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Making the most of a health savings account

Learn about their triple-tax advantage*.

Key Takeaways

  • To contribute to an HSA, you need to be enrolled in a high-deductible health plan, not enrolled in Medicare, and not be a dependent on someone else’s tax return
  • HSAs offer a unique triple-tax advantage: 1) The money going into the account reduces your taxable income 2) The money grows tax-deferred 3) The money is withdrawn tax-free when used for qualified medical expenses
  • You can invest your annual HSA contributions and keep the funds in your account until retirement to allow for more growth potential

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*With respect to federal taxation only. Contributions, investment earnings, and distributions may or may not be subject to state taxation.

Investing involves risk, including risk of loss.

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.

Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.

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 www.IRS.gov. 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.

​The Retiree Health Care Cost Estimate (RHCCE) is based on a single person retiring in 2025, 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.

With respect to federal taxation only. Contributions, investment earnings, and distributions may or may not be subject to state taxation.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

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