The power of Health Savings Accounts (HSAs) as a tool for both managing health expenses and building your retirement savings is often overlooked.
On this episode, I’m sharing the basics of HSAs, highlighting their triple tax-free advantage, and explaining why they might be one of the best ways to maximize your retirement savings, even compared to more familiar accounts like IRAs and 401(k)s.
I also unpack some important upcoming changes to HSAs thanks to the One Big Beautiful Bill Act, set to take effect in 2026. These changes expand HSA eligibility, especially for those on healthcare exchange plans and direct primary care memberships.
Whether you’re new to HSAs or looking to fine-tune your retirement strategy, my practical tips—like how to track reimbursements, invest your HSA funds wisely, and ensure you’re making the most of every retirement planning opportunity.
Health Savings Accounts (HSAs) are often overlooked as powerful retirement planning vehicles. They are tax-advantaged accounts that allow individuals with high deductible health plans (HDHPs) to save and pay for qualified medical expenses.
To be eligible, you must be enrolled in a qualifying HDHP; not all plans make the cut, so check with your insurer or employer to confirm eligibility. For 2025, annual contribution limits are $4,300 for individuals and $8,550 for families, with an additional $1,000 catch-up allowed for those age 55 and over.
Both you and your employer can contribute, but the total combined contribution cannot exceed these limits.
HSAs are the only accounts that offer a triple tax advantage:
This makes HSAs one of the most tax-efficient savings vehicles available.
While the primary purpose of an HSA is to cover medical expenses, its value extends far beyond that, especially for forward-thinking retirement planners. Many people cover their current medical out-of-pocket expenses with regular cash flow, allowing their HSA investments to grow tax-free for years, even decades.
Upon reaching age 65, you are allowed to withdraw funds for non-medical expenses without penalty (although you will owe income tax, much like a traditional IRA). For medical expenses—including Medicare Part B, D, and Medicare Advantage premiums—withdrawals remain tax-free.
However, Medigap policy premiums are not eligible for tax-free reimbursement from your HSA. A strategic approach can involve tracking your unreimbursed eligible medical expenses over the years.
You can reimburse yourself in retirement with HSA funds for past qualified expenses, effectively turning your HSA into a tax-free retirement “bonus.”
Looking ahead to 2026, recent legislative changes will further expand HSA eligibility and flexibility.
Expanded Access for Health Care Exchange Plans:
Before 2026, only certain HDHPs on the healthcare exchange allowed HSA contributions. The One Big Beautiful Bill Act will enable individuals enrolled in any Bronze-tier plan through the health care exchange to qualify for HSA contributions, potentially making over 7 million more people eligible.
Direct Primary Care Compatibility:
Membership in direct primary care plans—where patients pay a monthly fee for enhanced access to primary care services—will now be compatible with HSA eligibility, subject to fee limits ($150/month for individuals, $300/month for families, indexed to inflation). Previously, participating in such plans disqualified individuals from contributing to HSAs.
Investing your HSA balance (beyond a buffer for immediate health costs) can help you harness the benefits of compound growth over time. Compare fees and investment options among HSA providers to maximize long-term gains.
Be mindful when approaching Medicare eligibility. HSA contributions must stop six months before you enroll in Medicare Part A, due to retroactive coverage.
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