Balancing Benefits: HSAs Aren't Just for High Earners

Ed note: Posts published on From the Workplace are written by outside contributors and do not necessarily reflect the view or opinion of SHRM.

No two households are alike, but they all collect tools over time. Some are specialized—like that wrench you bought for a single project years ago—but the most valuable are almost always the most common. 

Employees and their families are stretched right now. Even as inflation has (generally) cooled, everyone is looking for ways to make their dollars go further. A health savings account (HSA) is one such tool that enables families to stretch health care dollars while offering long-term financial benefits. Importantly, HSAs are not only useful for high-income individuals.

The Messy Kitchen Drawer

To be clear, I have worked in the niche world of HSAs for several years now—but they have become so commonplace that my intent is not to advocate for their adoption. Rather, it’s to dispel the ‘HSAs are only for the well-to-do’ myth.

In reality, HSAs are a standard financial tool widely available to Americans. Data supports this: an analysis of my firm’s share of HSA account holders shows that more than three-quarters of them earn less than $100,000 annually. Devenir research aligns with this, indicating that 75% of HSA holders live in ZIP codes with a median household income below $100,000.

Additionally, The concentration of HSAs with lower balances across lower ranges is significant. The average balance of new HSAs opened in 2023 was $1,598. Finally, the HSA market is expected to grow significantly, with projections of 44 million accounts holding $168 billion in assets by 2026. As I posited earlier, these are a practical and widely used financial tool.

All of this stems from the design of the benefit: HSAs are, for all intents and purposes, the financial planning equivalent of that screwdriver or multi-tool you always keep around, because whether you’re just getting started in life and want to take some pressure off for needed care (think mental health care or a longer course of regular care), or are saving for later in life (think retirement or late-life health care needs), an HSA can flex to meet consumers where they are.

A DIY Generation

Speaking of tools, DIY culture is thriving (who doesn’t watch HGTV?)—and millennials, who are often described as financial do-it-yourselfers, are leading the charge in HSA adoption. Their participation rate is more than double that of any other generation, reflecting their life stage, and their appreciation of a tool that is versatile. Let’s not forget: millennials are not just getting started anymore. By and large, they have mortgages, careers, and kids.

Employers are noticing the popularity of HSAs as well. In our data set, more than one-third of employers now contribute to their employees’ HSA accounts, with mid-sized businesses leading the way with nearly 75% contribution rates. This support, paired with individuals’ proactive use of HSAs, highlights how these accounts are becoming mainstream.

While millennials embrace HSAs early in their careers, they are equally valuable for those nearing retirement. These accounts provide a way to save and invest for health care expenses later in life, reinforcing their accessibility and utility across different life stages.

Literacy and Education

Every tool, no matter how versatile, requires some know-how to be effective. Think again of the screwdriver in your kitchen drawer. In the hands of someone unfamiliar, it might only tighten loose screws. But for those who know its potential, it can assemble furniture, open paint cans, or even act as a makeshift chisel. HSAs are similar: their full utility goes beyond tax benefits.

Promoting HSA education can empower users to make more strategic decisions about their health care finances. Key areas to focus on include contribution limits, long-term benefits of investing HSA funds, and understanding how to use these funds. With better literacy, more Americans can unlock the full potential of their HSAs.

A Tool for All

HSAs are essential tools for managing health care costs, not exclusive benefits for high earners. They are accessible across income levels and age groups, and data demonstrates their widespread use and practicality. With the right education, more individuals can harness the versatility of HSAs to secure their financial and health care futures.

Nicky Brown is vice president of public policy and government affairs at HealthEquity whose 20-plus year career has focused almost exclusively on the benefits space in implementation, compliance, and advocacy.