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[haele]

30. HSAs are good when you have someone with a chronic condition with occasional big expenses

Disclosure: Because I've dependents that have chronic conditions, I've had an HSA through my employer since 2007. Of course, I make just over the median income, so it's something I can budget for on top of the premiums for health, dental, and vision I pay through my employer.
Prior to getting the HSA, we were facing medical bankruptcy because of medical bills the insurance left for us to pay as our "20% co-pay responsibility" or because they didn't cover a certain procedure the doctor ordered for a particular diagnosis and we had to decide between covering any expensive medication or co-pay "pay up front" out of pocket, and having the clinic or hospital bill us for everything else - and hope we had the money before the bill in the mail went to collections (most times we didn't - and we eventually couldn't afford to keep setting up $25 a month payments after net on bills over $700 that we were accruing twice, sometimes three times a year)

An HSA is a way of putting aside money you *know* you'll have to spend for those 90-day mail order pharmacy or expensive lab procedures up front along with other bills such as rent/mortgage or auto insurance - and you'll get the tax documentation to help you figure out how much you can deduct on your taxes.
If you have access to an HSA through an employer, the money can be taken out before taxes, so it will already be considered "deducted" from your estimated annual income for tax purposes. And I've never found that you have to pay a fee to withdraw your HSA money for a medical expense, unlike retirement funds. There might be an annual fee, but it's never been something I've noticed over the year.

The only problem with this is that like most retirement "investment", the amount of money you can set aside is barely enough to meet most of the annual cap for just one person's medical deductible (max - $6250 for family, $7250 if one person is over 55), and if there's competing high medical and dental expenses, you'll still be on the hook for potentially up to $12K out of pocket over the year to cover the deductible.

But, HSAs get a better return than a typical bank or credit union savings account and not only are they portable, they roll over - so it is possible to consider starting one with a minimum $25 a month or so set aside through an employer to "invest" for future expenses such as potential emergencies, orthodontia, optical - or just for geriatric expenses later on, if you and your dependents throughout the years are lucky and don't have to use the HSA for anything other than check-ups and immunizations.

Here's the thing people keep forgetting. Like a 401K, a HSA is an investment *tool*, useful if you can afford it after all the required monthly bills are paid. A HSA is a SAVINGS ACCOUNT.
While desirable for as many people who can afford to have, a HSA is still *not* a replacement for Health insurance, or a health care tax for Medicare/Medicaid, or for a single payer health care like the VA or Tricare, where the full costs that pay for actual health care are spread across a wider population so that higher cost burdens don't crush individuals who could otherwise participate in society.

If you don't have enough monthly income to save - heck, if your monthly income is such that your household will be still be better off taking the standard Deduction than itemizing, it's not economically beneficial to you to have a HSA - unless you know you will probably have to have out of pocket expenses of at least $4K for medical or dental purposes a year within the next 5 years or so. So if you're pretty sure your kids will need braces or if bad teeth run in your family, start putting aside a bit.

But if you're an average worker with no real health issues, it really might be better to use the money that goes into a HSA to reduce your current expenses enough so you can get in a position to start saving money for medical expenses that might not be realized until after you hit 40/50 years of age.

Haele