For Your (Tax) Health: The Underloved HSA

Core Insights - Health Savings Accounts (HSAs) are increasingly recognized for their tax benefits, making them attractive for wealth-management clients eligible for them [3][4] - Despite their advantages, HSAs remain underutilized, particularly among the general population, with only 1% of individuals having more than 10% of their portfolios in HSAs [5][6] - The total assets in HSAs are projected to reach $170 billion by the end of 2025, with a significant portion being invested [1] Contribution Limits - Annual contributions for HSAs in 2026 are set at $4,400 for individuals and $8,750 for families, an increase from 2025 [2] Tax Efficiency - HSAs offer a "triple tax" benefit: contributions, investment returns, and withdrawals for eligible expenses are all tax-free [3] - They are considered more tax-efficient than traditional retirement accounts like IRAs and 401(k)s [4] Utilization and Awareness - A significant gap exists in awareness and utilization of HSAs, with many advisors not discussing them with clients [5][6] - Wealthier households are more likely to allocate a portion of their portfolios to HSAs, with 31% of households with at least $3 million in investable assets having 1% to 10% in HSAs [5] Long-Term Care and HSA Applicability - HSAs can be beneficial for long-term care expenses, which have been rising faster than inflation [7] - Recent legislation allows HSA funds to be used for direct primary care fees, with specific monthly limits [6][7] Industry Insights - The HSA industry has seen improvements in transparency and fee structures, but there is still room for enhancement [7] - Fidelity and HealthEquity are noted as top-rated providers in terms of investment and spending accounts [9]