Saving for retirement with an HSA

Build your HSA balance

For 2014, you can contribute $3,350 if you have an individual plan. Or $6,550 for a family plan. If you’re 55 or older, you can add an additional $1,000.

Advantages of an HSA:

  • Tax-deductible deposits -- this lowers your taxable income for the year and your tax bill, too.
  • "Rollover" -- your money stays in your account from year to year until you use it.
  • Tax-free growth -- your money grows tax free, whether it's earning interest or you decide to invest it.
  • Tax-free withdrawals -- as long as you're paying for eligible expenses or premiums for Medicare health plans, long-term care insurance and certain health care coverage. 
  • Retirement advantages -- an HSA is a great way to save for health care expenses after you retire.
  • Investment options -- you can invest HSA dollars in mutual funds and other investments for more growth potential after your balance reaches $1000. Flexibility -- HSA funds can be used for non-health care expenses. Taxes and penalties will apply until you turn 65 when all withdrawals become tax-free. 

Maximize your HSA for retirement

Strategy 1: Fund your HSA early. Contribute the maximum allowed to your account at the beginning of each year. Even though you have until April 15 of the next year to make HSA deposits, this gives you more time to take advantage of your HSA's tax-free growth. Over the years, you could get tens of thousands of additional dollars with this strategy alone.

Strategy 2: Wait to withdraw. Delay taking money from your HSA for as long as possible. Pay for your medical expenses out of pocket and leave your HSA money so it grows tax free. Then pay yourself back from your HSA in the future for those eligible medical expenses. Be sure to save your receipts.

Strategy 3: Invest. Use your HSA balance to buy mutual funds or other investments that offer growth potential.*


A 45-year-old couple could have $134,525 to $172,510 EXTRA in their HSA when they retire by using these strategies. Here's how:

They deposit $5,450 annually to their HSA for 20 years and earn a 6 percent return on their HSA investments:*

  • They have $2,000 a year in eligible heath expenses.
  • Each year, they take out from their HSA to pay themselves back.
  • In 20 years they'll have $134,525 in their HSA as they begin retirement. 

If the same couple delays taking out the $2000 each year, paying their health care expenses out of pocket:

  • They'll have $212,510 in their HSA at age 65.They then pay themselves back for medical expenses from earlier years.They'll have $172,510 in their HSA.

The 6 percent rate of return is for illustration only.  Actual returns will vary.  Investing in mutual funds involves risk, including possible loss of capital.

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