Health Savings Accounts are triple-tax free, so if eligible to contribute, make the most of it. Tax advantages include tax-free or tax-deductible contributions, tax-deferred earnings in the account and tax-free withdrawals for qualified health care expenses. If HSA dollars are invested, the earnings inside the account may be significant. The best chance to benefit from long-term tax-deferred compounding is the result of paying for current health care expenses from funds outside of the HSA to the extent feasible. This approach can maximize all three tax-advantaged aspects of an HSA to help cover qualified health care expenses in retirement.

While HSAs are tax-advantaged accounts, there are tax penalties for withdrawals that are not qualified before the age of 65; therefore, it is important to have a separate emergency savings account. See IRS publications 502 and 969 for details on qualified withdrawals.