The aspiration of accumulating $1 million in a health savings account by the time you retire may seem ambitious, but it’s quite achievable.
Starting early, maximizing your annual pretax contributions, incorporating catch-up contributions, and allowing the funds to grow for four decades without withdrawing for healthcare costs can indeed lead to this goal, based on a recent analysis by the nonpartisan Employee Benefit Research Institute (EBRI). Families have the potential to save nearly double that amount.
“The study emphasizes the potential,” explained Paul Fronstin, director of health benefits research at EBRI and one of the report’s authors, in an interview with Yahoo Finance. “This is under ideal conditions.”
For a quick overview, an HSA offers a triple tax advantage: it’s the sole account that allows tax-free contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. (However, some states impose state taxes.)
Learn more: What is a health savings account?
To contribute to an HSA, you must be enrolled in a high-deductible health plan. These plans generally have lower monthly premiums but require a higher annual deductible (the amount you pay before insurance activates). For 2025, this means a deductible of at least $1,650 for individual coverage and $3,300 for family coverage. Freelancers or business owners can also establish an HSA if they have a qualifying high-deductible plan. Contributions can roll over indefinitely and remain yours if you switch employers or retire.
Andrea Ducas, vice-president of health policy at the Center for American Progress, noted, “The only way to save a million dollars in an HSA is if you refrain from using it, which contradicts its intended purpose.” (Getty Creative) · MoMo Productions via Getty Images
The contribution limits for HSAs in 2025 are $4,300 for individuals and $8,550 for families. Those aged 55 and older can contribute an additional $1,000.
Read more: HSA contribution limits for 2024 and 2025
The researchers based their astonishing millionaire findings on this premise: Beginning at age 25, you contribute the maximum allowable amount each year and continue doing so until age 64, without tapping the funds for medical expenses. This money is invested at a projected 7.5% annual return. The EBRI analysis did not include any employer contributions.
So, while it’s theoretically plausible to reach a seven-figure sum in an HSA, should you pursue it?
Opinions differ.
“To amass a million dollars in an HSA requires not utilizing the account, which defeats its basic purpose,” Andrea Ducas from the Center for American Progress stated to Yahoo Finance.
“HSAs should assist people in managing their high-deductible health plans,” she elaborated. “The goal of an HSA is to facilitate the coverage of expenses like a $5,000 deductible, offering tax advantages for those necessary expenditures.”
Moreover, there’s this reality: “Many individuals in America struggle to come up with $400 in an unexpected situation. For those individuals, HSAs may not provide much assistance.”
In practical terms, most account holders withdraw funds from their HSAs to manage current medical bills. Last year, the average HSA withdrawal was about $1,300, according to HSA advisory firm Devenir.
“Many individuals treat it more like a checking account rather than an investment account,” Fronstin mentioned. “Their primary usage is to handle current healthcare costs.”
Additionally, being able to maximize contributions annually is an unrealistic expectation for many workers. “Assuming that everyone can contribute the maximum is not feasible for a lot of individuals,” Fronstin said. “People face various competing financial needs… whether it’s student loans, parenting, home buying, or saving for retirement.”
Many HSA holders do not invest their savings. Only around 3.2 million HSAs have any investments, according to Devenir. The majority keep their funds in cash, hence missing a crucial benefit of the account.
To reach millionaire status, investing early is key, stated EBRI’s Fronstin. “If you begin at age 46, achieving a million dollars is unlikely. You likely won’t reach even half of that.”
Nevertheless, as the saying goes: The best time to plant a tree was two decades ago. The second-best time is right now.
HSA funds, irrespective of whether they reach seven figures, can significantly aid in covering medical costs even after enrolling in Medicare at age 65.
EBRI projects that a 65-year-old man on a Medigap plan will need to save $184,000 to have a substantial chance of covering premiums and prescription expenses during retirement, while a woman will need $217,000. Couples will need to set aside $351,000. This varies based on individual health and whether retirees have health coverage from a prior employer or a different type of Medicare plan.
If you have questions regarding retirement, personal finances, or career matters, feel free to reach out to Kerry Hannon.
You can contribute for 2024 until this year’s tax filing deadline, which is April 15 in most states. Certain federal disaster areas may have extended filing deadlines.
“Even if you don’t hit the million-dollar mark, building an HSA will certainly support you in managing healthcare expenses during retirement,” Fronstin concluded.
Kerry Hannon is a Senior Columnist at Yahoo Finance. She specializes in career and retirement strategies and is the author of 14 books including “In Control at 50+: How to Succeed in the New World of Work” and “Never Too Old To Get Rich.” You can follow her on Bluesky.
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