Hidden Retirement Gem? How an HSA Can Be a Key Long-Term Asset

If you’ve heard of Health Savings Accounts (HSAs), you probably associate them with paying for medical bills. That’s true. But if you stop there, you might be missing one of the most tax-efficient tools available for retirement planning.

Let’s talk about what an HSA really is and how to think strategically about using an HSA as part of your long-term financial plan.

Key Takeaways:

• HSAs offer triple tax benefits: You can contribute pre-tax, enjoy tax-free growth and withdraw tax-free for qualified medical expenses.
• After age 65, HSAs can act like a traditional IRA for non-medical costs – without penalties.
• 2026 HSA limits are increasing, giving you more room to save: $4,400 for individuals and $8,750 for families.
• HSAs aren’t for everyone – they require a high-deductible health plan and disciplined saving to unlock their full potential.

What’s an HSA?

A Health Savings Account is a special account that lets you set aside money (pre-tax) to cover qualified medical expenses. That includes everything from prescriptions to dental work to hearing aids.

But here’s where it gets interesting. HSAs come with what we call a triple tax advantage:

1. Contributions are tax-deductible.
2. Growth is tax-free.
3. Withdrawals for qualified medical expenses are also tax-free.

Compare that to your 401(k) or traditional IRA, and you can see why some call HSAs a “stealth IRA.”

How Much Can You Save? 2026 HSA Contribution Limits

The IRS recently announced new HSA limits for 2026, adjusted for inflation:

• Self-only coverage: $4,400 ($4,300 in 2025)
• Family coverage: $8,750 ($8,550 in 2025)
• Catch-up for age 55+: Add an extra $1,000

To qualify, you need to be enrolled in a high-deductible health plan (HDHP). For 2026, that means:

• Minimum deductible: $1,700 (individual) ($1,650 in 2025), $3,400 (family) ($3,330 in 2025)
• Max out-of-pocket: $8,500 (individual) ($8,300 in 2025), $17,000 (family) ($16,600 in 2025)

How HSAs Can Work for Retirement

Here’s where HSAs can really shine.

Once you turn 65, you can withdraw funds for non-medical expenses without the 20% penalty. You’ll still pay income tax, just like a traditional IRA, but you get tax-free growth along the way.

And if you do use the money for medical costs (which tend to rise in retirement), it’s entirely tax-free.

You can think of an HSA as a medical retirement fund. Let it grow while you’re working, and tap it later when you really need it.

The Downsides of HSAs

HSAs aren’t right for everyone. The biggest hurdle? You need a high-deductible health plan.

While HDHPs usually mean lower premiums, they also come with higher upfront costs. For someone with regular medical needs or limited emergency savings that can be tough to manage.

Also:

• Spend HSA money on non-medical costs before age 65? You’ll pay tax plus a 20% penalty.
• Keeping receipts and tracking expenses is key if you want to avoid IRS issues.
• You can’t contribute once you’re on Medicare.

Bottom line: HSAs work best if you’re healthy enough to handle a high deductible and have the cash flow to let the account grow untouched.

How a Financial Adviser Like Advance Capital Management Can Help

When it comes to planning your retirement, a fee-only fiduciary financial adviser won’t just look at your 401(k) or IRA. We look at everything. That includes often-overlooked accounts like your HSA.

A financial adviser can help you determine:

• If an HSA makes sense for your health and financial situation
• How much to contribute and when
• When to tap into it and when to let it grow
• How it fits with your retirement income and healthcare plans

It’s all part of building a plan that’s designed around your real life and goals, not just your investment accounts.

The Bottom Line

The 2026 HSA contribution increases open the door to even more tax-advantaged savings. But the key is making sure it fits into your whole retirement picture.

If you’re unsure whether an HSA is right for you or how to get the most out of one, let’s talk. Because a comfortable retirement isn’t about having one good account. It’s about making the most of all your resources.

Schedule a call with an Advance Capital adviser today.