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How Millennials can Maximize Their HSA Benefits in 2024

Historically, those approaching or entering retirement have significantly underestimated their cost of living, particularly when it comes to healthcare. This trend is beginning to change, however, with younger generations getting ahead of future expenses by exploring a wider range of retirement avenues, including health savings accounts (HSAs). According to the 2022 Devenir & HSA Council Demographic Survey, one in five Americans in their 30s had an HSA at the end of 2022. 

Additionally, younger consumers are not just saving to their HSA, they’re also taking advantage of the investing options. The Employee Benefit Research Institute’s (EBRI) Analysis shows how younger generations are becoming power users of HSAs, with Millennials and Gen Z representing 60% of all investment accounts. 

As younger generations continue to embrace HSAs, including Millennials, who make up more than one-third of the current workforce at 39.4%, it’s critical they understand how to maximize HSAs for both short- and long-term goals. 

If you belong to one of these generations, keep reading for how you can maximize your HSA. 

READ: Mapping Out Financial Success with Retirement Planning

How HSAs work

There are many advantages to having an HSA. Begin by familiarizing yourself with the account options so you can maximize your usage. 

Here are some quick facts:

  • An HSA is an individually owned, tax-advantaged account. 
  • The money you put in can be used for qualified medical expenses at any time, including during retirement.
  • The 2024 maximum contribution amount for individuals is $4,150 and $8,300 for family coverage.  
  • HSAs have a triple tax advantage: tax-free deposits, earnings, and withdrawals

To open and contribute to an HSA, you must: 

  • Be enrolled in a high-deductible health plan (HDHP).
  • Not be enrolled in any part of Medicare.
  • Not be claimed as a dependent on another’s taxes.
  • Not have any other non-permissible health coverage, such as a medical plan other than an HDHP or a flexible spending account (FSA).

During annual enrollment, many employers will offer HSAs, but if yours does not, you can still open one with an HSA provider. Your HSA is tied to you, so your account will stick with you throughout every life stage, with unused funds rolling over each year. 

Using your HSA for saving and investing 

When it comes to getting the most out of your HSA, your young age paired with the ability to start saving early are great assets. 

As mentioned earlier, being intentional about investing within your HSA is a great way to potentially maximize your HSA dollars. Just like your other retirement accounts, strategic allocation can significantly affect your savings — particularly if you intend to earmark some or all these dollars for the long-term.

Your HSA should be viewed as one piece of your overall financial portfolio. Regularly review all the accounts you are actively contributing to, such as your 401(k) and emergency fund, as well as any debt you are currently paying toward your student loans or other financial obligations, to ensure balance and diversity. 

READ: 4 Tips for Tax-Efficient Investing

Spending your HSA correctly

In addition to maximizing your contributions, be sure you understand what is considered a qualified medical expense that your HSA dollars can cover. If you use your HSA for a non-qualified expense, you’ll have to pay ordinary income tax on the withdrawal and will be hit with a penalty fee of 20% of what you took out. 

Some examples of qualified medical expenses include:  

  • Your deductible.
  • Dental treatments, exams or cleaning costs.
  • Prescription drug costs.
  • Vision expenses such as contact lenses or glasses.
  • Chiropractic or acupuncture fees.
  • Hand sanitizer.
  • Eye surgery.

You can find a full list of HSA-eligible expenses in the IRS Publication 502

Your HSA use changes when your life changes 

As you move through life and your financial goals change, so will the way you utilize your HSA. When you’re in the early stages of being an account holder, you’re likely also just starting on the salary spectrum, so you may be contributing less. You may also be spending more, particularly if you have a family.  As you move further into your career, you may be earning more and can therefore save more in your HSA. Toward the end of your career, you will hopefully be able to take full advantage of the saving and investing opportunities that your HSA provides. Finally, once you retire, you can keep as much of your HSA invested as possible while utilizing it to cover qualified medical expenses.

Your HSA is a lifetime account, and if you start maximizing its benefits at a younger age, it has even more time to grow with you and help meet your ever-changing needs. 


Brian Hutchin headshotBrian Hutchin is executive vice president and director of UMB Healthcare Services. With more than 25 years of financial industry experience, he is responsible for the overall strategy and management of the Healthcare team, including sales, implementation and relationship management. Additionally, Brian serves as an executive team member for the Institutional Banking division, providing input on the strategic direction of the department and overall growth of the business.

