HealthyHive Team
We consistently praise Health Savings Accounts (HSAs) for their triple tax advantages, but there’s a lot more beneath the surface that even savvy savers often overlook. Whether you’re new to HSAs or have had one for years, these lesser-known facts could help you unlock powerful tax benefits, boost retirement savings, and build a stealth financial safety net.
1. Adult Children Can Contribute, Even If Their Parents Pay the Premiums
Here’s a surprise: if you’re an adult child (18+) still on a parent’s High Deductible Health Plan (HDHP) and not claimed as a dependent on your parent’s tax return, you can open and fund your own HSA.
Even better? You can contribute up to the full family maximum:
- $8,550 in 2025
- $8,750 in 2026
That’s a huge opportunity for recent grads or young adults in their early careers. It’s also a great way for parents to help their adult children build long-term savings while still keeping them covered. One thing to note is that these contributions will be after-tax, but can be deducted. It is also worth noting that anyone can fund this HSA, for example, a parent could fund the account with after-tax dollars, using up some of their gift exclusion for the year.
2. Payroll Contributions Come With a Hidden Bonus: No FICA Tax
HSA contributions made through payroll deductions are even more valuable than personal contributions, and here’s why:
They avoid the 7.65% FICA tax (Social Security + Medicare). So if you contribute $5,000 through payroll, you’re saving an extra $382.50 right off the top. Even better, this is on top of the federal and state income tax savings. Considering this tax saving when compounded over many years shows how powerful these accounts can be, and this is without taking into account any investment growth.
In other words: always use payroll deductions when available!
3. You Can Do a One-Time IRA to HSA Rollover
As we have discussed in a prior blog, this one is a true stealth move: the Qualified HSA Funding Distribution allows you to do a one-time, lifetime rollover from a traditional IRA to your HSA, up to the annual contribution limit. Why is this a big deal?
- You’re moving pre-tax IRA money into an account that can ultimately be spent 100% tax-free (as long as it’s used for qualified medical expenses).
- It reduces your future required minimum distributions (RMDs) and tax liability from the IRA.
- It’s a great strategy if you’re short on cash but still want to max out your HSA contribution.
Just remember: you must remain eligible for an HSA (i.e., enrolled in an HDHP) for 12 months after the rollover, otherwise, the rollover can become taxable and could leave you with a 10% early withdrawal penalty! For more information on this strategy, be sure to check out our blog linked above.
4. “Shoe Boxing”: Building a Stealth Emergency Fund
Next time you pay out of pocket for a medical expense, hang on to that receipt! With an HSA, you can save receipts for qualified healthcare expenses, even if they are from years ago. This allows you to reimburse yourself whenever you need the cash, tax-free.
This strategy, called “Shoe Boxing,” lets you pay for medical expenses now, hold onto the receipt, and reimburse yourself later when the money is needed. In the meantime, be sure to keep contributing to your HSA, as those funds will hopefully be able to see investment growth over time.
Think of it as creating a stealth emergency fund that grows tax-free while you don’t touch it. It’s a simple, clever way to build a financial cushion without sacrificing your long-term savings. While keeping track of receipts can feel like a lot of work, the best way to do this is to take pictures upon getting the receipts and storing them in a folder on your computer. This way, you do not have to worry about losing them and they can be accessed easily!
5. Use Price Transparency Tools to Save While Investing the Difference
Thanks to the federal Hospital Price Transparency Rule, it’s now easier than ever to compare prices for common medical procedures. The difference in cost can be shocking, sometimes thousands of dollars for the same service! Using these tools can reduce your wasteful spending and allow the savings to grow for your retirement. Let’s walk through an example scenario:
- John is 35 years old and has been dealing with a nagging injury and decides to get an MRI. His doctor recommended a hospital close by that will do the scan for $1,500. Before booking it, he decided to do some quick research using a healthcare price transparency tool:
- With a quick search, John finds an imaging center a few miles away that will conduct the scan for $600. John books the imaging center and is able to invest his savings in his HSA account.
- Using a modest return estimate of 5%, investing the savings of $900 until the age of 65 would leave John with over $3,800! This might not seem like a big difference, but a series of these decisions can potentially give you several extra years of medical savings. This is just one example of how making conscious healthcare decisions can lead to building long-term wealth.
6. Withdrawing Funds After 65 Years Old
After you turn 65, your HSA (Health Savings Account) becomes even more versatile. You can still use the funds tax-free for qualified medical expenses, but you can also withdraw money for any purpose without facing the 20% penalty. Just keep in mind that non-medical withdrawals will be taxed as ordinary income, similar to a traditional IRA. It’s a flexible way to cover healthcare in retirement or supplement your income if needed.
Final Thoughts
HSAs aren’t just a way to pay for medical expenses. They’re a powerful, flexible, and deeply underused financial planning tool. Whether you’re in your 20s, 40s, or 60s, there’s value to be gained from understanding the full potential of your HSA.
Contact us at info@hiveaway.com to learn more about our tools, education, and strategies to make the most of your savings.
Disclaimer:
👉 This blog is for informational and educational purposes only and does not constitute financial, tax, or investment advice. HealthyHive does not provide personalized recommendations. Before making any decisions about Health Savings Accounts (HSAs) or other financial matters, consult a licensed financial advisor or tax professional.
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