Open enrollment: how an HSA can double as a retirement investment account

As open enrollment season gets underway, certified financial planners say a health savings account (HSA) can do more than pay this year's medical bills: money in the account can be invested and left to grow for decades, with tax advantages that make it a powerful retirement savings tool.

John Bell, a CFP and founder of Free State Financial Planning, calls HSAs "sneaky-good and very underrated" investment tools. For clients who are eligible, he generally ranks maxing out an employer-sponsored HSA near the top of his savings priorities — just behind capturing the full employer match in a 401(k), and ahead of funding a Roth IRA or a taxable brokerage account.

That said, planners told CNBC Make It that you should not pick a health plan solely to gain access to an HSA's investment potential. Whether an HSA-eligible plan makes sense depends first on your healthcare needs and on the costs and coverage of the plans available to you.

How HSAs differ from FSAs

Like a flexible spending account, or FSA, an HSA lets you set aside tax-advantaged money for qualified medical expenses such as doctor visits, prescription drugs and dental care. But to contribute, you generally must be enrolled in a high-deductible health plan. For 2027, such plans have a minimum deductible of $1,750 for individuals and $3,500 for families.

FSAs carry no such insurance requirement and are often offered alongside traditional copay plans, which tend to have higher premiums and lower deductibles. HSAs also stay with you if you change jobs, and unspent money rolls over from year to year rather than falling under a "use it or lose it" rule.

Few account holders invest

Despite the investment potential, only 11% of HSAs held investments as of midyear 2026, according to Devenir, an HSA research and investment firm. Robert Persichitte, a CFP and CPA at Delagify Financial, says an HSA combines "the best parts of traditional and Roth IRAs" through what is commonly called a triple tax advantage.

You do not need an employer to open an HSA, as long as you have an HSA-eligible health plan, and since 2026 all Bronze and Catastrophic plans sold on the Affordable Care Act marketplace are HSA-eligible. Workplace accounts can add an employer contribution, and money put in through your paycheck can often avoid Social Security and Medicare taxes.

Fidelity Investments estimates that a 65-year-old retiring in 2026 can expect to spend an average of $185,500 on healthcare over the course of retirement. "Healthcare is one of the few retirement expenses we can virtually guarantee," says Corinna Rose, a CFP at Bell Investment Advisors. There is also no time limit on reimbursing a past qualified medical expense: a $5,000 bill paid out of pocket at age 50 could be withdrawn tax-free at 65, provided records are kept. Persichitte waited three years to reimburse himself after breaking his arm.

Plan choice comes first

Michael Schramm, a CFA charterholder and author of the forthcoming book "Emotional Finance," says an HSA's appeal should not drive an isolated decision. He advises comparing premiums, deductibles and out-of-pocket maximums, along with any money an employer contributes to an HSA. Higher-deductible plans generally trade lower monthly premiums for higher upfront healthcare costs, which can suit people who expect little medical care but may cost thousands of dollars for those who need more. Emergency savings matter too.

Investing HSA money carries risk: stocks and bonds can lose value and past performance does not guarantee future returns, so money needed for near-term medical expenses may be better kept in cash.

For 2027, HSA contribution limits are $4,500 for self-only coverage and $9,000 for family coverage, plus an additional $1,000 for people age 55 and older; employer contributions count toward those limits. Non-medical withdrawals before age 65 generally mean paying income tax plus a 20% additional tax, which goes away after 65, although income tax still generally applies.

Source: CNBC.