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Your HSA and retirement

Have you ever thought of your HSA as a tool for saving for retirement?  A health savings account (HSA) is a great tool to help you prepare for future health care costs and retirement. Plus, it can help you save on taxes.

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Boost your retirement income with HSA savings

Have you ever thought of your HSA as a tool to boost retirement savings?

Most retired Americans will need more money to pay for their health care needs than their insurance coverage will provide. Research suggests that a 55-year-old couple retiring in 10 years will need $950,000 in savings — just for health care.

If you are like most people, you may think about your HSA solely as a way to pay for current-year qualified medical expenses, such as trips to the doctor or prescriptions. But did you know it can also be used as a long term investment vehicle that can play an even greater role in your overall wealth and retirement strategy.

You can use your HSA with other retirement accounts to maximize your after-tax retirement income. Saving in an HSA for retirement gives you a tax-advantaged account dedicated to future medical expenses — allowing you the opportunity to avoid dipping into retirement accounts intended for cost-of-living expenses. Also, HSAs are a great way to pay for qualified medical expenses in retirement. 

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Are you prepared for health care costs in retirement?

Learn how your HSA fits into retirement planning with the HSA investment overview flyer.

Learn more

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Get ahead on taxes in more ways than one

HSAs are triple tax advantaged, making them an effective savings and investment account:

  • Withdrawals for qualified medical expenses are income tax-free
  • All contributions to an HSA are income tax-free.
  • And, any interest earnings and investment growth from deposits are income tax-free.

Unlike other accounts, an HSA is one of the only savings vehicles that allows you to put money in tax-free, grow your savings tax-free (interest and investment earnings are not taxed), and take the money out income tax-free for qualified medical expenses. With a 401k,  you’ll always pay taxes when you withdraw funds but, if you use HSA funds for qualified medical expenses — it’s always 100% income tax-free. Plus, after turning 65 you can use your HSA funds for non-qualified expenses. You’ll pay ordinary income tax on those funds, but the 20% tax penalty no longer applies.

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Maximize your savings by investing

If you have $1,100 in your HSA account, you may invest a portion of your HSA dollars in Optum Bank mutual funds. This is a great way to grow your balance tax-free. Investing HSA dollars has many potential tax benefits and can be an additional way to save for long-term health care expenses and financial goals. 

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Fill in the gaps of medical costs

HSAs and Medicare
It's important to max out your HSA now, because once you enroll in Medicare, you can no longer contribute to your HSA — but  you can still use your HSA funds income tax free to pay for qualified medical expenses. You can also use your HSA to pay for Medicare premiums and qualified out-ofpocket expenses including deductibles, copays and coinsurance for:

  • Part A (hospital and inpatient care)
  • Part B (doctor and outpatient care)
  • Part D (prescription drugs)

Catch-up contribution
Once you turn 55, you can contribute an additional $1,000 each year to your HSA, called a catch-up contribution. If you and your spouse are both over the age of 55, you can each contribute an additional $1,000. Your spouse will just need to open their own HSA for their additional portion. 

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

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Hank saves for retirement with an HSA

Hank is 60 years old and preparing for retirement. For the past five years, he has 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.**

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Total Contributions
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Total Contributions

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$39,500
over the past 5 years

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saved in taxes over the last 5 years
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saved over

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$14,870
on taxes in the past 5 years

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Bottom line? Taking control starts with funding your HSA today, so that it’s there for you today, tomorrow — and into retirement. Sign into your account to make a contribution to your HSA today.

Sign in to your account 

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Results and amounts will vary depending on your particular circumstances. This example assumes individual is in 25% federal tax bracket and 5% state tax bracket.

** Contributions are based on IRS contribution limits for family coverage from 2016-2020 and include catch-up contributions. Tax savings assumes a 25% federal tax rate, 5% state tax rate and 7.65% FICA. Mutual fund investment options are made