Last spring, a financial planner I was interviewing for a story at a coffee shop in suburban Denver slid a napkin across the table and drew a tiny triangle. “Virtually none of my clients max out this account,” he said, tapping the center of it. He wasn’t referring to a Roth. “And it’s probably the best one they have.” He was not referring to a 401(k). He was referring to a health savings account.
It’s odd that the HSA, which is typically covered in a single hurried slide during open enrollment and tucked away in health insurance paperwork, has remained hidden for so long. Employees debate whether the match is “free money,” obsess over their 401(k) balances, and browse Reddit posts about target-date funds. In the meantime, a mostly empty account in the corner offers three levels of tax benefits. There’s a feeling that people would treat it very differently if they truly understood what it could do.
It’s difficult to dispute the math. Pre-tax contributions are made, the funds grow tax-free, and withdrawals for approved medical costs are also tax-free. In the US retirement system, no other account stacks all three. Two of those advantages are provided by a 401(k). You get two with a Roth IRA. At Thanksgiving, hardly anyone brings up the HSA’s covert offer of all three.
This is the part that surprises people. The HSA basically becomes a regular IRA after age 65. As with a 401(k), you can withdraw money for anything and pay ordinary income tax on non-medical withdrawals. However, those reimbursements remain tax-free indefinitely if you have saved medical receipts over time. A dental bill from your forties can pay for a trip in your seventies. Odd? Sure, is it legal? Absolutely.
Access is, of course, the catch. Contributions require a high-deductible health plan, and not everyone is eligible. The contribution caps, which are approximately $4,300 for individuals and $8,550 for families in 2025, are lower than those of a 401(k). However, according to recent industry surveys, the average HSA balance is close to $4,300, indicating that most account holders treat it more like a checking account for co-pays than a long-term investment vehicle. That’s the lost chance. Instead of allowing the money to compound, people are spending it.
If I’m being completely honest, it has been a little annoying to watch this develop over the past few years. For decades, the retirement industry has pushed Americans toward target-date funds and auto-enrollment, and with good reason. However, the HSA—possibly the most potent tax-advantaged account ever developed—lives outside of that nudge architecture. They are offered by employers. They are mentioned once by HR departments. Then there was quiet.
According to some planners I’ve spoken with, there is a particular type of client—typically in their fifties—who eventually understands. For years, they have maximized their 401(k). The Roth has been financed by them. As they scan their surroundings for the next move, the HSA emerges in the corner, looking almost ashamed. By then, they may have contributed for ten years. In those discussions, there’s a subtle regret.
Whether the HSA will ever receive the recognition it merits is still up in the air. The marketing budgets of 401(k) providers are far larger than anything HSA custodians can muster, the regulations are linked to insurance, and the contribution caps are low. However, the account can discreetly outperform nearly everything else owned by employees who recognize it early, invest it instead of spending it, and store their receipts in a shoebox. The retirement plan with the loudest pitch isn’t always the best one. Sometimes it’s the one that no one has bothered to clarify.
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