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6 benefits of an HSA in your 20s and 30s

Key takeaways

  • A health savings account (HSA) isn't only for emergency medical savings. It can also help you pay for qualified medical expenses and even help you save for retirement.
  • Thanks to multiple tax advantages, you may get more out of your money now and in the future.
  • One key to maximizing your HSA is contributing early and often.

A health savings account (HSA) might be saving's best-kept secret. It can help you save for medical expenses today and create a financial cushion for the future.

If you're covered by an HSA-eligible health plan (a high-deductible health plan), you can open and contribute to an HSA. Even if you're still on your parents' health insurance (but not claimed as a dependent on someone else's tax return) you may be eligible to open an HSA yourself. In an HSA, you can contribute pre-tax dollars from your paycheck automatically, and your employer might even match those contributions, tax-free. Then you can invest your contributions without paying federal income taxes on any growth. The money you take out now won't get taxed either, as long as it goes toward qualified medical expenses, such as doctor visits and prescriptions, if certain conditions are met.1

What does this have to do with retirement? Starting at age 65, there's no penalty to use HSA money for nonmedical expenses. You will have to pay income tax though, similar to pre-tax withdrawals from your 401(k). An HSA is another way to save if you've maximized your 401(k) or IRA savings.

Read on to better understand the benefits of opening and contributing to an HSA in your 20s and 30s.

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1. HSAs can be your emergency medical savings

Your health care costs are likely to be lower in your 20s and 30s than when you're older,2 but that doesn't mean that you won't ever get hit with a big bill. Medical expenses often come when you least expect them. In fact, about a quarter of millennials and Gen Zers with medical debt have it because of an accident or injury.3

Money contributed to an HSA can avoid federal income tax. Because your potential investing gains can be tax-free as well, your HSA savings can potentially grow even more. That could ease the financial blow—and spare your regular emergency savings—if an expensive health issue surfaces.

2. HSAs can also help you pay for certain health care, vision, and dental costs

Even if you don't have a big bill, HSAs can be helpful for covering everyday health expenses. Over-the-counter products such as pain relievers, allergy medicine, face masks, and acne treatments can all be paid for with HSA funds. Copays for doctors' visits and prescriptions, dental cleanings and braces, and eye exams and contacts count too. Even LASIK eye surgery can be paid for out of an HSA.4 Check out a list of eligible expenses.

3. HSAs can help you save for future medical expenses

Unlike flexible spending accounts (FSAs) that may have a "use it or lose it" rule, the money in an HSA rolls over year after year. So if you're saving up for something big—such as fertility procedures or medically necessary surgery—HSA money could help you fund it.

Whatever's left can be used in retirement. According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2023 may need approximately $315,000 saved (after tax) to cover health care expenses in retirement. An average individual may need $157,500 saved (after tax) to cover health care expenses in retirement.5 Contributing to your HSA early and often and investing those savings can help you better afford medical care later. The contribution limit for 2023 is $3,850 for individual coverage and $7,750 for family coverage.

4. HSAs can grow on their own over time

Funds in an HSA can be invested, giving that money the potential to grow just as in any other investment account. And if you invest early, you could benefit from compound growth. The new money that you've made has the potential to also make money if you keep it invested. This can increase your growth potential the longer you keep your money in the market, though investing isn't without risk of loss.

To learn more, read our guide to HSA investing: Ways to invest in your health savings account.

5. Employers may help fund your HSA

Many employers match contributions you make to your HSA. That means that for every dollar you put in, they may also put in a dollar, up to a certain limit. Or, some employers may opt to contribute a lump sum to your HSA, often at the beginning or end of the year. In 2022, 26% of all dollars contributed to an HSA came from employers, with the average employer contribution being $869.6 Employer contributions can jump start your savings.

And you're not tied to the HSA your employer provides access to. You can shop around and compare different options. But make sure to check that any matching from your employer still applies if you opt for another HSA provider.

6. HSAs offer a cushion when you change jobs

Potential medical expenses can be especially scary when you're in between jobs or doing freelance work. A healthy HSA can help you pay for qualified medical expenses if you lose your health insurance.

Also, if you're changing jobs, HSAs are portable. If your new employer offers an HSA-eligible health plan with an HSA, it's possible to keep your old HSA or roll your funds into the new one. If your new employer doesn't offer an HSA-eligible health plan, you can still keep your old HSA; you just won't be able to contribute to it.

Interested in learning more about HSAs? Visit our HSA homepage. If you have an employer-sponsored Fidelity HSA, you can log in to NetBenefitsLog In Required to access your account.

Consider a health savings account (HSA)

With an HSA, you can pay for qualified medical expenses in a tax-advantaged way.

More to explore

1. With respect to federal taxation only. Contributions, investment earnings, and distributions may or may not be subject to state taxation. Please consult with your tax advisor regarding your specific situation. 2. "Why are Americans paying more for healthcare?", February 16, 2022, Peter G. Peterson Foundation, 3. Dan Grunebaum, "One in four Gen Z, millennials, skip rent or mortgage due to medical debt: Survey,", March 15, 2022, 4. Publication 969, IRS. 5.​ Estimate based on individuals retiring in 2023, 65-years-old, with life expectancies that align with Society of Actuaries' RP-2014 Healthy Annuitant rates projected with Mortality Improvements Scale MP-2020 as of 2022. Actual assets needed may be more or less depending on actual health status, area of residence, and longevity. Estimate is net of taxes. The Fidelity Retiree Health Care Cost Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, original Medicare. The calculation takes into account Medicare Part B base premiums and cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by original Medicare. The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care. 6. "2022 year-end HSA market statistics & trends executive summary," Devenir Research, March 30, 2023.

This information is intended to be educational and is not tailored to the investment needs of any specific investor.

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.

The information provided here is general in nature. It is not intended, nor should it be construed, as legal or tax advice. Because the administration of an HSA is a taxpayer responsibility, customers should be strongly encouraged to consult their tax advisor before opening an HSA. Customers are also encouraged to review information available from the Internal Revenue Service (IRS) for taxpayers, which can be found on the IRS Web site at They can find IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, and IRS Publication 502, Medical and Dental Expenses (including the Health Coverage Tax Credit),online, or you can call the IRS to request a copy of each at 800.829.3676.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

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