Health savings accounts, or HSAs, are often misunderstood. Around 40% of employees feel like they don’t fully understand how to utilize their account, according to a survey by national health savings administrator Further. For those in retirement, the advantages of an HSA may be even more confusing — but the benefits are worth taking advantage of.

What is a health savings account?

HSAs are tax-advantaged savings accounts commonly used to cover current medical costs such as copays, deductibles and other qualifying medical expenses. They're only available to people in high-deductible health plans.

These accounts are chock-full of benefits when it comes to covering hefty health care costs. One of the major perks of these accounts is that the funds can be invested, including in securities like mutual funds and ETFs, giving them the opportunity to grow significantly over time. Better yet, there is no “use it or lose it” deadline to worry about. Any funds you don't use one year will carry over to the next year.

Not only are HSAs a great option when it comes to saving for medical costs, but they also have a unique structure that makes them powerful retirement savings vehicles. HSAs are the trifecta of tax-advantaged accounts. Pre-tax contributions lower your tax liabilities this year, investments grow tax-free inside the account and withdrawals are federal income tax-free as long as the money is used for qualifying expenses.

HSAs can be leveraged in more ways than one. Here are four strategies to maximize your HSA during retirement.

How to Maximize Your Health Savings Account in Retirement

Cover pre-Medicare health expenses

A retired couple could face health care costs upwards of $400,000. This figure varies depending on your location, prescription requirements and other medical needs. It also varies based on how early you retire.

Unless you have a disability or qualifying condition, the earliest possible enrollment age for Medicare is 65. For those with the good fortune of retiring before reaching this threshold, leaning on an HSA is a tax-efficient way to cover your health care costs until you’re ready to apply. Having enough in your account to bridge this gap can bring peace of mind as you transition into a new phase of life.

HSAs also allow for “catch-up” contributions for those over the age of 55. This gives account holders the ability to contribute an additional $1,000 every year and helps relieve the increasing health care costs that can come with age.

You will no longer be eligible to contribute to your HSA after you enroll in Medicare, but you can continue to use your HSA funds to cover Medicare costs, including your premiums, coinsurance and deductibles.

Use your HSA as a retirement investment tool

Only 13% of HSAs are invested in assets other than cash, according to a recent study by the Employee Benefit Research Institute (EBRI). This suggests that the many account holders are potentially missing out on thousands of dollars of future earnings.

Instead of sitting on a stack of cash, use your HSA to invest in stocks, bonds, ETFs and mutual funds. By playing an active role in investing your allocated funds, you could have a powerful addition to your investment portfolio when you retire.

When you retire, you can even use your account funds for nonmedical purposes. If you’re over the age of 65, then you can withdraw funds at any time, for any reason, without penalty. However, if the cash will be used for something other than a qualified medical expense, then the amount will be taxed at your current tax rate.

Prepare for long-term care expenses

The average cost of a private room in a nursing home in the United States is $92,000 per year.  Medicare does not cover the cost of long-term care, leaving retirees to be responsible for the full bill. And long-term care can be one of the most difficult costs to plan for as each situation is unique.

You should have a plan for how you'll cover the costs of long-term care for yourself or your spouse, even if you don't think you'll need it. The good news is that your HSA can take care of some of the cost burden for you. When you take advantage of the investing power that an HSA holds and grow your contributions over time, you can create a safety net for yourself or your spouse.

Provide security for your loved ones

HSAs can be a tax-efficient way to transfer unspent funds to your loved ones. How the account is taxed boils down to who you name as your beneficiary. If you pass away with your spouse as the beneficiary, they can leverage the account ownership benefits and tax-free withdrawals for the qualified expenses that make HSAs so attractive.

Non-spousal individuals, such as children or siblings, can also be beneficiaries on your HSA account. However, one major caveat exists in doing so. The tax benefits for withdrawing funds disappear if you transfer the account to someone other than a spouse. The assets will also be taxable to the beneficiary when they receive them. Don't let this dissuade you from using your HSA as a legacy planning tool. The assets will still have your entire lifetime to grow tax-deferred and can become a considerable windfall for whoever inherits them.

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Maxime Rieman Croll is senior director, organic content marketing at LendingTree.