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As open enrollment arrives, thousands and thousands of People face key choices, comparable to choosing medical insurance. If the plan comes with entry to health savings account, or HSA, contributions, you might use the funds for long-term investments, consultants say.
Whereas most employees spend HSA money on yearly out-of-pocket well being bills, a small share invests the balance, which might grow tax-free for future medical prices.
“The plan is to enter retirement with a six-figure HSA,” stated licensed monetary planner Dan Galli, proprietor of Daniel J. Galli & Associates in Norwell, Massachusetts. When coupled with different Roth and after-tax retirement funds, “that is the holy grail of retirement planning,” he stated.
Greater than 59 million Americans had an HSA as of Dec. 31, 2024, in response to a survey from Devenir, an organization that gives HSA funding options and analysis, and the American Bankers Affiliation’s Well being Financial savings Account Council. The survey polled the highest 20 HSA suppliers.
President Donald Trump’s “big beautiful bill” enacted in July expanded access to HSAs by making extra market well being plans HSA-eligible, amongst different modifications.
The curiosity in investing HSA funds comes as the price of medical bills in retirement continues to climb. A 65-year-old retiring in 2025 can count on to spend an average of $172,500 on well being care throughout their retirement years, up greater than 4% from 2024, in response to a July report from Constancy Investments. This doesn’t embrace the price of long-term care.
Listed here are a few of the key advantages of investing your HSA steadiness — and the way it can assist offset future well being bills.
HSAs have triple-tax advantages
To make well being financial savings account contributions, you will need to have a qualifying high-deductible medical insurance plan. For 2026, the HSA contribution limit will enhance to $4,400 for self-only well being protection or $8,750 for household plans, the IRS introduced in Might.
For more healthy purchasers, some advisors recommend choosing a high-deductible plan for entry to HSA contributions. However it may be dangerous: Sometimes, these plans have decrease month-to-month premiums, however out-of-pocket bills are increased.
An HSA is a excessive precedence for long-term financial savings as a result of it is the one account with three tax advantages. Contributions are tax-deductible, the funds develop tax-free and you do not pay levies on withdrawals for medical bills, which is “highly effective,” in response to Galli.
Within the meantime, in the event you pay for out-of-pocket well being bills, it can save you the receipt and reimburse your self anytime, Galli stated.
Most HSA contributors aren’t investing funds
Whereas HSAs provide beneficiant tax advantages for long-term savers, most contributors aren’t investing their balances, analysis exhibits.
“The truth is that many individuals have to entry their funds for present bills,” stated Hattie Greenan, director of analysis and communications for the Plan Sponsor Council of America.
Two-thirds of employers offered investing options for HSA contributions in 2024, in response to the Plan Sponsor Council of America’s 2025 HSA survey launched in September, which polled about 600 U.S. employers. However solely 20% of HSA contributors invested their belongings in 2024, up from 18% in 2023.
One motive for the small share of invested funds could possibly be the minimal steadiness necessities, which have been at the very least $1,000 for three-quarters of the businesses polled, in response to Greenan.
When you’re utilizing your HSA steadiness for current-year well being bills, that $1,000 minimal could be “laborious to take care of,” she stated.
