05/22/2026
What is an HSA, and how does it work?
An HSA is a tax-advantaged account that can be used to pay for qualified medical expenses, including copays, prescriptions, dental care, contacts and eyeglasses, bandages, X-rays, and a lot more. Itโs "tax-advantaged" because your contributions reduce your taxable income, and the money isn't taxed while itโs in the accountโeven if it earns interest or investment returns. As long as you use your HSA funds for qualified medical expenses, you won't owe taxes when you take money out of the account.
Even when you're changing jobs, your HSA belongs to you. You can usually continue contributing to it if you maintain HSA-eligible health insurance. This portability sets the HSA apart from the similarly structured flexible spending account (FSA) and other employer-sponsored savings accounts, such as the 401(k).So when you leave a job, you keep all of the money you've saved up in your HSA and can transfer into a new HSA or employer-sponsored HSA at your next job.
When you turn 65, you can take money out of your HSA tax-free to use as retirement income. You'll never be required to take any funds out of your HSA, unlike pre-tax 401(k)s and traditional IRAs, which require you start RMDs minimum withdrawals when you turn 73.
Pro Tip- Once you enroll in Medicare (typically at 65), you can no longer contribute to your HSA โ including catch-up contributions โ even if youโre still working. You can still spend existing funds, but no new money can go in.
