The dream of scraping together $1 million in a health savings account by retirement might sound pie in the sky, but it’s not impossible.
If you start early, contribute the maximum pretax contribution annually, add in any catch-up contributions, and let it ride for four decades without tapping it to cover healthcare expenses, you have a shot at doing just that, according to a new analysis by the nonpartisan Employee Benefit Research Institute (EBRI). Families can save nearly twice as much.
“The study is all about the potential,” Paul Fronstin, director of health benefits research at EBRI and an author of the report, told Yahoo Finance. “Under the best possible circumstances.”
As a quick refresh, an HSA benefits from a triple tax advantage. It’s the only account that lets you put money in on a tax-free basis, lets it build up tax-free, and lets it come out tax-free for qualified healthcare expenses. (One downside: Some states assess state taxes.)
Learn more: What is a health savings account?
In order to put money into an HSA, you must be enrolled in a high-deductible health plan. In those plans, you pay a lower premium per month than other types of health insurance plans, but a higher annual deductible (the amount you pay for covered medical costs before insurance kicks in). For 2025, that translates to a deductible of at least $1,650 for individual coverage and $3,300 for family coverage. You can also open an HSA as a self-employed freelancer or business owner if you have a qualified high-deductible health plan. Your contributions roll over year after year and are yours to take along when you retire or change employers.
The only way that you would be able to save an amount, like a million dollars, with an HSA is if you don’t use it, which is antithetical to the point,” said Andrea Ducas, vice-president of health policy at the Center for American Progress. (Getty Creative) ·MoMo Productions via Getty Images
The 2025 contribution limit for an HSA is $4,300 for individuals and $8,550 for families. Individuals who are 55 or older can contribute an additional $1,000.
Read more: HSA contribution limits for 2024 and 2025
The researchers arrived at the eye-popping millionaire status with this assumption: At 25, you start contributing the maximum allowable amount each year and steadily make those contributions through age 64 without using it to pay medical expenses. The money is socked away in investment vehicles that provide a 7.5% rate of return. The EBRI researchers did not take into account contributions an employer might make.
So it’s possible, in theory, to save seven figures in an HSA. But should you?
Opinions vary.
“The only way that you would be able to save an amount, like a million dollars, with an HSA is if you don’t use it, which is antithetical to the point,” Andrea Ducas, vice-president of health policy at the Center for American Progress, a policy institute, told Yahoo Finance.
“HSAs are a tool designed to help people afford to use their high-deductible health plans,” she said. “The purpose of an HSA is supposed to be to help you meet your expenses. So if you have a $5,000 deductible, it’s helpful to give you some tax benefits for the money that you’re spending.”
And then there’s this hitch: “We know that many people in America can’t even come up with $400 in an emergency. For those folks, an HSA is not going to be helpful.”
In the real world, most account holders pull funds from their HSAs to cover current medical bills. The average withdrawal from an HSA account last year was roughly $1,300, according to HSA advisory firm Devenir.
“Most people use it as a checking account, not an investment account,” Fronstin said. “They’re using it mainly to pay current healthcare expenses.”
Plus, maxing out a contribution each year is a fantasy for many workers. “The assumption that you can max out your contributions is potentially unrealistic for a lot of people,” Fronstin said. “Most people have competing needs … if you’re coming out of school, you’ve got student loans, if you’ve got children, or you’re buying a house, trying to save for retirement, helping your kids with their school and so on.”
Many HSA account holders don’t invest their HSA savings. Only about 3.2 million health savings accounts have at least a portion of their HSA dollars invested, per Devenir. Most just leave the money in cash, missing out on one of the account’s key advantages.
To attain millionaire status, you have to invest — and start early, EBRI’s Fronstin said. “If you start at 46, you’re not going to come anywhere near the million dollars. You won’t even get halfway there.”
That said, as the oft-repeated proverb goes: The best time to plant a tree was 20 years ago. The second best time is now.
HSA funds, even if they aren’t tickling seven figures, can go a long way in covering medical expenses even after you enroll in Medicare at age 65.
EBRI estimates a 65-year-old man enrolled in a Medigap plan will need to save $184,000 to have a high chance of having enough to cover premiums and prescription drug expenditures during retirement, and a woman will need to save $217,000. Couples will need to save $351,000. It varies, of course, by how healthy someone is and whether they have retiree health coverage from their former employer or type of Medicare plan.
Have a question about retirement? Personal finances? Anything career-related? Click here to drop Kerry Hannon a note.
You can contribute for 2024 up to this year’s tax filing deadline, which is April 15 in most states. Federal disaster areas have extended filing cutoffs.
“Even if you don’t make it to a million, building up an HSA account certainly is going to be helpful for covering healthcare expenses in retirement,” Fronstin said.
Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including “In Control at 50+: How to Succeed in the New World of Work” and “Never Too Old To Get Rich.” Follow her on Bluesky.
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