Health Savings Accounts (HSAs) are among the most powerful—and underutilized—tools in the world of employee benefits. While many employees opt into them, they often fail to maximize their potential, leaving money on the table that could significantly enhance their financial health. HR executives and benefits brokers have the opportunity to provide crucial help, so employees understand the value of their HSAs and guidance on how to leverage them effectively.

SAVVI’s NextDollar tool can make this process easier. By helping employees visualize how each dollar they contribute can add up over time, SAVVI’s NextDollar empowers employees to make smarter decisions, not just for today but for their financial future. In this deep dive, we’ll explore why HSAs are essential, their benefits, and actionable strategies to help employees maximize their contributions and potential.

1) What is an HSA? A Quick Recap
An HSA is a tax-advantaged savings account to help employees save for medical expenses. Employees who are enrolled in a qualified high-deductible health plan (HDHP) can open an HSA and make contributions on a pre-tax basis. Contributions can be made by both the employee and employer, and funds roll over year after year if not used.

Triple Tax Advantage: The unique appeal of an HSA lies in its "triple tax advantage":

1. Contributions are tax-deductible.
2. Earnings (interest and investment gains) grow tax-free.
3. Withdrawals for qualified medical expenses are tax-free.

These advantages make HSAs one of the most powerful tools for managing healthcare costs while simultaneously saving for the future.

2) Why HSAs Are Essential for Employees' Financial Wellness
HSAs offer much more than just a way to pay for healthcare expenses. When used strategically, they can be a key component of an employee’s overall financial plan, helping them save for immediate medical needs and long-term retirement goals.

‍Covering Current and Future Healthcare Costs: Employees often use their HSA funds for immediate medical expenses like doctor visits and prescriptions. However, the true value lies in using an HSA as a long-term savings tool for future healthcare needs, especially as employees age. Healthcare expenses in retirement can be significant, and HSAs can help mitigate that burden.

‍Retirement Savings: After age 65, funds in an HSA can be withdrawn for any purpose without penalty, though they will be taxed if used for non-medical expenses. This provides an additional retirement savings avenue that can supplement traditional retirement accounts like 401(k)s or IRAs.

‍Employer Contributions: Many employers contribute to employees’ HSAs, making this benefit even more valuable. Employees should fully understand how to leverage these contributions to maximize their savings.

3) How to Maximize the Value of an HSA
Helping employees fully understand how to use their HSA to its maximum potential is key to enhancing its value. Here are some actionable steps:

‍Maximize Contributions: Encourage employees to contribute consistently throughout the year rather than waiting until the end of the year. This allows them to take advantage of the full tax benefit and potentially earn more interest or investment returns.

‍Invest HSA Funds: Help employees understand when and how to invest their HSA funds. Many HSA administrators offer investment options that can lead to greater growth over time, especially if funds are not being used for immediate medical expenses.

‍Save for Future Healthcare Needs: Encourage employees to track their healthcare spending and consider saving receipts for out-of-pocket medical costs. These costs can be reimbursed from the HSA in the future, allowing employees to let their funds grow for longer.

4) Using SAVVI’s NextDollar to Drive HSA Contributions
SAVVI’s NextDollar is a powerful tool that helps employees visualize the long-term value of each dollar they contribute to their HSA. By understanding the compounding effects of their contributions, employees are more likely to take proactive steps in saving for their future healthcare needs.

‍Visualizing Long-Term Growth: NextDollar shows employees how small, consistent contributions today can lead to significant savings in the future. This visualization empowers employees to make informed decisions about contributing more to their HSAs, particularly if they aren’t yet utilizing the full contribution limits.

‍Encouraging Consistent Contributions: By using NextDollar, employees can see the impact of contributing a little extra toward their HSA each paycheck, making it easier to understand the long-term value of those contributions. This tool makes it clear that even small increases in contribution can lead to substantial benefits down the road.

5) The Role of HSAs in Retirement Planning
As healthcare costs continue to rise, planning for healthcare expenses in retirement becomes even more important. HSAs offer a tax-advantaged way to save for medical expenses in retirement, and understanding this aspect of the HSA is critical for employees’ long-term financial health. Help employees view their HSA as a retirement savings tool, not just a short-term medical expense account. Encourage them to start early and contribute regularly to maximize the power of compounded growth and tax-free earnings.

Health Savings Accounts (HSAs) offer employees a wealth of benefits beyond simply covering current medical expenses. Tools like SAVVI’s NextDollar can make the difference by helping employees see the true value of their contributions and how even small, consistent actions today can lead to meaningful long-term benefits. With the right guidance, employees can harness the full potential of their HSAs, improving both their financial wellness and their health outcomes in the years to come.At SAVVI Financial, we provide the technology and insights to help you. Contact us to learn more about how we can support your strategic planning efforts. Click here to schedule a 15 minute chat. Or simply call 781-583-7017 or email at sales@savvifi.com.