Can I have an HSA if I'm on Medicare?

No, once you enroll in Medicare, you can no longer contribute to an HSA. However, you can still use the money that's already in your HSA for qualified medical expenses tax-free, including Medicare premiums, deductibles, and copays. If you're approaching 65 and want to delay Medicare enrollment to keep contributing to your HSA, make sure you understand the Medicare enrollment rules to avoid penalties.

What happens to my HSA if I change jobs or leave my employer?

Your HSA is yours to keep—it stays with you regardless of job changes, and your entire balance remains available. Unlike a flexible spending account, you don't lose the money when you switch employers. You can continue using the same HSA account, roll it over to a different HSA provider if you prefer, or simply let it sit and grow. Your HSA isn't tied to your employer like some retirement accounts are.

Can I use my HSA to pay for my spouse's or children's medical expenses?

Yes, you can use your HSA funds tax-free to pay for qualified medical expenses for yourself, your spouse, and your tax dependents, even if they're not covered by your high-deductible health plan. This makes family coverage HSAs particularly valuable since you can use the funds for anyone in your household who qualifies as a dependent on your tax return.

What counts as a qualified medical expense for HSA withdrawals?

Qualified medical expenses include most healthcare costs like doctor visits, prescriptions, dental care, vision care, mental health services, and medical equipment. IRS Publication 502 has the complete list. Things that don't qualify include cosmetic procedures, over-the-counter medications without a prescription (with some exceptions), and health insurance premiums (except for COBRA, Medicare, and long-term care insurance).

Is it better to invest my HSA or keep it in cash?

If you can afford to pay current medical expenses out of pocket and you have many years before retirement, investing your HSA gives you the opportunity for significant tax-free growth. A common strategy is to keep a cash cushion for near-term medical costs (perhaps $2,000-$5,000) and invest the rest in low-cost index funds or target-date funds. The longer your time horizon, the more sense it makes to invest rather than leaving everything in a low-interest savings account.

What happens if I withdraw HSA money for non-medical expenses?

If you're under 65 and withdraw HSA funds for non-medical expenses, you'll pay ordinary income tax on the withdrawal plus a 20% penalty. After age 65, the penalty goes away—you'll just pay regular income tax on non-medical withdrawals, similar to a traditional IRA. This makes the HSA especially flexible as a retirement account since you have penalty-free access to the money after 65 regardless of how you use it.

HSA Limits 2026: Contribution Rules & Triple Tax Benefits

Here's something most people don't realize: a Health Savings Account isn't just a place to stash money for doctor visits. It's actually one of the most powerful tax-advantaged retirement accounts available—and it's the only account that gives you a triple tax break. If you have a high-deductible health plan or are considering one for 2026, understanding how to maximize your HSA could save you thousands of dollars in taxes while building a substantial nest egg for healthcare costs in retirement.

The numbers for 2026 are going up. You can now contribute $4,400 if you have individual coverage or $8,750 for family coverage—increases from the 2025 limits of $4,300 and $8,550. If you're 55 or older, add another $1,000 on top. That's real money that can grow tax-free for decades if you're strategic about it.

Understanding the Triple Tax Advantage

Let's break down why financial advisors call HSAs the "holy grail of retirement planning." The triple tax advantage works like this:

First, contributions are tax-deductible. When you contribute through payroll deductions, you avoid federal income tax, state income tax (in most states), and even Social Security and Medicare taxes. If you contribute on your own outside of payroll, you still get the deduction—and you don't need to itemize to claim it.

Second, your money grows tax-free. Any interest, dividends, or capital gains you earn are completely sheltered from taxes while they're in your HSA. This is huge if you invest your HSA balance instead of leaving it in cash—more on that in a moment.

Third, withdrawals for qualified medical expenses are tax-free. Not tax-deferred like a 401(k)—actually tax-free, forever. No other retirement account offers this combination. Even Roth IRAs only give you two of these benefits.

Who Qualifies for an HSA in 2026?

To open and contribute to an HSA, you need to be enrolled in a high-deductible health plan, or HDHP. For 2026, that means your health plan must have a deductible of at least $1,700 for individual coverage or $3,400 for family coverage. The plan also can't have an out-of-pocket maximum higher than $8,500 for individuals or $17,000 for families.

