Which type of account is tax-deferred and used for qualified health care expenses, allowing unused funds to roll over from year to year?

The Health Savings Account (HSA) is designed to be a tax-deferred savings account specifically used for qualified health care expenses. One of the key features of an HSA is that it allows unused funds to roll over from year to year, which means that the account holder can accumulate savings for future medical expenses without the pressure of losing the funds at the end of each year.

This account can be funded with contributions made by the individual or their employer, and the contributions are tax-deductible. Additionally, any interest or investment earnings grow tax-free, and withdrawals for qualified medical expenses are also tax-free. These attributes distinguish HSAs from other health-related accounts, such as Flexible Spending Accounts (FSAs), which typically have a "use it or lose it" policy regarding unused funds at the end of the plan year.

By promoting long-term saving for health care costs, HSAs encourage individuals to consider their health care spending more mindful and also incentivize them to seek cost-effective medical care. This multifaceted utility makes HSAs a popular choice for those looking to manage their health care finances efficiently.