In the 1980s, America was winning – and losing – the medical arms race...
The U.S. was a hub of incredible medical innovations... In 1982, two Massachusetts General Hospital investigators discovered how telomeres protect chromosomes – now thought to be a critical part of our longevity. That same year, a doctor in Utah implanted the first artificial heart in a 61-year-old man. In 1985, the first robotic-assisted surgery was used for a brain biopsy.
These advances were giving people better options for medical care, but they came at a cost. From 1979 to 1980 alone, spending on personal health care rose 15.2%. And by the end of the decade, medical expenditures had more than doubled.
To help ease the strain of soaring health care bills, Congress authorized medical savings accounts ("MSAs") in 1996. It largely replaced this program with the more widely available health savings accounts ("HSAs") in 2003.
Roughly 60 million Americans are covered by an HSA today. And this year, new rules mean that even more people are eligible to open one.
So today, we're going to go over some of the basics of HSAs and how you can use yours to boost your funds in retirement...
What is an HSA?
An HSA is an account that allows you to contribute pretax dollars, which can grow tax-free. Like an individual retirement account, an HSA can include cash or investments, such as stocks, bonds, and funds. You can withdraw funds from the account at any time, also tax-free, for qualified medical expenses such as:
- Copays on your medical visits
- X-rays
- Eye exams and eyeglasses
- Hospital services
- Ambulance services
- Long-term care premiums
- Nursing care
For 2026, an individual account can receive up to $4,400 for the year for self-only coverage or $8,750 for family coverage. This includes any money your employer might kick in, along with your own contributions. Folks aged 55 and over are allowed an additional $1,000 catch-up contribution.
Who can open an HSA?
Previously, you needed to have a high-deductible health plan, or HDHP, to qualify for an HSA.
HDHPs cover preventative care and many screenings. But if you need further care, an HDHP's deductible is a minimum of $1,700 for a single person, along with an out-of-pocket maximum of $8,500. The HSA's role is to help pay these costs.
This year, millions more Americans can open an HSA. President Donald Trump's "One Big, Beautiful Bill" expanded eligibility to folks with a bronze or catastrophic health plan or a direct primary care service arrangement. These are other forms of health insurance with low costs if you stay healthy but higher bills if you do need care.
However, folks with other types of health insurance, including Medicare, are ineligible to open an HSA or fund an existing one. You also can't open your own HSA if someone else claims you as a dependent on their tax return.
My employer doesn't offer an HSA. Can I still open one?
Many people get HSAs through their jobs, especially if their employer helps fund the account. But you can also get your own. They're widely available, including through well-known financial companies like Bank of America, Fidelity, and Charles Schwab. They'll need proof of a high-deductible health insurance plan.
Whatever you do, make sure you understand the management fees for each account. HSAs may charge a monthly or annual fee, plus transaction fees, minimum-balance fees, and more... If you're not careful, that could cost you thousands over time.
Investment firm Devenir put together a comparison tool for 852 HSA providers. Devenir includes its own products in the comparison, so understand its motivations for creating this resource... But it's still a good starting point for research. Check it out here.
Do I lose the money in my HSA if I don't spend it?
You don't. Money stays in your HSA for as long as you want. That's a key advantage over a flexible spending account ("FSA"). An FSA also lets you put in pretax dollars... but if you don't find an eligible use for that cash, you've thrown it away. You can't withdraw it or save it for another year, and you can't invest your FSA money to help it grow.
An FSA can still be a good fit for someone with predictable medical expenses, and you don't need an HDHP to open one.
How does an HSA benefit my retirement?
As I mentioned earlier, the money in your HSA grows tax-free. That means the capital gains, interest, and dividends in your account are nontaxable. Remember, your contributions are either pretax or tax-deductible. And you can make tax-free withdrawals for qualified medical expenses.
That means you're saving on taxes three times over: You don't pay taxes on the income you've put into your HSA. You don't pay taxes on growing your HSA's funds through your investments. And you don't pay taxes when you withdraw the money to spend it on your health care.
After age 65, you can withdraw funds for any use. But if it's not for a covered medical expense, you'll pay taxes on what you take out.
Here's how it could work... Two people aged 55 could put away $8,750 a year in tax-free money. If they stay relatively healthy and don't need to withdraw the money early on, a conservative 4% return would let them amass a nest egg of more than $105,000 in tax-free money by the time they retire at 65. If they keep contributing, at 70, that value would rise to more than $175,000. And that's not including potential future increases to contribution limits.
What happens to my HSA after I die?
If you want to keep the tax savings going after your death, list only your spouse as your beneficiary. He or she can take control of the account and continue to use it with the tax benefits. However, if you name anyone else as either sole or co-beneficiary, the account value will be taxable income for the beneficiary in the year of your death.
That taxable amount may be reduced if you have any outstanding qualified medical expenses. Your beneficiary can use the HSA funds to pay those off. Make sure they understand this and can get access to your account.
What We're Reading...
- Something different: It's "fireball season" in the U.S.
Here's to our health, wealth, and a great retirement,
Laura Bente, CFP®
April 2, 2026
Editor's note: Our offices are closed for Good Friday tomorrow. Expect your next Health & Wealth Bulletin issue on Monday, April 6.
