HSA (Health Savings Account)
A triple-tax-advantaged account for medical expenses, available with a high-deductible health plan.
An HSA is arguably the most tax-advantaged account available. Contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free — a rare triple benefit. You must be enrolled in a qualifying high-deductible health plan to contribute.
Used strategically, an HSA doubles as a stealth retirement account. If you pay current medical costs out of pocket and let the HSA invest and grow, you build a tax-free medical fund for later life — when healthcare costs are highest. After 65, non-medical withdrawals are allowed at ordinary income rates (like a traditional IRA), while medical withdrawals remain tax-free.
HSA distributions for qualified expenses don't count toward MAGI, which makes them useful for managing ACA subsidies and IRMAA in early retirement.
This definition is general information to help you understand a term, not financial, tax, or legal advice. Figures that change year to year (limits, thresholds, rates) should be confirmed against current official sources. For guidance on your situation, a licensed fee-only fiduciary is the right next step.