Health Savings Account (HSA)
An HSA is a US tax-advantaged account for individuals enrolled in a high-deductible health plan (HDHP). Contributions are pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are tax-free — making it the only triple-tax-advantaged account.
2025 contribution limits: $4,300 for individual coverage, $8,550 for family coverage (plus $1,000 catch-up for age 55+). Funds roll over indefinitely — there is no "use it or lose it" rule like an FSA.
Many financial planners recommend maximising the HSA and investing the funds in low-cost index funds, then paying medical expenses out of pocket if possible. After age 65, you can withdraw for any purpose (taxed like a traditional IRA) — making the HSA a stealth retirement account with additional medical benefits.
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- 401(k)
- A 401(k) is a US employer-sponsored retirement savings account. Contributions are pre-tax (traditional) or post-tax (Roth), grow tax-deferred or tax-free, and benefit from compound growth over decades.
- Roth IRA
- A Roth IRA is a US individual retirement account funded with after-tax dollars. Investments grow tax-free, and qualified withdrawals in retirement are completely tax-free.
- Effective Tax Rate
- Your effective tax rate is your total tax paid divided by your total income, expressed as a percentage. It is always lower than your marginal rate in a progressive tax system.