What is a health savings account (HSA) primarily used for?

A health savings account (HSA) is a tax-advantaged account designed specifically to help individuals save for medical expenses. The primary benefit of an HSA is that it allows for contributions to be made on a pre-tax basis, and withdrawals for qualified medical expenses are tax-free. This means that funds can be used to pay for a range of healthcare costs, including deductibles, copayments, and some other health-related costs that may not be covered by insurance.

The tax-free nature of both contributions and distributions (when used for qualified medical expenses) makes HSAs an attractive option for individuals looking to manage healthcare costs efficiently. Additionally, HSAs can roll over funds from year to year, allowing for savings accumulation over time, specifically aimed at healthcare-related expenses.

While a health savings account can support financial planning for healthcare needs, it is distinctly different from vehicles aimed at retirement savings, education expenses, or stock investments, which do not share the same tax advantages or intended uses as an HSA.