12 HSA Mistakes to Avoid in 2026

Most HSA holders are leaving thousands of dollars on the table every year. Whether it's failing to invest, missing eligible expenses, or not contributing enough, these common mistakes compound over time into significant lost wealth. Here are the 12 biggest HSA mistakes — and how to fix each one.

Mistake #1: Not Investing Your HSA

The cost: Tens of thousands in lost growth over a decade.

The average HSA balance sits in a cash savings account earning 0.1-0.5% interest. Meanwhile, the S&P 500 has averaged ~10% annual returns over the long term. On a $4,400 annual contribution over 10 years:

Cash at 0.5%: ~$45,120
Invested at 8%: ~$65,156
Difference: $20,036 in lost tax-free growth

Fix: Keep 1-2 months of medical expenses in cash. Invest the rest in low-cost index funds. Treat your HSA like a retirement account, not a savings account.

Mistake #2: Not Maxing Out Contributions

The cost: $1,500-$4,600/year in lost tax savings.

If you can afford it, contribute the maximum — $4,400 (individual) or $8,750 (family) in 2026. The triple tax advantage means every dollar you contribute saves you 30-45% in combined taxes. Even if you don't have medical expenses this year, the money grows tax-free for future use.

Fix: Set up automatic contributions to hit the 2026 maximum. If you can't max out, contribute at least enough to cover your expected medical expenses.

Mistake #3: Treating Your HSA Like a Spending Account

The cost: Massive long-term growth potential wasted.

Many people use their HSA debit card for every medical expense, depleting the balance regularly. While that's better than not having an HSA, you're missing the compounding opportunity.

Fix: Shoebox your receipts. Pay medical expenses out of pocket, save receipts, and let your HSA grow. Reimburse yourself later — there's no deadline.

Mistake #4: Missing HSA-Eligible Expenses

The cost: $1,000-$3,000/year in unclaimed tax savings.

Most people only use their HSA for doctor visits and prescriptions. But the list of eligible expenses is much broader:

Gym memberships (with LMN)
Supplements (with LMN)
Fitness equipment (with LMN)
Sunscreen (automatically eligible)
OTC medications (automatically eligible since CARES Act)
Therapy (automatically eligible)
Dental care (automatically eligible)
LASIK (automatically eligible)
Contact lens solution, first aid supplies, menstrual products

Fix: Use Hammock to automatically track eligible expenses across your spending. Get LMNs for wellness expenses that need documentation.

Mistake #5: Over-Contributing

The cost: 6% excise tax on excess contributions.

If you contribute more than the annual limit (including employer contributions), you'll owe a 6% excise tax on the excess — and it applies every year the excess remains in the account.

Fix: Track your year-to-date contributions carefully, especially if you change jobs mid-year. Withdraw excess contributions before the tax filing deadline to avoid the penalty.

Mistake #6: Not Having an HDHP (When You Should)

The cost: Missing out entirely on HSA benefits.

Many people default to a PPO or HMO when an HDHP would save them money overall — especially if they're young, healthy, and would benefit more from tax-free HSA contributions than lower deductibles.

Fix: Run the math. An HDHP with lower premiums + HSA tax savings often beats a traditional plan, especially if you don't have significant medical expenses. The premium savings alone can fund a substantial portion of your HSA contribution.

Mistake #7: Forgetting to Contribute After a Job Change

The cost: Months of missed contributions.

When you start a new job, HSA contributions don't automatically resume. If your new employer offers an HDHP and HSA, you need to actively enroll and set up contributions.

Fix: Add "set up HSA contributions" to your new-job checklist. See our complete guide to HSAs when changing jobs.

Mistake #8: Using HSA for Non-Qualified Expenses (Before 65)

The cost: Income tax + 20% penalty on the withdrawal.

Using HSA funds for non-medical expenses before age 65 triggers a steep penalty. A $1,000 non-qualified withdrawal could cost you $420+ in taxes and penalties (at a 22% bracket + 20% penalty).

Fix: Only use your HSA for qualified medical expenses. If you're unsure whether something qualifies, check the IRS list or use Hammock's expense tracker.

Mistake #9: Not Using the Last-Month Rule

The cost: Reduced contribution limit.

If you become HSA-eligible mid-year, the default is a prorated contribution limit. But the last-month rule lets you contribute the full annual amount if you're eligible on December 1st (with a testing period commitment).

Fix: If you gain HDHP coverage after January 1st, evaluate whether the last-month rule can increase your contribution limit.

Mistake #10: Paying High HSA Fees

The cost: $25-$75+/year in fees, plus limited investment options.

Many employer-tied HSAs charge monthly maintenance fees ($3-$5/month) and offer limited, high-fee investment options. Over time, these fees significantly erode your returns.

Fix: Transfer your HSA to a no-fee or low-fee provider like Hammock, Fidelity, or Lively. You can maintain an employer HSA for payroll deductions and periodically transfer balances to a better provider.

Mistake #11: Not Getting LMNs for Wellness Expenses

The cost: $500-$3,000+/year in missed eligible expenses.

Many people don't realize their gym membership, supplements, fitness tech, and wellness services can be HSA eligible with a Letter of Medical Necessity.

Fix: Get LMNs for your regular wellness spending. A single LMN can make thousands of dollars in annual expenses HSA eligible.

Mistake #12: Not Having an HSA at All

The cost: $1,500-$5,000+/year in tax savings.

If you're eligible for an HSA and don't have one, you're missing out on the most tax-advantaged account available. Even if you rarely go to the doctor, the contribution tax deduction alone justifies opening an account.

Fix: Open an HSA today. Hammock offers a free HSA account with automatic expense tracking, or you can open one at Fidelity, Lively, or through your employer.

How Hammock Helps You Avoid These Mistakes

Hammock addresses the most common HSA mistakes:

Automatic expense tracking catches eligible expenses you're missing (Mistake #4)
Free HSA account eliminates unnecessary fees (Mistake #10)
Unlimited LMNs ( Premium) expands your eligible expenses (Mistake #11)
Receipt management supports your shoeboxing strategy (Mistake #3)

The average Hammock member saves $1,000-$1,400/year by correcting these mistakes.

The Bottom Line

Most HSA mistakes are sins of omission — not investing, not contributing enough, not capturing eligible expenses. The fixes are straightforward, and the cumulative impact of getting your HSA right is tens of thousands of dollars over your lifetime. With 2026 contribution limits at $4,400 (individual) and $8,750 (family), now is the time to optimize your HSA strategy.