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Turn your HSA into retirement savings

Feb 4, 2021
Empower Insights

Contribute more to take advantage of long-term, tax-free growth potential

A majority of people are looking to put more money into savings in 2021, and a health savings account (HSA) may be just the way to do it.1 HSAs offer a “triple tax advantage”: tax-deductible contributions, tax-free growth and tax-free withdrawals for qualified medical expenses.2 That makes it a great way to pay for your current healthcare costs. But you could get more out of your HSA when you also use it to save for the future.

The following example shows how one family uses an HSA to cover out-of-pocket medical costs and save for healthcare costs in retirement.

  • Lee’s family is on a high-deductible health plan. They typically spend $2,000 a year on out-of-pocket medical expenses, including doctors’ visits and Lee’s husband’s regular bloodwork and CT scans. If Lee put $77 out of her biweekly paycheck into her HSA, she would cover the year’s medical bills.
  • But Lee has more ambitious plans. She knows that an HSA exposes her money to potential growth with no use-it-or-lose-it deadlines. So she contributes $200 to her HSA from every paycheck.
  • By the end of one year, Lee has contributed $5,200 to her HSA. Of that amount, $2,000 has gone toward immediate medical expenses. That means she can invest the remaining $3,200.
  • For the sake of argument, let’s say Lee keeps this pattern up for 10 years. Her contributions and expenses remain the same, and she earns a 6% annual return on the money she’s invested.
  • Lee's HSA retirement savings could help her offset healthcare costs in retirement.
Graph of Money Contributed and Investment Balance. Notable increase of Investment Balance over ten years.

FOR ILLUSTRATIVE PURPOSES ONLY. This hypothetical illustration does not reflect a particular investment and is not a guarantee of future results. It assumes $200 biweekly contribution, a 6% annual rate of return, reinvestment of earnings and no withdrawals on the invested portion. Rates of return may vary. The illustration does not reflect fees, which could change the outcomes provided.


Consider following in Lee’s footsteps and investing a portion of the money in your HSA each year. Over time, the money you set aside can make a real difference in paying for healthcare costs in retirement.

Explore more ways to grow your retirement

1 Empower Retirement, "In Uncharted Waters, Savers Keep Both Hands on the Tiller," January 2021.

2 Contributions, any earnings and withdrawals are federal income tax-free if used to pay for qualified medical expenses. State income taxes may still apply. HSA funds used for nonqualified medical expenses may be subject to applicable federal and state income taxes and/or penalties. 

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IMPORTANT: The projections, or other information generated on the website by the investment analysis tool regarding the likelihood of various investment outcomes, are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. The results may vary with each use and over time.

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