While they can benefit some individuals, opening an HSA is not a one-size-fits-all solution. Several hidden pitfalls associated with HSAs may outweigh the perceived benefits.
HSAs are only available to individuals enrolled in High-Deductible Health Plans (HDHPs). These plans come with significantly higher deductibles than traditional health insurance policies.
HSAs are meant to be a long-term savings tool for medical expenses, and you can only withdraw funds for qualified medical expenses without facing a penalty.
HSAs often come with administrative fees charged by the financial institutions offering them. These fees vary significantly and may affect potential tax benefits and investment gains.
While HSAs offer the opportunity to invest your contributions, the investment options within the HSA account are often limited compared to a traditional brokerage account.
Some individuals may accumulate substantial HSA balances over time, only to face the risk of losing the money if they don't use it for qualified medical expenses in retirement.