5 Reasons All Women Need a Health Savings Account|

With longer lifespans, lower average earnings, and a persistent gender wage gap, women need to take proactive steps to build financial security. One strategic yet often overlooked tool is a health savings account (HSA), which offers a combination of tax benefits, investment opportunities, and long-term financial security.

This short guide will cover exactly why you, as a woman, should consider opening and contributing to an HSA.

What Is an HSA and How Does It Work?

An HSA is a tax-advantaged savings account designed to help people with high-deductible health plans (HDHPs) save for current and future medical expenses. Contributions to an HSA are tax-deductible (or pre-tax, if made through an employer), the funds grow tax-free, and withdrawals used for qualified medical expenses are also tax-free.

HSA funds roll over year after year, and any unused balance remains in your account. Once you turn 65, your HSA can double as a retirement savings account, allowing withdrawals for non-medical expenses without penalties (though they will be taxed as income). This unique flexibility makes an HSA an ideal option for women who need to save for short-term health care needs as well as plan for long-term financial goals.

1. HSAs Combat Rising Health Care Costs for Women

Health care costs can be a significant expense for many Americans. Furthermore, studies show women often pay more for medical services throughout their lifetimes. 

From higher health insurance premiums to expenses like birth control, pregnancy, and menopause-related care, women’s health expenses can be more frequent and more extensive than their male counterparts. In some cases, the so-called “pink tax” can result in women paying more for everyday health and hygiene products, further exacerbating the problem. 

An HSA can help offset these costs by allowing you to save pre-tax dollars to cover qualified health expenses. This includes expenses like menstrual products, contraception, and general reproductive care.

2. HSAs Can Bridge the Retirement Savings Gap

On average, women may earn less over their lifetime than their male peers and are more likely to take career breaks for caregiving. Because of this, they may face additional challenges when it comes to saving for retirement. Also, since women have longer lifespans, it means their nest eggs must stretch further, which is why an HSA should be a strong consideration to bridge this gap.

Because funds in an HSA can grow tax-free through investments—similar to a 401(k) or IRA—it can double as a retirement savings account. Unlike other retirement accounts, however, withdrawals for qualified medical expenses remain tax-free in retirement.

Considering that health care costs for retirees can be extremely expensive, having a dedicated, tax-advantaged account to handle these expenses can be a real game-changer. For women, this “backup” retirement account of sorts can provide some wiggle room to avoid outliving their savings.

3. HSAs Can Encourage Financial Independence

One of the most empowering aspects of an HSA is the individual ownership feature. This means that even if you switch jobs, take a career break, or lose employer-sponsored benefits, your HSA remains intact and under her control. Contributions can continue as long as you’re covered by an HDHP, and existing funds can always be used for qualified health care expenses.

Additionally, HSAs provide investment opportunities that allow you to grow your savings over time. Many HSA administrators offer options to invest in stocks, bonds, or mutual funds. If you’re hesitant to enter the world of investing, an HSA may serve as a comfortable entry point and give you the confidence to continue your investing journey.

4. HSAs Offer Flexibility and Freedom

Another great reason to open an HSA is the flexibility it provides. This savings account allows for flexible spending on a broad range of health care related expenses, including out-of-pocket costs for dental, vision, and even mental health services.

For women who anticipate significant health care expenses later in life—such as long-term care or end-of-life care, an HSA can act as a dedicated fund to cover these costs. And if funds remain unused in retirement, they can be withdrawn for non-medical expenses (taxed as regular income), making it a versatile financial account that can be helpful in various circumstances.

5. HSAs Offer Compound Interest Benefits

Though having a “sinking fund” for health-related expenses can be helpful, it’s important to understand that the ability to increase your balance with the lower APR banks offer will often pale in comparison to investing through an HSA.

Women who start contributing to an HSA sooner rather than later will find their savings balances grow exponentially over time due to the power of investing and compound interest. Even small contributions made consistently can result in a significant balance by retirement—especially if the funds are invested.

The Pros and Cons of HSAs

The Bottom Line

For many women, financial independence and security are not just goals. They’re life-saving needs. An HSA offers a versatile and robust way to manage health care costs, save for retirement, and establish a solid financial cushion for the future.