While the amount you’ll need to save for healthcare costs depends on your unique situation, a health savings account (HSA) can help cover out-of-pocket healthcare expenses and even offer tax benefits.

HSAs are great for managing healthcare-related expenses, especially as the chances of spending more on healthcare increase as you age. That’s why it’s important to regularly review your retirement plan and factor in your medical needs if they change so that you budget your post-employment income with as little headaches as possible.

The funds you contribute to an HSA fund can be used for various eligible purchases, from prescription eyeglasses and medication to routine checkups and hospital visits. HSAs are a way to save for your future well-being and potential health emergencies. HSA funds are also yours to keep and are transferable if you change positions and employers.

Another benefit of HSAs is the triple-tax advantage. HSA owners can benefit from tax-free contributions, growth and withdrawals.

Tax-free contributions - Your taxable income can be reduced through money you contribute pre-tax. Assume you contribute $1,000 in 2025 and are in the 22% tax bracket. This could reduce your federal income taxes by $220 in 2025.

Tax-free growth - You can invest your contributions, which can increase over time through compounding.

Tax-free withdrawals - HSA funds used on eligible health expenses are tax-free.

If you’re enrolled in a high-deductible health plan (HDHP) and meet IRS requirements, you could be eligible to open an HSA. If you have an HSA, or your employer sponsors an HSA, contact the HSA provider for more information. If your employer does not sponsor an HSA, you could be eligible to open one through an external financial institution. Read more on HSA benefits from Voya, our recordkeeper, here.

INPRS is not an HSA administrator, such as a bank or credit union. This article is for educational purposes only. INPRS is not a tax advisor and cannot provide you with tax advice.