What is a "Health Savings Account" (HSA)?

A Health Savings Account (HSA) is defined as a tax-advantaged savings account specifically designed to help individuals save for medical expenses. Contributions to an HSA are made with pre-tax dollars, meaning they reduce taxable income, and funds can be withdrawn tax-free when used for qualified medical expenses. This tax benefit makes HSAs a powerful tool for managing healthcare costs and planning for future medical needs.

HSAs also offer the potential for growth, as funds can be invested, and interest or investment earnings are not taxed as long as the money remains in the account and is used for qualified expenses. This distinguishes HSAs from regular savings accounts, which do not provide similar tax advantages.

The definition and purpose of an HSA clearly align with the attributes mentioned in the correct choice, reinforcing why this option holds significant relevance in discussions about health insurance and personal finance.