How an HSA can help women save on medical costs in retirement

When you think about preparing for retirement, the usual strategies come to mind— IRAs, 401(k)s, annuities, pensions, etc.

But have you considered how your HSA could play a role in your retirement savings strategy?

Women spend nearly double on healthcare in their adult lifetimes than men, and medical expenses are only expected to increase in retirement.1 While you’ll have access to Medicare, not every expense will be covered by insurance. HSAs can offer some incredible tax benefits for women in retirement while still helping to cover the cost of medical care during your working years.

If you have access to an HSA but haven’t utilized it to its full potential yet, here’s what might change your mind.

What Is an HSA?

A Health Savings Account (HSA) is a tax-advantaged savings account for medical expenses. It’s available to those who get health insurance coverage through a high-deductible health plan (HDHP). If you are currently on a low-deductible health plan, you are not eligible to open an HSA.

For 2021 and 2022, a high-deductible health plan must have a yearly deductible of at least $1,400 per individual or $2,800 for a family.2 When choosing a health plan, make sure to review the plan details to ensure it’s HSA-eligible.

The money you and/or your employer contribute to an HSA can be rolled over year after year, all the way up to and through retirement. This defining feature makes it an excellent long-term savings vehicle.

The IRS defines contribution limits for HSAs each year. For 2021, individuals can contribute up to $3,600. For families, the limit is $7,200. These limits account for both employee and employer contributions and do not include the $1,000 catch-up contribution for those 55 and older.3     

You can use your HSA to pay for eligible medical expenses, including:

  • Deductibles
  • Copays
  • Coinsurance
  • Prescriptions
  • Other IRS-approved medical costs

Why Is Having an HSA Important?

While HSAs create designated savings for medical expenses, they can be one of your greatest retirement savings tools as well, thanks to their triple-tax advantage.

Contributions to an HSA are made with pre-tax dollars if done by an employer, or they are tax-deductible if contributed by you, the account owner. Any earnings that grow in your HSA over time are not subject to tax, and withdrawals made on eligible expenses are tax-free as well.

Your HSA provider will offer more detail on which expenses are deemed qualified. If a cost isn’t qualified, you could be looking at a 10% penalty and income tax on the distribution.

You can contribute to your HSA up until age 65, even if you are not working. If you’re thinking ahead to 2022, the limits will increase only slightly: $3,650 for individuals or $7,300 for families, with a $1,000 catch-up contribution still available to those over 55.3

Your HSA and Retirement

While HSAs can be beneficial at any age in helping to cover vision costs, unexpected medical expenses, dental care, and more, there are some profound benefits to using them strategically during retirement.


Once you enroll in Medicare, you are no longer eligible to contribute to an HSA. This is because Medicare does not qualify as an HDHP. While you can no longer contribute, you still have access to the funds you’ve accumulated previously. These can help cover costs your Medicare insurance may not – deductibles, coinsurance, copays, etc.

You may also use withdrawals from your HSA to cover Medicare Part A, B, and D premiums. Once you turn 65, you may use your HSA withdrawals to cover Medicare supplemental program (like Medigap) premiums as well.

This is a significant advantage to consider, as before becoming Medicare eligible, you could not use your HSA to cover most health insurance premiums.

Long-Term Care

Women are statistically more likely to outlive men. But with a longer life expectancy comes a greater chance of needing long-term care at some point during retirement.

If you’ve been considering obtaining long-term care insurance, you may be eligible to use a portion of your HSA funds to cover the premiums. There is a maximum annual tax-free amount you will be able to use on these premiums, depending on your age. The older you are, the higher the limit.

The 2021 limits by age are:4

  • 40 years old or younger: $450
  • 40 to 50 years old: $850
  • 50 to 60 years old: $1,690
  • 60 to 70 years old: $4,520
  • Over 70 years old: $5,640

Say Goodbye to Penalties

Up until retirement, you are limited to using your HSA funds on eligible medical expenses only or face a 10% tax penalty. But at age 65, the rules become more flexible. After turning 65, you may use your HSA funds on non-medical expenses without incurring a penalty.

Note that if you use the money on non-medical expenses, you will be required to pay income tax on the withdrawals. 

In this way, you have the freedom to treat your HSA account as a traditional IRA or 401(k) after the age of 65.

HSA Strategies for Women in Retirement

Here are a few ways to better align your HSA with your greater financial goals as you prepare for retirement.


Did you know that you can invest your HSA funds? You may choose to invest the funds from your HSA in a mutual fund, stocks, or investment vehicle of your choice. This could help potentially grow your funds in a more effective way than letting them sit in a savings account.

Before you begin investing, make sure to build up enough savings to cover your regular expected medical costs, with perhaps some extra set aside for an unexpected health emergency.

Save Your Receipts

Keep any receipts you may have accumulated for unreimbursed medical expenses. You can use these to obtain tax-free funds from your HSA, even years after you initially incurred the expenses.

Save HSA Funds for Retirement

Consider rolling over your HSA for as long as possible. As discussed above, the triple-tax benefits of utilizing your HSA funds in retirement are too good to ignore. The longer you hold on to your HSA funds, the more time to maximize tax-free growth over time.

Ready to Maximize Your Retirement Savings?

I can’t emphasize enough how important preparing for retirement is – and using unlikely tools like an HSA can be instrumental in making financial independence happen. If you have questions about maximizing your HSA funds for retirement, I’m here to help.

Give me a ring or send me a message; I look forward to preparing for a sound retirement together.


  1.  Registered Nursing: Here’s How Much Your Healthcare Costs Will Rise as You Age 
  2.  ​​ High Deductible Health Plan (HDHP) 
  3.  SHRM: IRS Announces 2022 Limits for HSAs and High-Deductible Health Plans 
  4.  American Association for Long Term Care Insurance: 2021 Tax Deductibility Limits