Use your HSA as a tool for retirement savings

Unlike other accounts, an HSA is one of the only savings vehicles that offers triple tax advantages, making it an effective savings and investment account. You can:

• Contribute money on a before-tax basis through payroll deduction. 
• Grow your savings tax-free (interest and investment earnings are not taxed). 
• Withdraw money income tax-free for qualified medical expenses.

With a 401k, you’ll generally pay taxes when you withdraw funds. But if you use HSA funds for qualified medical expenses, it’s generally income tax-free. Plus, once you turn 65, you can use your HSA for non-qualified expenses. You’ll pay ordinary income tax on those funds, but the 20% tax penalty no longer applies.

Investing HSA dollars has many potential tax benefits, giving you another way to save for long-term health care expenses and financial goals. Once your HSA reaches a certain balance, typically $2,000, you can choose to invest a portion of it in one of 2 ways:

Option 1: Optum Bank self-directed mutual funds

Choose from more than 30 mutual funds that average a 4-star Morningstar rating and offer some of the lowest expense ratios in the industry, including life-stage funds. Our asset allocation calculator can help you decide which funds are right for you.

Option 2: Betterment digitally managed investments

Betterment helps take the guesswork out of investing your HSA. Based on your investment goals, it recommends a personalized portfolio of low-cost, exchange-traded funds (ETFs). It also helps keep your HSA investments on track through auto deposits and automated rebalancing. 

There’s more. If you’re saving your HSA for retirement, Betterment can help you manage your investments alongside your other retirement accounts, helping maximize your after-tax retirement income.

Start investing

Once you turn 55, you can contribute an additional $1,000 every year to your HSA. This is called a catch-up contribution. If you and your spouse are both 55 or older, you can each contribute an additional $1,000. Your spouse will just need to open their own HSA for their portion. 

Your HSA contributions can really add up. If you can contribute $3,000 a year, you’d get over $1,000 in tax savings. Do that for 5 years, and you’d have $15,000 in your account plus more than $5,000 in tax savings.*

Hank is 60 and preparing for retirement. For the past 5 years, he’s been contributing the maximum amount allowed by the IRS. See how fast his account balance has grown and how much he’s saved on taxes.**