As healthcare expenses continue to rise, many pre-retirees and retirees are understandably concerned about how to cover medical costs in the future—without derailing their retirement plans.

One powerful yet often overlooked strategy is using a Health Savings Account (HSA).

HSAs offer triple tax advantages that make them a unique tool in your long-term financial strategy:

✅ 1. Tax-Deductible Contributions

Money you contribute to your HSA reduces your taxable income—similar to a traditional IRA.

✅ 2. Tax-Deferred Growth

Your HSA balance can be invested, and any growth or interest accumulates tax-free while the money stays in the account.

✅ 3. Tax-Free Withdrawals

When used for qualified medical expenses, withdrawals are completely tax-free—no matter your age.

Is an HSA Right for You?

To qualify for an HSA, you must be enrolled in a high-deductible health plan (HDHP). If that’s the case, contributing to an HSA could help you:

• Lower your current tax bill
• Build a reserve for future healthcare costs
• And even supplement retirement savings over time

For 2025, contribution limits are:

• $4,150 for individuals
• $8,300 for families
• Plus a $1,000 catch-up contribution if you’re age 55 or older

It’s also important to know that you cannot contribute to an HSA once you’re enrolled in Medicare, though you can still use the funds already in the account.

Potential Considerations Before You Open an HSA

While HSAs offer great tax advantages, they aren’t the right fit for everyone. Here are a few things to keep in mind:

• HDHP Requirement: You must be covered by a high-deductible health plan to contribute. These plans may mean higher out-of-pocket costs until the deductible is met.
• Penalty for Non-Qualified Expenses: If you use HSA funds for non-medical expenses before age 65, you’ll pay taxes plus a 20% penalty.
• Limited Eligibility After Age 65: Once you enroll in Medicare, you can no longer contribute—though you can still use existing HSA funds.

Everyone’s health and financial picture is different, so it’s important to evaluate whether this strategy supports your broader goals.

HSA = A Retirement Healthcare Reserve

While HSAs are often seen as short-term medical savings accounts, they also have significant long-term benefits in retirement.

After age 65, you can use HSA funds to pay for:

• Medicare premiums
• Dental and vision care
• Hearing aids and prescriptions
• Long-term care services
• And other qualified expenses

Used correctly, an HSA becomes a tax-free healthcare fund that grows with you into retirement—and gives you more flexibility later in life.

Want to Learn More?

We’ve created a simple guide to help you get started:
📥 Download: “Contributing to a Health Savings Account in 5 Easy Steps”

And if you’re wondering whether an HSA makes sense for your situation, we’d love to help.

📞 Call our office at 517-435-4025 to schedule a short conversation.

We’ll walk through your current plan, help answer your questions, and help you make informed decisions about managing healthcare costs in retirement.

At Richmond Brothers, our purpose is simple:
We empower clients to live fearlessly into and beyond retirement.

Sources:

Ed Slott & Company, LLC

IRS Publication 969 – HSA Use in Retirement
IRS.gov – Publication 969 (HSA Use in Retirement)

IRS Revenue Procedure 2024-25 – 2025 HSA Contribution Limits
IRS.gov – 2025 HSA Contribution Limits

IRS Publication 969 – Health Savings Accounts
IRS.gov – Publication 969

Fidelity Viewpoints – What Happens to Your HSA at Retirement?
Fidelity.com – What Happens to Your HSA in Retirement