Myth #1: HSAs are only a good option for those with a lot of money

October is HSA Month. Each week this month, we’ll be busting a common myth around health savings accounts (HSAs) in hopes of increasing the access to and understanding of these helpful tax-advantaged savings vehicles. With healthcare costs in the U.S. continuing to rise, we hope to elevate HSAs and improve consumer understanding to deliver another tool that will ease the cost burden in retirement and make healthcare more affordable today.

If you have a question about how HSAs work, reach out to us at [email protected].


Myth #1: HSAs are only a good option for those with a lot of money

Many consumers believe that HSAs are just a tax shelter for the wealthy or a low-cost health insurance alternative for young and healthy individuals. The truth is that up to 65% of consumers would benefit financially from being in a high-deductible health plan (HDHP) paired with an HSA. These plans and accounts support a diverse group of participants who have middle-class incomes, families and even chronic conditions.

HSA participants by the numbers*:

  • $72.4k is the average household income
  • 59% are 39 years old or older
  • 52% have children
  • 37% have a high school diploma or less
  • 10% consider themselves to be unhealthy

*Results gathered from the Alegeus 2019 HSA Participant Profile

So if HSAs are for everyone, how does one fund their account when money is tight? In an ideal world, healthcare consumers would have plenty of money to contribute to their HSA in order to pay for qualified medical expenses pre-tax, save money for future medical care and invest to increase savings. But the reality is that many people simply can’t afford to engage in that way with their HSA. The next-best move is to contribute the dollar amount you think you’re likely to spend on out-of-pocket healthcare costs in the coming year, at least up to your plan’s deductible. That way, you can reach your deductible with tax-free dollars and, therefore, spend less money (30% less on average) than you would were it to come straight from your bank account.

Another tip for paying for healthcare costs and increasing savings: Contribute to your HSA the amount that would have gone toward your monthly premium in a traditional health plan. For example, if the monthly premium for your employer’s traditional health plan is $400 and the premium for the HSA-eligible HDHP is $200, take the difference ($200) and contribute it into your HSA. Worst case, you’ll be prepared to spend that money on medical expenses that arise. If you don’t use it all that month, however, you can slowly build up a nest egg for future unforeseen costs, retirement or investment.

October is HSA Month!
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