Investing Your Health Savings Account: A Strategic Retirement Move
As open enrollment season approaches, millions of Americans face critical choices regarding their health insurance plans. For those with access to a Health Savings Account (HSA), experts recommend considering the long-term investment potential of these accounts rather than solely using them for immediate medical expenses.
Certified financial planner Dan Galli of Daniel J. Galli & Associates describes the goal succinctly: “The plan is to go into retirement with a six-figure HSA balance.” When combined with Roth and other after-tax retirement funds, he calls this approach “the holy grail of retirement planning.”
HSA Adoption and Legislative Changes
More than 59 million Americans had HSAs as of the end of 2024, according to a Devenir and American Bankers Association Health Savings Account Council survey of the top 20 HSA providers. Recent legislation, notably President Donald Trump’s “big beautiful bill” enacted in July 2025, expanded HSA eligibility by increasing the number of marketplace health plans that qualify.
Rising Healthcare Expenses in Retirement
Healthcare costs continue to rise sharply, making HSA investing increasingly relevant. Fidelity Investments projects a 65-year-old retiring in 2025 will spend an average of $172,500 on healthcare during retirement — a 4% increase from 2024 — excluding long-term care costs.
HSAs Offer Unique Triple-Tax Advantages
To contribute to an HSA, individuals must be enrolled in a qualifying high-deductible health plan (HDHP). For 2026, the IRS has increased contribution limits to $4,400 for individual coverage and $8,750 for family plans.
HSAs stand out as a savings vehicle due to their threefold tax benefits: contributions are tax-deductible, earnings grow tax-free, and withdrawals used for qualified medical expenses are exempt from taxation. Dan Galli emphasizes this as “powerful” for long-term financial security.
Additionally, individuals can pay out-of-pocket for medical expenses and reimburse themselves later, providing flexibility in managing healthcare costs.
Majority of HSA Holders Do Not Invest Their Balances
Despite the clear tax advantages, most HSA participants use their funds to cover current health expenses rather than investing for the future. Hattie Greenan, director of research at the Plan Sponsor Council of America, notes that many people need immediate access to these funds.
While two-thirds of employers offered investment options for HSAs in 2024, only 20% of participants invested their balances—an increase from 18% in 2023 but still a minority.
Minimum balance requirements for investing, often set at $1,000 or more, can be a barrier for participants who regularly use their HSA for current-year expenses.
FinOracleAI — Market View
The expanding adoption of HSAs, coupled with legislative enhancements and rising healthcare costs, positions HSAs as a critical component of retirement planning. However, the low rate of investment participation highlights a gap in consumer education and behavioral adoption.
- Opportunities: Increasing awareness and education could boost HSA investment participation, leveraging triple tax advantages for long-term growth.
- Risks: High out-of-pocket costs with HDHPs may discourage enrollment or reduce balances available for investment.
- Employers expanding investment options can facilitate greater HSA utilization as a retirement savings vehicle.
- Policy changes expanding HSA eligibility will likely increase participation and asset accumulation.
Impact: HSAs represent a highly advantageous but underutilized tool for retirement healthcare funding. Greater adoption of investment strategies within HSAs could significantly improve retirees’ financial preparedness for escalating medical expenses.
