What personal account enables individuals to set aside funds for future healthcare expenses?

A Health Savings Account (HSA) is designed specifically for individuals to save funds for future healthcare expenses. The contributions to an HSA are often tax-deductible, and the funds can grow tax-free, which means that individuals can accumulate savings specifically for medical expenses over time. This account type allows for both short-term and long-term savings, providing individuals with a financial cushion for healthcare needs not covered by insurance.

The flexibility of HSAs is notable, as funds do not expire at the end of the year and can carry over indefinitely, making them a valuable resource for managing healthcare costs, especially as individuals approach retirement when medical expenses may increase. HSAs can only be used in conjunction with qualifying high-deductible health plans, which further emphasizes their role in setting aside funds specifically for health-related costs.

Other account types, like a flexible spending account, are intended for more immediate healthcare expenses and typically require funds to be used within a specific time frame. Retirement accounts focus on long-term savings for retirement and are not specifically designated for healthcare costs. Trust accounts can serve various purposes, including estate planning, but they do not specifically cater to healthcare expenses.