HSAs are a great way to maximize these savings while making sure you’re covered for health events that could happen after retirement. 

If you choose to spend your HSA funds on non-medical expenses once you have turned 65, the good news is that you will not face any penalties, however, you will have to pay taxes on this money.

5. Consider Catch-up Contributions

After the age of 55, you can contribute an extra $1,000 each year on top of the yearly maximum until you are 65. The good thing about catch-up contributions is they allow you to reduce your taxable income even further and save as much as possible before retirement. 


Having funds tucked away for healthcare costs that could occur now or in the future is crucial and HSAs provide a smart, tax-beneficial way to save for these costs. However, understanding how an HSA can best serve you, and how you should set up your cash balance versus investment balance is important if you want to get the best out of this account. 

Our Entrust Wealth Partners team can advise you on this matter and help you use your HSA to your advantage.  Contact your advisor or reach out to us at (860) 838-3730 to find out more. 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.