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

The primary purpose of establishing a Health Savings Account (HSA) is to save for medical expenses with significant tax benefits. HSAs are designed to help individuals and families manage their healthcare costs by allowing them to set aside money on a pre-tax basis, which means contributions are deducted from taxable income. This not only reduces the taxable income for the individual but also allows for tax-free growth of the funds within the HSA when invested.

Withdrawals from an HSA for qualified medical expenses are also tax-free, which encourages individuals to use their funds for healthcare needs. Additionally, HSAs can serve as a long-term savings tool, as unused funds can roll over from year to year and even be invested, potentially growing over time.

Overall, HSAs provide a means to effectively save for healthcare costs while enjoying multiple tax advantages that can lead to substantial savings over time, especially when paired with high-deductible health plans.