DW has been contributing to a HSA for a few years. Not sure of the balance but there is probably a few $k in there. I have only a vague idea of how they work.
Is it best to max out contributions to build a big hedge against future health costs, or should you withhold only what you think you need this year?
Max it out, every year. Even at the cost of diverting funds from your other savings, an IRA or a 401k. There is nothing like it. It is the only savings vehicle that is
intended to be tax free going in, tax free coming out, and with tax free growth. It is also the only savings vehicle that reduces your FICA taxes in addition to your income taxes.
Repeat after me...
"max it out, early and often!"
I will have mine maxed out by June from payroll deductions, and earlier if I can get a rental property sold.
If the balance grows to a decent size, can it be invested or otherwise be put to work earning money?
Yes. In fact, that is kinda the point.
At some point in time, if the balance is large, can it be withdrawn or converted to non-medically-related expenditures or investments?
Yes, but this is a complex answer. The age that you can withdraw funds for other than medical expenses without penalty (but not without taxes) is 65. However, there are a few tricks for getting out
some of the money out before 65, if necessary. There are many devils in these details, so ignore those options until you know a
lot more about them.
I recently went on my employer's medical/dental/vision coverage and off hers (wow, what a big savings!). Can her HSA be used for medical expenses I incur going forward?
She can use deposited funds for you under limited circumstances, but she can't claim the family contribution limit anymore. This gets tricky, proceed with caution.