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Saving for Retirement with Your HSA

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Your HSA is a smart way to save for retirement. This page presents strategies for saving for retirement with your HSA.

Using your HSA to save for retirement

An HSA is one of the best ways to save money for medical expenses during retirement. Only HSAs allow you to make withdrawals tax-free to pay for eligible medical expenses. You can make withdrawals before and after age 65.

One of the biggest reasons more people don’t retire before age 65 is lack of health insurance. The truth is many Americans are woefully unprepared for the medical expenses they’ll face after they retire.  

Strategies to maximize your HSA

Strategy 1: Max out your HSA at the beginning of the year

While you typically have until April 15 of the following year to make HSA deposits, contributing the maximum dollar amount to your HSA at the beginning of each year allows you to take full advantage of the tax-free growth in your account by letting the funds earn interest for the entire year.  The extra interest you earn by contributing to your account on January 1 of each year could be significant over 20 years or more.  Family coverage allows you to grow your account even more since you can contribute $8,550 in 2025. The limit for 2026: TBD. 

Catch-up contributions

If you're over 55, you can make catch-up contributions of $1000 a year on top of the IRS's annual limit of $5,150 in 2024. The limit for 2025: $5,300.

See Catch-up contributions to learn more.

Strategy 2: Keep your money in your HSA

You aren’t required to seek reimbursement for your medical expenses right away. In fact, you can reimburse yourself at any time, even years later. Your money stays in your HSA. And unlike an FSA, there's no "use it or lose it" rule.

Pay medical expenses out of pocket

If you can afford it, it may make sense to pay for medical expenses out of pocket. This way, you'll have all of your HSA funds available when you need them.

Put off reimbursement

By leaving your money in your HSA, you'll build up your balance. Over time, you'll earn interest on that balance, and you’ll still have those funds available if a large or unexpected expense comes up. Just make sure to keep your receipts, prescriptions, and other documentation of these expenses.

Defer reimbursement until the end of the year  

At the end of the year, reimburse yourself from the remaining funds for the expenses you had earlier in the year.  Just make sure to keep the receipts, prescriptions, and other documentation of these expenses. 

How does putting off reimbursement benefit you?

Two 45-year-old couples deposit $6,750 a year in their HSA for 20 years. During that time, each couple spends around $2,000 a year for eligible medical expenses, and they get a 6 percent return on their HSA investments. 

Couple One Couple Two
Couple One withdraws the $2,000 from their HSA each year to pay for medical expenses.  This adds up to a net HSA contribution of $4,750 per year. Couple Two delays withdrawing that $2,000 each year.

At age 65, Couple One has $185,215 in their HSA as they begin their retirement.

At age 65, Couple Two reimburses themselves tax-free from their HSA for the $40,000 in medical expenses incurred in the previous 20 years.

They now have $223,201 in their HSA as they begin their retirement, $78,187 more than if they had withdrawn the money each year as expenses incurred.

Save your receipts 

As long as you save your receipts, you can withdraw money from your account tax-free in the future to reimburse yourself for expenses you have today.

Horizon’s My Records and Receipts document storage system is a convenient tool that you can use to manage and organize your important health care receipts and documents.  See Maintaining Documentation for Eligible Medical Expenses to learn more.

Strategy 3: Invest your HSA funds

The money in your health savings account will grow and earn interest over the years if you make your annual maximum contributions and look for ways to get the best value. You can then use your HSA primarily to maximize tax-advantaged retirement savings. You may want to consider the advantages of our online self-directed mutual fund investment account available to all account holders for only $18 per year.

See Investment Options for your HSA for more information.

Medicare and HSAs

When enrolled in Medicare, you can use your account to pay for expenses. However, you can no longer contribute to an HSA. It's important to understand how Medicare affects your HSA. See Medicare and HSAs to learn more.

Frequently asked questions

My spouse and I turn 65 this year and will sign up for Medicare. Can we still use the money in our HSA?
Yes. Although you can’t contribute to an HSA after you enroll in Medicare, you can keep the account and use your HSA funds tax free for eligible medical expenses after age 65. You can use HSA dollars for a broad range of medical expenses, including premiums for Medicare Parts A, B and D (prescription drugs), and to pay Medicare Advantage plan premiums. You may also pay qualified long-term care premiums. However, you can’t use HSA money tax free to pay Medicare Supplement or “Medigap” premiums. Remember, you will owe taxes on any withdrawals for non-eligible medical expenses.
I am turning 65 soon and will enroll in Medicare at that time. How much can I contribute to my HSA for the year?
Once you (as the account holder) are enrolled in Medicare you must pro-rate the contributions for the year that coverage begins. Medicare coverage will begin on the first of the month in which you turn 65. In this case you would take the allowed contribution for the year (including any catch-up contribution) and divide by 12. For example, if you turn 65 in April, you are eligible to contribute from January to March and can multiply the monthly amount by three to get your maximum allowed contribution amount.
Must all contributions be made prior to my 65th birthday?
No. Contributions can be made until your tax filing deadline, typically April 15.
I am married, covered by a family HDHP with an HSA. My spouse is enrolled in Medicare but also covered under the family HDHP. Can I still contribute to the HSA?
Yes. Being eligible to contribute to the HSA is determined by the status of the HSA account holder, not the dependents of the account holder. Your spouse on Medicare does not disqualify you from making contributions to your HSA, even though your spouse is covered by your HDHP.
I am enrolled in Medicare and have money remaining in my HSA. What happens to these funds?
HSA funds can continue to be spent on a tax-free basis for eligible medical expenses for you and your tax dependents. If you, as the account holder, are over age 65 and the money is withdrawn for non-medical expenses, it is subject to income tax, but no other penalties apply.