10 Common Mistakes Too Many People Make With Their HSA Money

Discover the HSA blunders that could be draining your hard-earned money.
Updated May 8, 2024
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You may have an HSA as part of your employer benefits package or as a simple way to add money to your savings for medical costs.

But your HSA, or health savings account, can have restrictions you’re unaware of, or you may not be using it to its full potential.

If you’ve been saving money in an HSA, here are a few poor decisions many people make with that money that you should avoid.

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You spend all of it now

Kittiphan/Adobe woman using calculator to compute expenses.

You may think an HSA account is for everyday expenses like doctors’ appointments, prescriptions, over-the-counter medications, and other medical costs. But there’s no expiration date or time limit on how soon you have to spend the money in your HSA.

Instead, consider whether you prefer to hold off on spending money in your HSA account for medical issues later on or consider it a part of your retirement portfolio designated for medical spending. The sooner you can get ahead financially, the better off you’ll be.

You put money in when you’re not eligible

SB Arts Media/Adobe Man is under stress while making bill payments.

You may not realize that changes in health insurance could make you ineligible to contribute funds to your HSA.

If you have an HSA, you can still access that money to spend on medical expenses, but you may not be able to contribute more due to health insurance issues.

Check with your provider and determine what restrictions you might have depending on your particular insurance coverage, especially if you’ve recently changed coverage.

You don’t pay for your family’s bills

gpointstudio/Adobe Little girl giving a high five to pediatrician.

HSAs are great because you can use them to pay for more than just yourself when it comes to medical expenses.

You might be able to spend the money on a dependent, or perhaps you have a spouse who can take advantage of your HSA savings. But you can’t give HSA money to a friend in need or an extended family member.

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You contribute too much

utah51/Adobe Document of Medical savings account.

HSA laws and regulations restrict how much money you can put into your HSA each year. Going above the limit could cause more issues than benefits.

It’s important to check with your insurance provider or HSA provider to determine your limits or how much you’ve contributed for the year already.

If you put too much in, you will have to pay a penalty and move that cash somewhere out of your HSA.

You didn’t bump up contributions after age 55

JenkoAtaman/Adobe Lady looking worried while reading a document.

You may want to consider your HSA as part of your retirement planning if you use it to cover extra medical costs.

You can contribute additional money if you’re less than a decade from taking on your Medicare coverage.

It can be a costly mistake not to put in those additional catch-up funds if you’re 55 or older and haven’t started collecting Medicare yet.

You’re not maxing out your contributions

lovelyday12/Adobe A hand deposits coins into a glass jug.

So you’ve decided to save your HSA funds and use them when you’re retired. But just how much do you need?

The average 65-year-old couple is expected to spend an average of $315,000 on medical care after they retire. That’s a mark you might not be able to reach if you’re not maxing out your contributions.

Instead, consider putting in the maximum each year to build up a nest egg to cover healthcare costs later, especially if your employer gives you extra incentives.

You’re not taking advantage of employer incentives

rocketclips/Adobe Doctor examining patient's blood pressure.

Your employer may have incentives to add to your HSA account, but only if you know about them and take advantage of them.

Employers may give workers extra HSA funds for having an annual physical or taking advantage of a wellness program or health assessment.

This could be free money from your employer, so make sure you know about potential HSA incentives so you don’t lose out on the extra cash.

You spend it on ineligible items

Monkey Business/Adobe Patient having consultation with doctor.

You may think medical items are always covered, but assuming so could get you a hefty fine.

HSA funds have restrictions you’ll need to check before spending the money. A necessary surgery, for example, could be covered, while an elective surgery may not.

Check a list of covered HSA items, or you may be taking the risk of a big fine from the IRS for misspending the money.

You haven’t invested your HSA funds

Cozine/Adobe Saving money for post-retirement purposes.

Your contributions to your HSA account don’t end up in a locked box without the ability to invest them before you take it out.

You can choose from different options depending on how you want to invest the money, such as index funds or target retirement funds, to earn some extra money.

You may want to talk to a financial advisor to get recommendations on investing funds or learn more about potential restrictions.

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You think you’re not eligible for an HSA

Drobot Dean/Adobe Bewildered girl shrugging her shoulders.

HSAs have some unique laws and regulations that could make it confusing when deciding whether to start an HSA or how much you want to contribute to an HSA.

But don't get caught off guard by assuming you aren’t eligible for an HSA. You may be surprised at the eligibility requirements, and not taking advantage of one could cost you a lot of money.

Bottom line

Prostock-studio/Adobe Patient talking to doctor during appointment.

If you are eligible for an HSA, you’ll also want to factor in how much you want to contribute each year and what kind of restrictions you might have on your contributions.

You also might be thankful you contributed to an HSA to reduce your money stress if you’re struggling financially, and you’ll be happy you contributed the money when you could.

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Author Details

Jenny Cohen Jenny Cohen is a freelance writer who has covered a bit of everything, from finance to sports to her favorite TV shows. Her work has been featured in The Wall Street Journal, USA Today, and FoxSports.com.

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