Using HSAs for Retirement Planning
- Daniel Kurt
- Nov 4, 2025
- 4 min read
Updated: 1 day ago
Main takeaways
HSAs offer triple tax benefits—contributions are deductible, growth is tax-free and withdrawals for medical expenses aren’t taxed.
Maximizing contributions and investing funds can turn an HSA into a powerful retirement savings tool, not just a short-term medical account.
You can use HSA funds to pay Medicare premiums when you turn 65, adding to the usefulness of these accounts.
Since they were introduced two decades ago, health savings accounts have helped consumers save big whenever they make a doctor visit, get lab work or even buy a new box of contact lenses. If you’re only putting in enough cash to handle short-term medical needs, however, you’re not getting the most out of these incredibly powerful accounts.
Because of the unique tax benefits of HSAs, they’re also an excellent way to build wealth for retirement—and by then, the amount you’ll be paying for medical care is likely to be much higher. Here’s a look at how HSAs work and how you can get even more long-term use out of them.
Understanding health savings accounts (HSAs)
A health savings account is a tax-advantaged account that you can use to pay for qualified health care expenses. It’s a long list that includes everything from physical exams and hospital stays to prescription drugs and dental treatments.
HSAs offer a unique combination of benefits, including:
Tax-Free Contributions: Your contributions to an HSA are tax-deductible, which lowers your income tax liability for the year.
Tax-Free Growth: The money inside your HSA grows tax-free, much like it would in an IRA.
Tax-Free Withdrawals: As long as you use the funds to pay for qualified medical expenses, withdrawals are also tax-free.
To be eligible for an HSA, however, you have to be enrolled in a high-deductible health plan (HDHP). For 2025, the IRS classifies an HDHP as a plan with a minimum deductible of $1,650 for an individual or $3,300 for a family, and maximum out-of-pocket expenses of $8,300 for self-only coverage or $16,600 for a family.
In 2025, you can contribute up to $4,300 per year into an HSA if you have self-only coverage, or up to $8,550 for a family plan. If you’re age 55 or older, you can make an additional catch-up contribution of $1,000 per year.
Using HSAs for Retirement
Though HSAs have become a popular way to save for short-term medical expenses, it’s easy to overlook their potential as a retirement savings vehicle as well. Here are a few tips to help get the maximum impact from these accounts:
1. Maximize your contributions
Rather than just putting in the amount that you think you’ll need for this year’s medical expenses, try saving as much as the IRS allows each year. That way, you’re getting the most out of their three-fold tax advantage: tax-deductible contributions, tax-free growth and tax-free withdrawals for medical expenses.
2. Invest your HSA funds
You don’t have to settle for meager interest payments if you’re not planning to use all your funds in the current year. A lot of HSA providers offer investment options, including mutual funds and ETFs, that you’ll want to consider for long-term needs. You can still keep some of your balance in cash for expenses that are just around the corner—but this way you have the potential to achieve much larger returns over extended periods of time.
3. Wait to seek reimbursement
There’s no time limit on when you’re able to reimburse yourself for medical expenditures—provided that you opened the account prior to receiving care. So if you pay for a doctor visit or a pair of eyeglasses today, you can save the receipt and request reimbursement from the HSA months, or even years, down the road. In the meantime, your funds will grow tax-free.
4. Use HSA money for Medicare premiums
Once you go on Medicare, you can tap your HSA funds to cover premiums, including Part B, Part D and Medicare Advantage. Because medical costs are one of the biggest expenses for most retirees, this can result in a substantial tax benefit.
5. Tap HSAs for non-medical expenses after age 65
After reaching age 65, you can pull money out of your HSA for non-medical expenses without incurring a penalty. Your disbursement will be subject to ordinary income tax, much like withdrawals from a traditional IRA. But you still benefit from tax-deductible contributions and tax-free growth.
The reality of health care costs in retirement
Even if they’re not a huge part of your budget now, medical costs are likely to be one of the biggest expenses you’ll incur in retirement. According to Fidelity’s 2025 Retiree Health Care Cost Estimate, an average retiree at age 65 will spend $172,500 (after taxes) to cover healthcare expenses in retirement. That estimate doesn’t even include long-term care costs, which can add significantly to the total health care expenses.
By utilizing an HSA, you can better prepare for these costs—not to mention reap serious tax benefits. The higher your tax bracket, the more you save on health care bills by using these accounts.
Choosing the right HSA provider
To maximize the benefits of your HSA, it’s important to choose a provider that meets your needs. Consider the following factors when making your selection:
Investment options: Look for providers that offer high-quality investment products, such as mutual funds, ETFs and target-date funds.
Ease of use: Make sure the provider offers a user-friendly platform for monitoring and managing your account.
Account fees: Steer clear of providers that charge hefty maintenance or investment fees that can drag down your returns. Compare a few different HSAs to see how they stack up.
The upshot
With health care costs continuing to rise, having a dedicated fund to cover these expenses can provide peace of mind during your retirement years. And because of the triple tax benefits that they offer, you’re getting a lot more bang for your buck than you would with other savings vehicles. Whether you’re just starting your career or nearing retirement, it’s never too late to make these accounts a bigger part of your financial plan.
