IRAs and 401(k) plans are popular for a reason. These accounts offer tax breaks in the course of building retirement savings. And since you'll need retirement savings to supplement your Social Security benefits, you might as well build them in a tax-advantaged manner.

Now as a quick refresher, traditional IRAs and 401(k)s allow you to contribute pre-tax dollars toward retirement savings. They also give you tax-deferred gains.

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Roth IRAs and 401(k)s, meanwhile, are funded with after-tax dollars. But these accounts also give you tax-free growth and withdrawals.

But would you believe there's one retirement savings plan that combines all of the benefits of traditional and Roth accounts? It's called a health savings account, or HSA. And while it's not strictly a retirement account, it can certainly be used as one.

How HSAs work

An HSA is a special account you can withdraw from to pay for medical expenses. What makes HSA unique is that they offer multiple tax breaks and a world of flexibility.

Specifically:

• Contributions are made with pre-tax dollars
• Investments gains are tax-free
• Withdrawals used for qualifying healthcare expenses are tax-free
• Funds never expire

That last one is huge, because it effectively allows your HSA to double as a retirement savings account. If you're used to having an FSA, or flexible spending account, it means you're probably used to having to spend down your balance year after year to avoid losing money. With HSAs, you don't have to worry about doing that.

Although you certainly can take withdrawals from year to year to pay for medical bills, if you're able to cover those from your salary and keep your HSA invested, it could grow into quite a large sum for retirement. And from there, you'll have another potential source of tax-free income.

Now you may be thinking, "But what if I end up with more money in my HSA than what I need for healthcare bills in retirement?" And that would certainly be a great problem to have, wouldn't it? But it's also not a problem at all.

As you might imagine, you get penalized if you take an HSA withdrawal for non-medical expenses. And that penalty is pretty steep -- 20% of the sum you withdraw, which is double the early withdrawal penalty for an IRA or 401(k).

But once you turn 65, you can use your HSA funds for any purpose without incurring a penalty. At that point, non-medical withdrawals will be subject to taxes, but that's no different than money in a traditional IRA or 401(k).

And also, if you're wondering whether HSAs impose required minimum distributions like traditional IRAs and 401(k)s do, the answer is no. That money is truly yours to spend (or not) as you see fit.

Do you qualify for an HSA in 2026?

If there's one bad thing that can be said about HSAs, it's that not everyone qualifies. Your health insurance plan needs to meet certain criteria that can change from one year to the next.

To qualify for an HSA in 2026, you need:

• A minimum deductible of $1,700 for self-only coverage or $3,400 for family coverage
• An out-of-pocket maximum of $8,500 for self-only coverage or $17,000 for family coverage

If you're getting new health insurance in 2026, it especially pays to check your coverage and see if it's HSA-eligible.

All told, HSAs may not get the same publicity as IRAs or 401(k)s, especially in the context of retirement savings. But they're an extremely valuable tool everyone should know about. And if you're eligible to participate in one in 2026, it's an opportunity you really do not want to pass up.