You also can't be enrolled in Medicare, can't be claimed as a dependent on someone else's tax return, and can't have other health coverage that would disqualify you (like a traditional health plan or a general-purpose flexible spending account).

Good news: HDHPs are required to cover preventive care—like annual checkups, cancer screenings, vaccines, and even telehealth visits—at no cost before you meet your deductible. Starting in 2025, telehealth services can be covered before the deductible without affecting your HSA eligibility, which is a significant improvement.

Investment Options: Turning Your HSA into a Retirement Account

Here's where HSAs get really powerful. Most people use their HSA like a checking account—money goes in, medical bills come out. But if you can afford to pay current medical expenses out of pocket, you can invest your HSA balance and let it grow for decades.

Most HSA providers offer investment options once your balance reaches a certain threshold (often around $1,000 to $2,000). You'll typically have access to mutual funds, ETFs, stocks, and bonds. Some providers offer target-date funds or robo-advisor options that automatically adjust your investments based on your age and risk tolerance.

A smart strategy many financial advisors recommend: keep enough cash in your HSA to cover two to three years of routine medical expenses (think doctor copays, prescriptions, dental work), then invest the rest for growth. If you're young and decades from retirement, you might invest more aggressively in stock funds. If you're closer to retirement, shifting toward bonds and dividend stocks makes sense.

The math is compelling. A 65-year-old retiring in 2025 can expect to spend an average of $172,500 on healthcare during retirement. If you max out your HSA contributions for just ten years and earn average market returns, you could easily accumulate enough to cover all those costs—completely tax-free.

What Happens to Your HSA After Age 65?

This is where HSAs offer incredible flexibility. After you turn 65, your HSA essentially becomes a traditional IRA with a bonus feature. You can still withdraw funds tax-free for qualified medical expenses (and Medicare premiums count!). But you can also withdraw money for any reason without penalty—you'll just pay ordinary income tax on those withdrawals, same as a 401(k) or traditional IRA.

Even better: HSAs don't have required minimum distributions like traditional retirement accounts do. Your money can stay in the account growing tax-free for as long as you want. This makes HSAs particularly valuable for estate planning—your spouse can inherit your HSA and use it as their own, and other beneficiaries can receive the balance (though they'll owe income tax on it).

Maximizing Your HSA: Practical Tips for 2026

If you want to get the most from your HSA in 2026, start by contributing the maximum if you can afford it. Set up automatic payroll deductions—it's the easiest way to maximize your tax savings since you'll avoid payroll taxes too.

Save your receipts for medical expenses you pay out of pocket. Here's a strategy many people don't know about: you can reimburse yourself from your HSA years or even decades later. There's no time limit. This means you can pay for medical expenses with your regular checking account today, invest your HSA for growth, and then reimburse yourself tax-free in retirement after your investments have potentially doubled or tripled.

Compare HSA providers carefully. Fees, investment options, and customer service vary widely. Some employers choose HSA providers with high monthly fees or limited investment choices. You can always open your own HSA with a provider that offers better options and roll over your funds—your HSA isn't locked to your employer like a 401(k) might be.

Getting Started with Your HSA

If you're sold on the benefits of an HSA, the first step is evaluating whether a high-deductible health plan makes sense for your situation. If you're generally healthy and don't have regular expensive medical needs, an HDHP paired with maxed-out HSA contributions can be a fantastic financial move.

During your employer's open enrollment period, compare the total costs of an HDHP versus a traditional plan. Factor in the premiums, the deductible, and the potential tax savings from HSA contributions. Many people find that even with the higher deductible, the HDHP saves them money—especially when they're not frequent healthcare users.

Once you have an HSA-eligible plan, opening the account is straightforward. Your employer might offer an HSA provider, or you can open one independently with banks, credit unions, or specialized HSA providers. Look for providers with low fees, good investment options (if you plan to invest), and a user-friendly platform for tracking expenses and reimbursements.

An HSA is more than just a health insurance perk—it's a powerful tool for building tax-free wealth and preparing for healthcare costs that everyone will face in retirement. With 2026 contribution limits increasing to $4,400 for individuals and $8,750 for families, now is an excellent time to maximize this often-overlooked account. Whether you're just starting out in your career or approaching retirement, an HSA deserves a central place in your financial strategy.

Health Savings Accounts (HSA) in 2026

Key Takeaways