How to Create an HSA Spending and Saving Strategy for 2021

2020 was an interesting year, to say the least. Raging wildfires, a global pandemic, the unemployment rate in the U.S. at a historic high. Months have felt like years. Our finances might have been impacted negatively due to a job loss or furlough.

While there's a lot one could fret about, it's a good idea to try and focus on the things we can control. For one, doing the prep work to create a new spending plan for the new year.

With 2021 here in full swing, what better time than now than to come up with a HSA spending and saving strategy? As your HSA is an account you can pull money from, it's important to see how it ties into your larger spending plan.

A bright spot in an otherwise gloomy year is that qualified health expenses for HSAs have expanded. With the passage of the CARES Act earlier this year, there's now greater flexibility in what is eligible in terms of HSA spending. Here's what has changed for the long haul:

Expansion of Eligible Medical Expenses:

Tax-advantaged accounts such as HSAs, Health FSAs, Archer MSAs, and HRAs now reimburse the cost of menstrual care products — think sponges, cups, liners, pads, and tampons.

A prescription is no longer needed to purchase over-the-counter drugs and medicines with your HSA funds.

This applies to any qualified purchases of menstrual care products and over-the-counter products made after January 1, 2020. That might not seem like a big deal, but think about the savings over time. The average price for a box of tampons in 2018 was $5.99 (Statista).

If there's about 32 tampons in a box, and one might go through 20 tampons each menstrual cycle, that's 7.5 boxes a year, or $45. Not to mention pantyliners, or over-the-counter pain medication to reduce painful menstrual cramps.

Make sure to hold on to your receipts for any or all HSA-eligible medical expenses. Whether you keep them in a stack and stash them in a safe place, or snap pics and save them to a file on your drive, trust that these receipts will come in handy during tax season.

Telehealth Covered:

And on a related note, telemedicine and telehealth services are temporarily covered. This kicked in starting March 27, 2020 and is in effect through December 31, 2021. Additionally, a high-deductible health plan (HDHP) would cover these services without a deductible or below minimum deductible and the individual can still contribute to the HSA under that plan.

As these are relatively new changes, keep a lookout for any updates. A good place to start is the HSA Store's Learning Center, or the IRS's Coronavirus resources page.

Know Who Is Covered

As outlined in the IRS Publication 969, eligible individuals that are covered under an HSA include:

  • You
  • Your spouse
  • You, or your spouse if filed jointly, could be claimed as a dependent on someone else's tax return in 2019
  • Any HSA dependents you claim on your tax return
  • Anyone you could've claimed as a dependent, but weren't able to, because they filed a joint return, or earned more than $4,200.

Estimating Your HSA Contribution

It's hard to predict exactly how much you'll need in 2021 for health-related expenses. But an educated estimate is a good place to start. See how much you spent in the current year, and go from there. A medical savings account can include the following:

  • Health insurance premiums
  • Prescription medication
  • Over-the-counter medications and supplies
  • Menstrual care products
  • Anticipated co-pays
  • Your annual deductible

Want to know how much you'll save in taxes now and into the future with an HSA? Use our HSA Calculator to find out.

Create a Health Savings Account (HSA)

Now for the fun stuff. How much you decide to stash away each month is a key part of your HSA spending and saving strategy.

But the more you tuck away, the more you can use toward medical expenses. Some of your medical expenses, such as your deductibles, copays and eligible expenses, can come out of this account.

And let's not forget the triple-whammy tax benefits of an HSA: Money you put into your HSA account can bump down your taxable income, and withdrawals made for qualified medical expenses are tax-free. And should you decide to invest the funds in your HSA, any earnings are also tax-free.

Commit to auto-contributing a set amount each month or week. In 2021, the contribution limits for an HSA is $3,600 for individuals, and $7,200 for families (SHRM). If you're age 55 and up, you're eligible for a HSA catchup contribution of $1,000.

If you can swing it, contribute regularly into your HSA account so you hit the max. So if the max contribution limit remains at $3,600 in 2021, you'll want to auto-save $69.23 a week, or $300 a month. If you're eligible for the family contribution limit, set your savings on auto-pilot: commit to stashing $138.46 a week, or $600 a month.

Review Your Health Insurance Premiums

The close of a plan year is an opportune time to review your plan and make sure it's still a good fit for you. For example,'s open enrollment period to purchase health insurance kicks off November 1 and runs through December 15th, so you'll be one of millions of Americans making important benefits decisions each fall. Unless you qualify for a special enrollment period, this is the only time you can change your plan. Here are a few questions to ask yourself:

  • Have you experienced a major life event? For instance, had a family, got married, got divorced, lost your job, or is one of your kids no longer a dependent and are leaving the nest? (Note, you might also qualify for a special enrollment.) If so, how might that impact your health insurance needs and costs?
  • Have you moved to a different state? Which insurance carriers and plans are available?
  • Do you anticipate requiring more medical treatment, prescription medication, and trips to the doctor?
  • Has there been a significant change in your financial situation?
  • If you're on an HDHP for 2021, would it be best for you to continue to stay on a HDHP for 2022? And vice versa?

Getting the ball rolling on your HSA spending and strategy for 2021 and beyond will position you for success. Less hassle, less worry, and ultimately less work during the holidays, when it's bound to get a bit hectic. Godspeed!


Thanks for visiting the Learning Center. For the latest info about your health and financial wellness, be sure to follow us on Facebook and Twitter.

Jackie Lam

Jackie Lam is a personal finance writer and is based in Los Angeles. Her work has appeared in Business Insider, Salon, Mental Floss, and GOOD. She is a candidate for the ACFPE® financial coaching certification.

Jackie is passionate about helping artists, freelancers, and gig economy workers with their finances. She has in-depth experience writing about budgeting, investing, frugality, money, and relationships, and loves finding interesting stories that revolve around money.

Best Sellers

More From the Learning Center