From HSA saver to HSA investor: See the full potential of your health savings account

Health savings accounts (HSAs) are widely recognized for their triple tax advantages—pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Yet, many HSA holders miss out on one of the most powerful aspects of these accounts: investing. While saving HSA funds for immediate healthcare costs is beneficial, leveraging the investment potential of an HSA can create long-term financial security, particularly for retirement healthcare expenses. Here’s how to shift from an HSA saver to an HSA investor and maximize your account’s potential.

Why invest your HSA funds?

Most HSA holders use their accounts as a short-term savings tool, covering out-of-pocket medical costs as they arise. However, those who invest their HSA funds can unlock significant benefits, including:

• Tax-free growth – Just like a 401(k) or IRA, invested HSA funds grow tax-free, meaning any interest, dividends, or capital gains aren’t subject to taxation.
• Long-term wealth building – Investing in an HSA allows you to take advantage of compounding growth, which can turn modest contributions into a significant nest egg for future healthcare expenses.
• Retirement healthcare planning – After age 65, HSA funds can be used for non-medical expenses without penalty (though regular income tax applies), making HSAs an additional retirement savings tool.

How to transition from an HSA saver to an HSA investor

If you’re ready to make the leap from simply saving in your HSA to actively investing, follow these steps:

1. Maximize your contributions

The first step in building a strong HSA investment strategy is ensuring you’re contributing as much as possible each year. For 2025, the contribution limits are:

• $4,300 for individuals
• $8,550 for families
• An additional $1,000 catch-up contribution for those age 55 and older

Making the maximum contribution allows you to grow your HSA balance more quickly and have more funds available for investment.

2. Keep a cash buffer for immediate expenses

Before investing, consider keeping enough in your HSA’s cash balance to cover near-term medical expenses. Many financial advisors recommend maintaining at least your annual deductible in liquid cash before allocating funds to investments. This ensures you have money readily available when needed while allowing the rest to grow.

3. Explore your investment options

Most HSA providers offer a variety of investment options, similar to 401(k)s or IRAs. Common investment choices include:

• Mutual funds – A diversified option that spreads risk across various stocks and bonds.
• Index funds – Low-cost funds that track market performance, ideal for long-term growth.
• ETFs (Exchange-traded funds) – Similar to index funds but trade like stocks, providing flexibility.

Review your provider’s investment offerings and select funds that align with your risk tolerance and financial goals.

4. Think long-term

Unlike a traditional savings account, investing in an HSA requires a long-term perspective. Since medical expenses in retirement are one of the biggest costs retirees face, investing your HSA funds now can lead to a substantial healthcare nest egg in the future.

5. Track and adjust your strategy

Once you begin investing your HSA funds, periodically review your investment performance and adjust your strategy as needed. If market conditions or personal circumstances change, you may want to rebalance your portfolio to stay aligned with your long-term goals.

Check out our HSA Day 2024 Benefits Buzz episode to hear stories from HSA savers and HSA investors!

The information in this blog post is for educational purposes only. It is not legal, tax or investment advice. For legal, tax or investment advice, you should consult your own legal counsel, tax and investment advisers. 

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