Education Center » Making the most of your HSA- Strategies for every age and stage

Making the most of your HSA- Strategies for every age and stage


Whether you’ve just started contributing to your health savings account (HSA) or have had one for years, chances are it offers more savings power than you realize. From paying your health plan deductible to buying braces to getting reimbursed for prescriptions, your HSA allows you to cover eligible medical expenses using pre-tax dollars.

No matter where you are in life—or where you’re headed—here’s what you can do to make the most of your HSA.

HSAs provide potential for a triple-tax advantage1 — something even a 401(k) or IRA can't do:

  • Account contributions are pre-tax
  • Any potential earnings are tax-free
  • Withdrawals for qualified medical expenses are tax-free

I'm in my 20s...
What can an HSA do for me?

HSAs are exclusively for people enrolled in a high-deductible health plan. High-deductible health plans are extremely popular with young people because the monthly premiums are typically lower. And let’s face it, as a young person you tend to be healthier and, therefore, less likely to need a lot of medical care.

By contributing to an HSA starting at an early age, you have the opportunity to let your money compound tax-free for 30-40 years. A parent or loved one can also make contributions to your HSA on your behalf. In total, contributions are limited to the annual maximum set by the IRS. For 2018, the IRS maximum is $3,450 for individuals and $6,900 for families.

Unlike a Flexible Spending Account (FSA), you own your HSA and it's yours for life. Any unspent funds roll over from year to year. You can use the funds now or in the future and even save them to help you pay for health care during retirement.

I'm in my 40s...
I have an HSA, but am I using it the right way?

Regular checkups are one thing. But between Bobby’s braces, Julia’s allergy medicine, and your eyeglasses, once you hit your 40s you may be paying a pretty penny to keep everyone healthy.

At this stage of life, an HSA offers you a tax-advantaged way to pay for common medical expenses. Let’s assume that you’re in the 25% tax bracket. Paying with pre-tax HSA dollars is like getting a 25% discount on things like your prescriptions, fillings, and ankle wraps—helping you stretch your money. You can pay qualified health care expenses right away using your HSA dollars, or you can pay cash, save your receipts and get reimbursed later—which gives your money more time to potentially benefit from compounding.

Retirement is on the horizon...
How can I maximize my HSA?


The first thing you can do if you’re age 55 or older is to take advantage of the higher HSA contribution maximum allowed by the IRS. In 2018, that means you can contribute an extra $1,000, which equates to $4,450 for individuals or $7,900 for families.

While it might seem challenging to increase your contributions, you should seriously consider how you could juggle your finances to allow you to save more while you are still working. Even people who have healthy diets, exercise regularly and limit their vices don’t get a “good health guarantee”— and almost everyone becomes a bigger consumer of health care as they age. Consider this: A healthy couple may need up to $265,00 for health care expenses after they retire2. When paying for health care costs in retirement, the HSA is a smart way to go. The money you contribute may be tax-deductible with a potential for tax-free growth. It can also be used to pay for qualified health care expenses tax-free. Medicare premiums3, long-term care, nursing services, medications and more4 are all currently qualified to be paid from an HSA account.

Maxing out your HSA to establish a nest egg to use for qualified health care expenses can free up your other savings— enabling you to do the things that are important to you.

Learn more and take action

Want to find out more about HSAs? Bank of America can help—visit today. You should also check with your employer.


Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

This material should be regarded as general information on health care considerations and is not intended to provide specific health care advice. If you have questions regarding your particular health care situation, please contact your health care, legal or tax advisor.

1About Triple Tax Advantages: You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. Any interest or earnings on the assets in the account are tax free. You may be able to claim a tax deduction for contributions you, or someone other than your employer, make to your HSA. It is recommended that you contact qualified tax or legal counsel before establishing a HSA.

2Source: Employee Benefits Research Institute, January 2017. A 65-year-old couple, both with median drug expenses would need $256,000 to have a 90% chance of having enough money to cover health care expenses (excluding long-term care) in retirement. Savings needed for Medigap premiums, Medicare Part B premiums, Medicare Part D premiums and out-of-pocket drug expenses for retirement at age 65 in 2016.

3For those over age 65, premiums for Medicare Part A or B, Medicare HMO and employee premiums for employer sponsored health insurance can be paid from an HSA.

4The Internal Revenue Service (IRS) publishes a list of qualified expenses in Publication 502, Medical and Dental Expenses, available at


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