Health Savings Account (HSA)

A Health Savings Account (HSA) is the most tax-advantaged account available in the US system. To use one, the account holder must be enrolled in a qualifying High-Deductible Health Plan (HDHP) and not have any disqualifying secondary coverage (most FSA types, Medicare, etc.). The HSA gets the triple-tax treatment:

1. Deductible going in: contributions reduce AGI dollar-for-dollar. When contributed through payroll, they also avoid FICA — a 7.65% advantage that no other US retirement vehicle offers.
2. Tax-free growth: dividends, interest, and capital gains inside the HSA are tax-free.
3. Tax-free out for qualified medical expenses: prescriptions, deductibles, copays, dental, vision, and a broad list of IRS-approved care. After age 65, withdrawals for any purpose are penalty-free (taxed as ordinary income if not for medical, like a traditional IRA).

2026 contribution limits:

• Self-only HDHP: $4,400.
• Family HDHP: $8,750.
• Catch-up (age 55+): extra $1,000.

The contrarian play: pay current medical bills out of pocket if you can afford to, keep receipts, and let the HSA invest aggressively for decades. The receipts become tax-free withdrawals later. Use the HSA contribution calculator to size annual contributions.