Building employees financial security in times of uncertainty

Today’s tumultuous environment has reinforced the need for financial approaches that can help weather an unexpected storm. As a business leader, times like this make it more important for you to help your employees set themselves up for success both in the current challenging situation as well as in the future, when conditions are more stabilized.

Helping your employees take a proactive, holistic approach toward financial wellness by examining healthcare savings, savings accounts and retirement funding can provide them a roadmap to make their hard-earned funds work for them in times of crisis and in the long term. Share these three best practices with your employees to help them feel more financially secure in both good and challenging scenarios.

Pay off and manage debt

If an individual has high-interest consumer debt, it’s best to pay off that debt first. While making additional payments on traditional loan debts, such as student loans or mortgages, will save money in the long run, it won’t lower monthly payments. By chipping away at high-interest debt, individuals can save money by cutting down on their interest payments.

In times of financial stress, such as the current pandemic, credit card companies may be willing to offer lower interest rates or delayed payments – so encourage your employees to pick up the phone and call their creditors to determine whether this is an option.

Build an emergency fund – especially for medical emergencies

Building an emergency fund for unexpected costs is important to overall financial wellness. In case of an unexpected events, individuals should have at least six months of income that can be lived on comfortably. This amount needs to account for everyday needs and expenses, such as monthly bills, including rent or mortgage payments.

Unfortunately, 44% of Americans don’t have enough cash to cover a $400 medical emergency according to a Federal Reserve report. The report also states that the median out-of-pocket cost for an unexpected medical expense is $1,000. This means half of our country is one unexpected medical bill away from a charge they can’t pay. Offering your employees an HSA-eligible health plan can help them better manage these expenditures. HSAs not only cover planned out-of-pocket costs but allow users to be better prepared financially when an unexpected injury or illness comes along.

In 2020, an individual can contribute a maximum of $3,350 to their HSA and a family can contribute a maximum of $7,100 with an additional $1,000 catch up contribution allowed for people 55 or older.

The triple tax advantage of an HSA

HSAs can make dollars go farther with the advantage of triple tax savings. HSAs offer tax benefits* at deposit, during the account’s life and upon withdrawal for qualified medical expenses. In addition, money contributed to an HSA can be rolled over from year-to-year — there is no “use it or lose it” clause.

HSA funds can be used for a variety of medical expenses, including dental, hospital and drug store expenses.

If and when you do offer an HSA-eligible health plan to your employees, make sure they understand the benefits. It could help be the difference between members of your team being able to cover an unexpected medial expense or being financially derailed by one.

Plan for the long term

Invest in an HSA

HSAs can also be used like traditional retirement accounts, allowing your employees to invest money in mutual funds, like a 401(k) or traditional IRA. Earnings in invested HSA funds grow tax-free, making your dollars stretch even further.

HSAs can serve as a powerful tool for long-term savings and as a key part of an overall financial wellness strategy to build wealth for both medical and other general expenses. A 2019 Employee Benefits Research Institute (EBRI) study estimates some couples could need as much as $363,000 to cover out-of-pocket medical expenses during retirement.

Increase 401(k) contribution

401(k) plans are a popular tool used to set aside money for retirement. They are traditionally tax free and have high annual contribution limits (an $19,500 maximum in 2020). This allows employees to set aside money that will earn interest and compound over the years until they can withdraw. Contributing from each paycheck can have a huge impact over many years — particularly if there is an employer match involved.

We’re all facing challenges during these uncertain and unprecedented days – but by educating your employees on ways to not only financially manage these current circumstances but also prepare for upcoming ones, you can make a positive difference.

*All mention of taxes is made in reference to federal tax law. States can choose to follow the federal tax-treatment guidelines for HSAs or establish their own, some states tax HSA contributions. Please check with each state’s tax laws to determine the tax treatment of HSA contributions or consult your tax adviser. Neither UMB Bank, nor its parent, subsidiaries or affiliates are engaged in rendering tax or legal advice. Withdrawals for non-qualified expenses are subject to income taxes and a possible additional 20% penalty if you’re under age 65.