What is the purpose of a Health Savings Account (HSA)?

A Health Savings Account (HSA) is specifically designed to allow individuals to save money tax-free for qualified medical expenses. Contributions to an HSA are tax-deductible, reducing the overall tax burden for individuals who utilize these accounts. The funds in an HSA can be used for a variety of medical costs, including deductibles, copayments, and other out-of-pocket expenses, provided these costs meet the IRS guidelines for qualifying medical expenses.

Using an HSA not only encourages individuals to save for health-related costs but also provides the benefit of tax-free growth. This makes HSAs an effective financial planning tool for individuals with high-deductible health plans who want to manage their health care expenses strategically.

Other options focus on different financial needs. For instance, while supplemental income during retirement is important, it does not align with the primary function of an HSA. Covering long-term care costs or paying insurance premiums directly are also not within the essence of what HSAs are intended to do; HSAs are focused solely on qualified medical expenses rather than these other financial avenues.