The advantage is in the "triple tax benefit," Carolyn McClanahan, a certified financial planner and director of financial planning for Life Planning Partners, told CNBC this week. Unlike use-it-or-lose-it flexible spending accounts, HSA balances roll over year after year, with tax-free investment growth. Withdrawals for medical expenses are tax-free at any age; distributions after age 65 for other purposes will be taxed at regular income-tax rates.
But it gets better. "You have to incur the medical expense after you establish the [HSA], but you can take it out five years later, 10 years later," said O'Rourke at Integrated Retirement Initiatives. So account holders who can afford to can pay out of pocket now and save their receipts, claiming the qualified distribution after the funds have had time to grow.
The scale is also bigger. Flexible spending accounts let users set aside a maximum of just $2,550 in pretax dollars in 2016 for medical expenses, while the annual contribution limits on HSAs are $3,350 for individuals and $6,750 for families. Account holders age 55 and older can make an additional $1,000 catch-up contribution.