Older Americans should plan to retire with a 6-figure HSA, expert says. But few realize this account's 'full potential'

One expert says you should aim to retire with a six-figure health savings account (HSA) — but many HSA holders aren’t aware that these accounts can be used as a retirement savings vehicle (and aren’t taking advantage of the opportunity to build savings).

There are more than 39.3 million HSAs in the U.S., providing coverage to approximately 59.3 million people, according to the 2024 Devenir & HSA Council Demographic Survey (1).

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“The plan is to go into retirement with a six-figure HSA,” certified financial planner Dan Galli with Daniel J. Galli & Associates, told CNBC (2). When coupled with other Roth and after-tax retirement funds, he said “this is the holy grail of retirement planning.”

But there’s one costly roadblock that many aren’t budgeting for. Here’s what you need to know.

Retirement health care costs are on the rise

Two-thirds of financial institutions that offer an HSA program also offer investment options for HSA contributions, according to the Plan Sponsor Council of America’s 2025 HSA Survey (3). Yet, on average, only one in five participants in these plans invested their contributions, and only an average of 27% of those balances were held in non-cash investments.

Fidelity research finds only 23% of Americans say they are contributing to an HSA as one way to prepare for health care costs in retirement, and just 3-in-10 are investing their HSA assets (4).

Experts say this is a big missed opportunity.

“HSAs are more than just a short-term savings tool — they can serve as a critical component of the retirement readiness equation,” said Steve Betts, head of Fidelity Health. “Our research consistently shows HSA users feel more prepared to cover health care expenses in retirement, yet many people don’t realize the full potential of the account. When used as a part of a well-crafted retirement plan, the tax-advantaged nature of your HSA savings can offer growth potential that can help reduce the burden of health care in retirement.”

A six-figure HSA may seem like a lot but, according to Fidelity, a 65-year-old retiring in 2025 can “expect to spend an average of $172,500 on health care and medical expenses throughout retirement.”

If the past is any indicator, working Americans can expect to pay even more when they eventually retire, as the average cost of health-related expenses throughout retirement was estimated to be $80,000 in 2002.

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Even more daunting, these numbers don’t include the cost of long-term care. In a 2022 report, the Urban Institute estimated that 57% of Americans turning 65 today will develop a disability serious enough to require long-term services and supports (LTSS) (5). And, on average, “an American turning 65 today will incur $122,400 in future LTSS costs, measured in today’s dollars.”

About two-thirds of this will be covered by public programs and private insurance, but about a third will be out-of-pocket — and 15% of people will spend at least $100,000 of their own money on LTSS.

Despite these potential costs, the average HSA balance for account holders aged 55+ was $6,564, with balances peaking at $7,585 for those 65-69, according to Devenir Research.

How to budget for an HSA

So why aren’t people saving more? After all, in addition to helping meet the need for future medical expenses, HSAs offer a triple-tax benefit: Your contributions are tax-deductible, your investments grow tax-free and withdrawals made for qualified medical expenses aren’t subject to taxes or penalties.

One issue is that more than half (52%) of pre-retirement HSA holders aged 55-64 aren’t aware that an HSA can be used as a retirement savings vehicle, according to Fidelity.

But even among those who are aware they can invest, there’s a potential hurdle: 47.2% of plans require that the account have a minimum balance of $1,000 to invest and additional 29.6% of plans require a minimum amount higher than $1,000, according to PSCA’s HSA Survey.

Since many people are paying for current health care expenses out of the plan — and the contribution limits for 2026 are only $4,400 for an individual with self-only coverage and $8,750 for an individual with family coverage — this minimum can be challenging to maintain.

Despite this potential hurdle, the tax advantages of your HSA and the expected costs of medical care in your later years make it worth consideration as part of your retirement plan.

It may be worth speaking to an advisor who can help you determine the optimal amount to invest, given your other accounts and your retirement goals. For instance, if you have a 401(k), you may want to prioritize that first if it offers employer-matching. An advisor could also help you find room in your budget, such as leveraging the tax-deductibility of your contributions. Your older self will thank you.

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Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Devenir (1); CNBC (2); Plan Sponsor Council of America (3); Fidelity (4); Urban Institute (5)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.