Despite growing adoption, Health Savings Accounts (HSAs) remain widely misunderstood. Many people still confuse them with FSAs, underestimate their long-term value, or overlook their tax-saving potential entirely.

In this guide, we break down six of the most common HSA myths and the facts that can help individuals, employers, and benefit decision-makers better understand how HSAs can contribute to both short-term savings and long-term financial wellness.

Myth #1: HSAs are expensive to open or maintain

Truth: HSAs can help you save (and even make) you thousands of dollars a year

Most HSAs are free to open and maintain. Many providers do not charge setup or monthly fees, making them accessible to a wide range of individuals.

What’s more, is it offers significant tax savings. Because contributions are made pre-tax, you can reduce the cost of eligible medical expenses by as much as 30%. In addition, your balance grows tax-free through interest or investments—and withdrawals for qualified expenses remain tax-free, too.

Some providers also offer investment options that allow you to grow your HSA like a retirement account. That means your HSA isn’t just a tool for covering medical bills—it’s a way to build long-term, tax-advantaged savings.

Myth #2: HSAs and FSAs are basically the same

Truth: HSAs offer year-to-year rollover, investment potential, and portability. FSAs generally do not

Flexible Spending Accounts (FSAs) sound similar to HSAs and on the surface have the same function: to provide people with a tax-free way to pay for qualified medical expenses. But there’s a catch. You must use all the contributions you make to an FSA by the end of the calendar year or else you forfeit anything that remains in your account. Your employer has the option to offer you a two-and-a-half month grace period in which to use your remaining contributions, or to allow you to rollover up to $500 to the following year, but they don’t have to.

HSAs, on the other hand, rollover from year-to-year so you never lose your contributions. This allows you to use it as a true savings account. You also own your HSA so you always have access to your money regardless of whether you’re still with your employer or qualified to contribute to your account.

This brings us to another point about FSAs: they’re employer-owned. So in order to open one, your employer must offer it as part of its benefits package. Any contributions left in your account once you leave your employer or which remain at the end of the year or grace period are absorbed by said employer.

If your employer doesn’t offer an HSA, you can still open one on your own if you qualify. This flexibility makes HSAs a more versatile option for long-term financial planning.

Myth #3: Health costs associated with an HDHP are too high

Truth: An HSA can actually help you save money on health costs

The name High Deductible Health Plan (HDHP) scares some people, and for good reason. No one wants to get stuck with a large medical bill they can’t afford. But here’s how HDHPs and HSAs work hand-in-hand:

1. HDHPs typically have the lowest monthly premiums of the health plans. So if you take the money you save every month and put it into your HSA, and then invest those savings, you build a tax-free safety net that you can use for copays, coinsurance, or to pay your deductible outright.

2. Preventative care like well visits, immunizations, and annual exams are 100% covered under an HDHP prior to your deductible being met. So if you don’t typically use the medical system for anything other than preventative care, you’re unlikely to experience high health costs.

3. You can use your HSA to pay for medical expenses your health insurance plan doesn’t cover. So there’s no need for a comprehensive health plan.

Myth #4: I’m too young or too old to benefit from an HSA

Truth: No matter your age, you can benefit from having an HSA

HSAs were specifically designed to benefit people at all stages of their health journeys. If you’re young, you may not utilize the health system too much outside of preventative care. When you purchase an HDHP, you could save a lot of money on unnecessary coverage. In addition, you have a lot of time to build up your savings so if needed, you’ll have plenty in your account to cover your out-of-pocket costs.

If you’re older, you may feel like you don’t have enough time to add an HSA to your retirement planning. However, starting at age 55 the IRS allows you to contribute an extra $1,000 per year to help you build your savings as you near retirement. In addition, when you use your HSA to pay for medical expenses in retirement the distributions remain tax-free (unlike with an IRA or 401k).

Another little known fact is: if you work for a large company and don’t retire at age 65, you can delay starting Medicare if you want to continue contributing to your HSA.

Myth #5: Medicare makes an HSA in retirement unnecessary

Truth: Many retirees face significant healthcare expenses—and HSAs can help cover them

Medicare is just another health insurance plan and as such, it doesn’t cover everything. You might have to pay a monthly premium or copays or coinsurance for prescriptions, procedures, and other care. But you can use your HSA to pay for all of these expenses. If you can start an HSA early, contribute to it regularly, and invest your savings, you will have the opportunity to be able to build enough savings so that you can use your other retirement accounts to meet other needs, or maybe even a little fun.

Myth #6: Your dependents can only use your HSA if they’re covered by the HDHP

Truth: You can use your HSA to pay for dependents’ medical expenses regardless of coverage

First, the HSA account holder must be covered by an HDHP to contribute to their HSA. But in the event it makes more sense to buy a different insurance plan, the account holder will still have access to their money.

Second, your HDHP coverage type determines how much you can contribute each year. In 2025, the IRS allows up to $4,300 in contributions for individuals and up to $8,550 for those with family coverage. If you're 55 or older, you can contribute an additional $1,000. No matter your plan type, HSA funds can be used for qualified medical expenses for your spouse or dependents—even if they aren't enrolled in your HDHP.

There are many benefits to contributing to an HSA no matter where you are in your life, career, or financial circumstance. If you have more questions about how HSAs work or what they can be used for, please check out our extensive library of resources or reach out to your HR department.