Written by Zach Melloh, CFP (follow him at X, @zachmelloh26 for daily finance content!
Most people are wrecking their HSA’s potential. It’s the only account in America that combines the benefits of a Pre-tax and a Roth IRA. Here’s how to turn your HSA into a 6-figure retirement weapon:
1. Qualifying for an HSA
To open & contribute to an HSA, you need a High Deductible Health Plan (HDHP).
For 2025, the IRS defines that as:
•Min deductible: $1,650 (individual) / $3,300 (family)
This means: Higher deductible → lower premiums → HSA eligibility
2. Triple Tax Advantage
An HSA is the only account with all 3 tax benefits:
• Contributions are tax-deductible (and not subject to FICA)
• Growth is tax-deferred
• Withdrawals are tax-free for qualified medical expenses
Note: CA and NJ are two states w/o state level deductions for contributions
2025 Contribution Limits:
• $4,300 single
• $8,550 family
3. The Strategy Almost Everyone Misses
Most people spend their HSA money right away on medical bills.
Instead:
Pay those expenses out of pocket.
• Let your HSA stay invested and compound tax-free for decades.
4. The Math
If you max a family HSA every year for 30 years at a hypothetical 7% return:
• Total contributions: $256,500
• Total value: ~$872k
• Growth: ~$615k (100% tax-free)
(Withdrawn tax-free for qualified medical expenses)
5. Reimbursing Yourself Years Later
There’s no time limit to reimburse yourself... as long as you keep receipts.
That means you could let your HSA grow for decades...
Then pull out a tax-free lump sum later to “reimburse” old expenses
6. If you're worried you’ll have more than you can spend on medical expenses...
Options:
• Save receipts & reimburse in future
• Use for future health costs & long-term care
• After age 65, withdraw for anything (no penalty, taxed like a traditional IRA)
7. Legacy Planning
• If your HSA passes to your spouse → it stays an HSA.
• If it goes to anyone else → it’s fully taxable to them in the year you die.
(This makes it less ideal for leaving to high-income heirs.)
