You've done the hard part of retirement savings. You've managed to scrape together some cash for the future. Now you have to decide where to put that money so it can be the most useful to you.
Your 401(k) is an obvious choice if you've got access to one, and an IRA could be a good fit if not. But you aren't limited to just a single account, and you don't have to stick to traditional retirement accounts either. If you do, you could miss out on one of the best retirement savings vehicles around.
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The benefits of HSAs for retirement
Health savings accounts (HSAs) technically aren't retirement accounts at all. But they've become popular places to stash your long-term savings anyway because they offer some unique tax advantages.
First, any contributions to HSAs reduce your taxable income for the year, just like contributions to traditional IRAs or 401(k)s. If you're lucky, this may even be enough to drop you into a lower tax bracket.
Your earnings grow tax-free also, so you don't have to pay taxes on them until you take your money out later. But the best part is that if you use that money on qualifying medical expenses at any age, it's tax-free.
You're also able to use your HSA funds for non-medical expenses. But if you do this, you will pay income taxes on them, plus a 20% penalty if you're under 65. For this reason, you're better off using it exclusively to cover your healthcare costs until you're clear of the penalty. Then it becomes pretty much like a traditional IRA without required minimum distributions (RMDs).
How to save with an HSA
In order to save with an HSA, you must have a high-deductible health insurance plan. This is one with a deductible of at least $1,650 for an individual in 2025 or $3,300 for a family. If your plan has a lower deductible than this, you will not be able to save in an HSA this year. However, if you have HSA funds saved from past years when you did qualify, you can still spend the money as needed for medical expenses or continue to keep it in your account.
You can open an HSA with many providers, including banks and brokers. You want to choose a plan that will enable you to invest your funds. As always, investing carries some risk of loss. But it also gives you a chance to grow your money much more quickly than you could with an HSA that earned a modest rate of interest like a savings account.
You can save up to $4,300 in an HSA if you have a qualifying individual plan in 2025. Those with qualifying family plans can save up to $8,550. Adults 55 and older can add another $1,000 to these limits. Contribution limits also increase from time to time, so it's possible you may be able to save even more in future years.
Though you're free to use your HSA funds for medical expenses at any age, it's best to avoid this if you plan to keep your retirement savings here. Tapping into this money early could set your retirement plan back.
Integrating your HSA with your other retirement accounts
You don't have to save exclusively in your HSA, though you can if you want to. But if, for example, you qualify for a 401(k) match from your employer, you might prefer to stash some money in your 401(k) until you've claimed the full match. Then you could switch to your HSA.
If you max that out, you could switch back to your 401(k) or save in an IRA if you prefer the greater control it gives you over your investment options. Just make sure you review the rules for every retirement account you use so you don't make mistakes that could lead to costly tax penalties.
