12 Mistakes Physicians Make With Their HSA

By Jared Andreoli, CFP®, CSLP®

As a physician, your days are likely filled with complex diagnoses, demanding schedules, and the relentless pursuit of patient well-being. Personal financial planning, although essential, often takes a backseat, leaving valuable opportunities unexplored. 

Among these, the health savings account (HSA) stands out as one of the most powerful (yet frequently underutilized) financial tools available to you. Often dubbed the "triple-tax-advantaged" account, an HSA offers unique gains: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. 

Despite these compelling gains, many physicians make common mistakes that prevent them from fully leveraging their HSA's potential. 

Let's examine 12 common mistakes and how you can avoid them to optimize your financial future.

1. Not enrolling in an HSA-eligible High-Deductible Health Plan (HDHP) 

This is the foundational error. You cannot contribute to an HSA unless you are enrolled in a qualifying HDHP. Physicians sometimes choose traditional PPO plans for lower deductibles or broader networks, inadvertently opting out of HSA eligibility. To avoid this, review your health plan carefully each year.

2. Failing to contribute the maximum allowed 

Many physicians contribute only enough to cover anticipated medical expenses or fail to maximize their contributions. The IRS sets annual limits ( updated each year), and missing out on these means missing out on tax-deductible contributions and years of tax-free growth. The 2025 maximum HSA contribution is $4,300 for individual coverage and $8,550 for family coverage.

3. Leaving funds in cash instead of investing 

This is perhaps the most significant error. Too many HSAs are treated like simple checking accounts for current medical bills. For a physician with decades until retirement, letting funds sit in cash means sacrificing significant long-term, tax-free growth. Most HSA providers offer investment options (mutual funds, ETFs, etc.)—utilize them!

4. Not leveraging the "catch-up" contribution (age 55+) 

For physicians aged 55 and over, the IRS allows an additional catch-up contribution of $1,000 in 2025 to an HSA annually. This is a powerful way to accelerate savings in the years leading up to retirement, yet it's often overlooked.

5. Paying for current medical expenses from the HSA 

The truly savvy strategy, especially for high-income earners like physicians, is to pay out-of-pocket (before age 65) for current qualified medical expenses and then save those receipts. This allows your HSA funds to continue growing tax-free. 

6. Failing to keep meticulous records of medical expenses 

If you choose the "pay out of pocket now, reimburse later" strategy, meticulous recordkeeping is paramount. Without receipts for qualified medical expenses, you won't be able to withdraw tax-free funds from your HSA decades later for non-medical purposes (after age 65) or for medical expenses. Treat these receipts like gold.

7. Not understanding what constitutes a "qualified medical expense" 

The IRS defines qualified medical expenses broadly, including doctor visits, prescriptions, dental care, vision care, mental health services, and even certain long-term care insurance premiums. Ignorance of this broad list means missing opportunities for tax-free withdrawals. Always check IRS Publication 502 for the latest guidelines.

8. Withdrawing funds for non-qualified expenses before age 65 

This is a costly mistake. Any distributions from your HSA for non-qualified expenses before you turn 65 are subject to both ordinary income tax and a hefty penalty. After age 65, non-qualified withdrawals are taxed as ordinary income, but without the penalty.

9. Not integrating the HSA into a holistic financial plan 

An HSA shouldn't be an isolated account. It needs to be part of your broader financial strategy, alongside your 401(k), IRA, taxable investments, and overall retirement income plan. A comprehensive approach helps you maximize all tax-advantaged accounts and make coordinated decisions about asset location and spending in retirement.

10. Forgetting about spousal HSA considerations 

If both you and your spouse are eligible for an HDHP, the family contribution limits apply to the combined total. Failing to coordinate contributions can lead to over-contribution and penalties for both.

11. Overlooking HSA beneficiary designations 

Like other retirement accounts, HSAs require beneficiaries to be designated. If you pass away, who will inherit your HSA? Update your beneficiary designation to prevent your account from going through probate and passing smoothly to your chosen heirs.

12. Not seeking professional guidance 

Trying to manage an HSA in isolation can lead to missed opportunities and costly errors. Partnering with a fee-only financial advisor who specializes in working with medical professionals can provide objective guidance, verify compliance, and optimize the long-term gains of your HSA.

Partner With a Specialist

By avoiding these common pitfalls and adopting a proactive, strategic approach, your health savings account can become an incredibly powerful tool for building substantial tax-free wealth for your retirement and beyond. 

At Simplicity Financial, we work with physicians, fellows, and residents to develop a financial road map to accomplish their financial goals. We address different areas of our clients’ financial life, including future aspirations and long-term financial plans.

Get started by scheduling a free consultation, or reach out to us by emailing jared.andreoli@simplicityfinancialllc.com or calling 414-207-6473.

About Jared

Jared Andreoli, CFP®, CSLP®, is president and financial planner at Simplicity Financial, a fee-only RIA dedicated to helping early-career physicians conceptualize their financial picture and achieve their financial goals. Jared specializes in devising individualized financial road maps for clients, and he loves nothing more than a full day meeting with clients who value his partnership to solve problems—big and small. 

After college, Jared spent six years working as a mutual fund administrator for a large company. While he learned an immense amount about the financial world, he was missing the personal connection of working with individual clients. Combining his passion for finance and personal connection, he established Simplicity Financial in 2017.

Jared has a degree in finance with a concentration in financial planning from Western Kentucky University, along with the CERTIFIED FINANCIAL PLANNER®, CFP® and a Certified Student Loan Planner (CSLP®) certifications. Outside of work Jared enjoys cooking and traveling. He played baseball in college and still coaches occasionally. He and his wife recently welcomed a daughter, who occupies most of their time. To learn more about Jared, connect with him on LinkedIn.