How Do Health Savings Accounts (HSAs) Work?

A health savings account (HSA) is an IRA-like account funded with pretax dollars that grow tax-deferred. The HSA assets may serve a dual purpose:

What is an HSA? tax-free and penalty-free distributions can be taken to pay for medical expenses, and
What is an HSA? penalty-free (but not tax-free) distributions can be taken for any reason starting at age 65.

In other words, HSA assets not used for medical expenses become retirement assets.

Health Savings Account Basics

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