4 ways to use HSAs to achieve your financial goals

Achieving financial goals is more than just setting a budget—it’s about creating a roadmap to your future. So how do you reach your financial goals? We broke down a few ways below, or watch this episode of our Benefits Buzz podcast to learn more about the perks of an HSA.

Max out HSA contributions

There is no “one-size-fits-all” guidance on how much you should be contributing to your HSA. With rising healthcare costs and cost of living, saving for retirement is more important than ever. Since all funds do carry over, you don’t risk losing funds at the end of the plan year, which is one reason why it makes sense to max out your HSA contributions in line with the IRS limits. 

Our My HSA Planner tool can help you determine the right contribution amount based on your goals. It provides personalized calculations so you can learn more about your HSA’s present and future potential. Simply by entering basic information the My HSA Planner calculates your future savings balance, potential retirement balance, and projects how different levels of contributions can make an impact. 

Set and monitor savings goals

Setting goals that are achievable is vital to securing your dream retirement, but so is monitoring those savings goals. Always remember that your HSA contribution amount is flexible and can be changed at any time during the plan year.

Even if you can’t contribute as much as you’d like into your HSA right away, it’s still important to set up your HSA account as soon as possible. You can only use your HSA funds to cover expenses incurred after the account is created and you can only contribute to your HSA while you’re still enrolled in an eligible plan. If you decide to switch to a non-eligible plan later, you won’t be able to add any contributions for that year. But you can still use the existing funds in the account.

It’s also important to review your savings goals for the year one by one and to be honest with yourself on your progress. 

• For goals you may have missed, it helps to figure out what may have caused you to miss them. Have you saved as much as you wanted to? Did you make the payments you planned to make? Did you reduce certain expenses in ways you aimed to?
• For goals you’ve hit, it can help to see if you have the capability to be more aggressive with them. If you have more money left at the end of the month than anticipated, how can you allocate it to other areas of your life?

Invest your HSA funds 

Investing your HSA funds can enable your money to grow faster, tax-free, and help supplement your needs long-term while you save for retirement. However, the majority of people with active HSAs don’t take advantage of investing their money. In fact, only 8% of account holders were investing their HSA balance in 2024.

The expected rate of return on mutual fund investments is much higher than the standard interest rate of an HSA. For example, let’s say that you have $10,000 in your HSA balance and are trying to decide if you should invest your dollars.

* Table indicates fund growth at an 8 percent rate versus interest at a 0.035 percent rate.

The difference is considerable, and those invested funds are growing tax-free!

Evaluate HSA and 401(k) together

Many people dream of a certain retirement lifestyle. These goals are achievable, especially with the right planning. Many don’t realize that health savings accounts (HSAs) and 401(k)s can be used together as a retirement savings strategy. This pairing helps expand your savings potential over time.

• An HSA and retirement. An HSA is a tax-advantaged savings account for current or future medical expenses. All funds roll over from year to year, and you can invest their funds. That makes these accounts ideal for retirement planning. They even have perks that a 401(k) or IRA don’t have as it pertains to healthcare costs in retirement. 
• A 401(k) and retirement. The 401(k) has long been a retirement-planning staple. You can take advantage of tax savings (either pre-tax or post-tax) when you set aside dollars in a 401(k) for future use. These funds are then invested for potential growth.

Achieving your financial goals requires careful planning, ongoing monitoring, and strategic use of tools like HSAs and 401(k)s. By maximizing your contributions, investing wisely, and evaluating your savings plans together, you can build solid financial future. Learn more about the perks of HSAs here.

This blog post was most recently updated in August 2024.