Investing Your HSA


An HSA isn’t just a tax-advantaged way to pay for medical expenses. It’s also an incredible retirement savings vehicle with tax benefits you won’t find in any other retirement savings tool.


On average, Medicare only covers about 59% of healthcare costs, leaving retirees to cover the remaining 41% from their retirement savings. For the average couple retiring at 65, that’s up to $404,000 of medical expenses they’re liable for. And if you used 401(k) funds to pay for that $404,000 of medical care, you’d need $538,000 once you factor taxes in (that’s an extra $134,000).

By investing your HSA funds like a 401(k), you can take advantage of HSAs’ triple tax benefit to build a nest egg for retirement medical expenses.

  • Contributions to your HSA are either tax-free or tax-deductible
  • Withdrawals for qualified medical expenses are tax-free
  • HSA investment earnings are tax-free in most states


The 2018 HSA contribution limits are $3,450 for self-only coverage and $6,900 for family coverage. If you contributed the annual maximum limit to your HSA and invested it from age 30 until 65, you’d have $523,000 under self-only coverage or $1,069,000 under family coverage. Even if you started at age 50, you’d still have $118,000 under self-only coverage or $221,000 under family coverage*.

Those dollars can go towards your medical expenses tax-free, so you can keep your other retirement savings for things you’d rather spend money on. And, if you choose to use HSA funds for non-medical expenses after 65, you’ll just pay regular income taxes like you would with a 401(k).

*These calculations assume a 6% rate of return, 25% tax rate, and 2% annual CPI increase.

Shoeboxing Receipts

HSA funds withdrawn for non-medical expenses after 65 are only subject to regular income taxes (no 20% penalty). Here’s an easy trick that will allow you to maximize your invested HSA dollars, then use those funds tax-free for anything you want, even before you turn 65.

There’s no deadline for when you have to reimburse yourself for eligible expenses from your HSA. This means that if you pay for eligible medical expenses out-of-pocket rather than using HSA funds, you can reimburse yourself years or even decades down the road. By doing this, your HSA balance can grow tax-free through interest on your principal and investment earnings.

When you pay out-of-pocket for eligible medical expenses, you’ll want to archive the receipts in a shoebox or app to show the IRS they were qualified. Then, down the road, you can reimburse yourself tax-free for years of medical expenses after your HSA has grown from years of compounding interest.

And here’s the best part, you can use those reimbursed HSA dollars on anything you want. Boat, vacation, whatever you like … it doesn’t have to be medical at all. It’s like pulling money out of your 401(k) and not having to pay taxes on it.

Ready to enroll?

A health savings account (HSA) combines the immediate benefits of a flexible spending account with the retirement strategy of a 401(k) … and offers more tax advantages than either.

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