Health Savings Accounts: Choosing the Right One

Health Savings Accounts (HSAs) have a lot of benefits, like helping you save on taxes, boosting your retirement fund, and earning tax-free interest. Thanks to these perks, Forbes contributor John Goodman says no other savings vehicle can beat an HSA. But different HSAs are designed for different needs. To make the most of your savings, here are some tips for choosing the right plan.

The first major benefit of an HSA is that your contributions are tax-deductible  –  up to $4,300 for singles and $8,550 for families (as of 2025). Your money grows tax-free as long as it stays in the account. When it’s time to pay for healthcare expenses, you won’t owe income taxes on your earnings. Since there’s a limit on how much you can contribute each year, it’s best to start young. If you're 55 or older, you can contribute an additional $1,000 annually as a catch-up contribution

To use an HSA, you need a health plan that meets certain requirements. As of 2025, it must have a minimum deductible of $1,650 and a maximum out-of-pocket of $8,300. Even if your plan meets these standards, be sure to check with your insurance broker or employer to see if your plan is HSA-compatible. And be aware that if you withdraw the money for non-healthcare-related purposes before age 65, you’ll face penalties. But once you turn 65, you can withdraw the funds tax-free, whether you're using them for medical expenses or not.

If you’re healthy enough to avoid medical costs or wealthy enough to pay out-of-pocket, consider an HSA geared toward saving. These accounts typically offer investment options, including both actively managed funds and index funds, as well as access to core asset classes. Look for an account that allows first-dollar investing, though most HSA providers require you to maintain at least $1,000-$2,000 in your account before you can start investing. Choose an account with low fees and a good interest rate.

If you plan on spending your HSA funds regularly, you won’t need a high-interest or investment option. Instead, find an account with no monthly fees, even if it means giving up interest. Some HSAs offer a fee waiver if you maintain a certain balance, but even so, it may be more cost-effective to choose a fee-free account. According to Mila Araujo, a contributor to The Balance, you might pay $50 in annual fees for an account that only earns $2 in interest.

When managed to suit your needs, an HSA can be a powerful tool for both saving and spending.

Ready to open an HSA? A Five Star Bank Health Savings Account has no application fees, no maintenance fees and no minimum balance requirements. Take the next step in maximizing your savings by opening a Health Savings Account with Five Star Bank. Visit your local branch today.