HSA as a retirement account

• Self-only coverage: $4,400.
• Family coverage: $8,750.
• Age 55 and over: an extra $1,000.
• Deadline for 2026 contributions: April 15, 2027.

You need a high-deductible health plan to contribute. For 2026 that means a deductible of at least $1,700 (self-only) or $3,400 (family) and an out-of-pocket maximum no higher than $8,500 or $17,000. Contributions made through payroll also skip Social Security and Medicare tax, which 401(k) contributions do not.

Pay medical bills from your checking account and leave the HSA invested. There is no deadline for reimbursing yourself, so a $400 dental bill from 2026 can come out tax-free in 2046, after twenty years of compounding.

Treat the balance like an IRA: low-cost index funds, an allocation that fits your timeline, and only as much cash as the provider requires. If your employer's HSA charges high fees or has no investment options, open one at another provider and transfer the balance.

At 65 the HSA turns into a traditional IRA with a bonus. Withdrawals for medical costs, including Medicare Part B and Part D premiums, stay tax-free. Withdrawals for anything else are taxed as ordinary income with no penalty. Before 65, a non-medical withdrawal costs income tax plus a 20% penalty, so do not treat the account as an emergency fund.

For most people the order is: 401(k) up to the match, HSA to the limit, then the IRA or the rest of the 401(k). The HSA goes ahead of the IRA because it is the only account with a deduction on the way in and no tax on the way out.

Example: an $8,750 family contribution in the 22% bracket saves about $1,925 of federal income tax this year, plus roughly $670 of payroll tax if it goes through your employer's plan.