A Health Savings Account (HSA) is a tax-advantaged savings account used for healthcare expenses, available with a high-deductible health plan.
In Depth
An HSA allows you to save and invest money specifically for medical costs. Contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are also tax-free. Unlike a Flexible Spending Account (FSA), HSA funds roll over year to year and are portable, meaning they stay with you even if you change jobs or health plans. It's a great way to save for future healthcare needs, especially in retirement.
Example
Sarah contributes to her HSA each paycheck, using the funds to pay for her annual doctor's visit and prescription medications, while also investing some for future medical needs.
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