A Health Savings Account is like a 401(k)-type plan on steroids.
In the past, I’ve called a quality 401(k)-type plan with a match the “best wealth-building account on the planet.” I stand by that statement because of 401(k)-type plans high contribution limits. An HSA, however, will give you a better after-tax return (everything else being equal).
Don’t enter your HSA and 401k in a boxing match, as depicted by the silly AI-generated picture above. Have them work as a team and kick that financial independence or retirement goal’s ass!
An HSA is the world champion when it comes to tax breaks. When you invest in an HSA, you get 4 of them, more than any other tax-advantaged account.
Saving and Investing in Your HSA
My millionaire strategy is simple: Save and invest the maximum HSA contribution limit between now and age 65. Prioritize funding your HSA each year and try not to withdraw any of it until later.
Despite it becoming more popular, many employer-sponsored HSAs still don’t offer investment options in their accounts. Or their investment options have bloated expenses and high fees. Don’t let that sway you from adopting this strategy.
Once funds are deposited into your employer’s HSA, including any employer match, transfer it to a quality HSA with investments that offer efficient and low-cost indexed ETFs and mutual funds, like the one at Fidelity Investments®.
Save Your Medical Receipts
Question: What’s the time limit for reimbursing yourself from your HSA for an unreimbursed medical expense? Answer: There is no time limit. Your medical receipts act as tickets to future tax-free HSA withdrawals.
Electronic storage of your medical receipts is a must because you may be saving medical receipts for 1, 5, 10, or 20-plus years. Cheap paper receipts don’t last that long. The IRS is cool with electronic copies. It’s as easy as taking a picture.
The same medical expense can’t be claimed twice. For instance, you might have “written off” that expense on your federal tax return that year. Be on the safe side. Save your tax returns from earlier years so you’ll be able to prove those medical expenses weren’t used previously.
Qualified Withdrawals
Money withdrawn from your HSA must be considered “qualified” to be tax-free. Both current and past unreimbursed medical expenses are qualified. So are a lot of over-the-counter medications. The IRS maintains a complete list of qualified expenses at https://www.irs.gov/pub/irs-pdf/p502.pdf.
Once you reach 65 and enroll in Medicare, you can no longer contribute to an HSA. You can, however, tap your HSA tax-free to reimburse yourself for payment of Medicare premiums for you and your spouse, which in 2026 is almost $5,000.
Your HSA can save the day if you or your spouse requires long-term care, and an HSA can be a suitable substitute for expensive long-term care insurance. Medicare only covers a fraction of long-term care expenses.
What if you end up having it all: Good looks and good health? Once you’re 65 or older, you can withdraw HSA funds without the nasty 20% penalty for non-healthcare-related expenses, but you do have to pay tax on it (much like traditional contributions).
Millionaire Examples
Not for Everyone
Are you fired up to become an HSA millionaire? Not so fast. Before committing to the plan, consider the possible downsides. It depends on you and your family’s healthcare options and needs.
Whether you have employer-sponsored health insurance, private insurance, or you get it through the exchanges, it can be incredibly confusing when mulling your options. Choosing the right healthcare is an important decision, so make sure you read the literature.
Make the right choice for you and your family. And remember, you can always switch back to your old plan next year if things don’t work out.
High Deductible Health Plan
With a high deductible health plan, you’ll pay more out-of-pocket for healthcare when you use it than with a lower deductible plan. However, high deductible plans have the lowest premium and the right to contribute to an HSA.
Are you and your family “heavy users” of health insurance? If yes, think twice about signing up for the high-deductible plan, despite the value of an HSA. A lower deductible plan could save you a lot of money. If an FSA is available, you can save even more.
The HSA millionaire strategy is at its best if you’re not a heavy healthcare user. Additionally, you must be willing to delay withdrawing money from your HSA and pay all your medical bills out of pocket.
What to Use Instead
If you’re not destined to be an HSA Millionaire, don’t fret. Plenty of other great tax-advantaged accounts can help you build your wealth instead of an HSA. I love a quality 401(k)-type plan, especially if it has a match, and Roth IRAs and 529s too.
