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The 2025 Guide to HSAs

A tax-free strategy to tame today’s healthcare costs

Why HSAs Deserve a Spot in Your Money Stack

A Health Savings Account (HSA) is the rare financial unicorn that gets three bites at the tax-free apple:

1. Tax-deductible contributions (lower today’s tax bill)

2. Tax-free growth (invest and compound without the IRS skimming a cent)

3. Tax-free withdrawals for qualified medical expenses

Used right, an HSA behaves like a retirement account that doubles as an anytime medical fund → minus the penalties when you need it most.

TL;DR

1. What Exactly Is an HSA?

Think of an HSA as a personal pocket attached to your high-deductible health plan (HDHP). You (and optionally your employer) funnel pre-tax dollars into the account, then spend or invest them for future healthcare costs. Unlike Flexible Spending Accounts, the money is yours forever; unused balances roll over annually and can even fund retirement after age 65.

2. How the Triple Tax Advantage Works

After 65, non-medical withdrawals are penalty-free (you’ll owe ordinary income tax just like a traditional IRA).

3. Qualified Expenses—More Than Band-Aids

• Routine care: doctor visits, surgeries, prescriptions

• Dental & vision: braces, implants, LASIK, contacts

• Mental health: psychiatrist, psychologist, therapy sessions

• Wellness aids: acupuncture, chiropractic, massage (medically necessary)

• Family planning: IVF, breast pumps, fertility treatments

• Everyday health: first-aid kits, crutches, tampons & pads

• Home changes: medically required ramps, railings, air-filtration systems

4. Who’s Eligible & How to Get Started

The must-haves

• Enrolled in an HDHP (2025 minimum deductibles above)

• No other health coverage (aside from dental/vision)

• Not claimed as someone else’s dependent

• Not enrolled in Medicare

Employees

Most HDHP-offering employers will open an HSA for you and may chip in cash. Employer dollars count toward the annual limit, but no match is required.

Self-employed & freelancers

Open your own at a brokerage like Fidelity or a credit union. Shop fees and investment menus just as you would with any other brokerage account.

5. 2025 Limits, Deadlines & Withdrawal Rules

* Subject to IRS holiday/weekend shifts.

Penalties: Over-contribute and get hit with a 6 % excise tax until corrected. Pull money for non-medical reasons before 65? Expect a 20 % haircut plus income tax.

6. Pro Moves: Investing Inside Your HSA

1. Think “stealth IRA.” Max the HSA before your traditional or Roth IRA if you can cash-flow everyday medical costs.

2. Index funds > cash drag. Many HSAs default to a low-yield sweep account. Move excess cash into index ETFs or mutual funds once your minimum cash cushion is met.

3. Stack receipts. Pay medical bills out-of-pocket today and save the receipts. You can reimburse yourself years later—letting the money compound tax-free in the meantime.

4. Bridge to Medicare. Retiring early? Use HSA dollars to cover HDHP premiums via COBRA or Medicare premiums once eligible.

5. Legacy play. After age 65, use the HSA as an extra IRA: non-medical withdrawals are taxed but penalty-free, and unused balances pass to heirs (spouses inherit tax-free HSAs).

The Bottom Line

An HSA is more than a rainy-day medical fund, it’s a stealth retirement account with unmatched tax perks. Max it if you can, invest the balance, and let the IRS subsidies grow your wealth while covering healthcare along the way.

Always verify current IRS limits and consult a tax professional for personalized advice.

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If you want more resources on building wealth as a solopreneur/entrepreneur, check these out:

• The Solo 401k handbook

• The Roth IRA handbook

• The Self-Directed IRA handbook

• The Guide to Paying Less in Taxes

• What is a Solo 401k?

• How to Open a Solo 401k