The Retirement Account Wealthy Retirees Use for Healthcare & Taxes

Today we’re talking about one of the most underrated tools in retirement planning, the Health Savings Account or HSA. I’m Nicole Reine and I’m excited to share this exciting news with you. Now I know you might be thinking, an HSA, isn’t that just for paying doctor bills? Well, yes, but also no. An HSA can actually be a secret weapon for advanced retirement planning. And today I’ll share some strategies many people don’t even know about.

Before we get too deep in, do me a quick favor. If you find this valuable, like the video, subscribe to our channel, leave a little comment, and share it with someone you know who’s planning for retirement. It helps others find this information. And if you’d like personalized guidance, contact us at Oak Harvest to see how we can help you build a retirement success plan.

The triple tax advantage explained simply

So let’s start with the basics. HSAs offer triple tax advantage. Your contributions are tax deductible, growth inside the account is tax free as long as withdrawals are for qualified medical expenses. That’s three layers of tax savings more than your IRA or 401k. But unlike those accounts, HSAs don’t have required minimum distribution. So you can let them grow untouched for as long as you and your spouse live.

Here’s why this matters for someone with seven-figure savings. Health care is one of the biggest retirement expenses. The average 65-year-old couple today is expected to spend well into the six figures on medical care throughout retirement. And an HSA is a way to set aside money just for that purpose with a tax advantage no other account offers.

2025 HSA contribution limits and catch up rules

If you’re eligible for an HSA, max it out every year. In 2025, that’s $4,300 for an individual, but you get $8,550 if you’re part of a family. Plus an extra thousand dollar catch up if you’re 55 or older.

Why investing your HSA may matter long term

But here’s the part many people miss. Don’t spend it all right away. But don’t just let it sit in cash either. Consider investing those dollars in the same way you’d invest your IRA or your 401k. Because over time, the growth can be significant.

For example, if someone contributed $8,500 annually for 20 years, hypothetically earns 7 percent on average each year, they could end up with roughly $400,000 in their HSA by retirement. Of course, actual results will vary and depend on market performance. But remember, those withdrawals for qualified medical expenses, all tax free.

Here’s another strategy that’s often overlooked. The IRS doesn’t require you to reimburse yourself the same year you incur that medical expense. That means you can pay medical bills out of pocket, save your receipts, let your HSA money keep growing. And then later you can reimburse yourself for those older expenses tax free dating back to when you first opened the HSA. And you can use that money however you’d like.

Imagine this. At age 60, you pay $2,000 for a procedure out of pocket. That’s $2,000 more in your HSA that stays invested. By 70, maybe it’s worth $4,000. Well, now you can pull $2,000 out tax free anytime essentially unlocking that tax free cash for travel, home upgrades, or anything else. Think of it as banking your medical receipts, and it’s a flexible way to let your HSA act like a stealth retirement account.

How HSAs work after age 65

Once you’re 65, though, HSAs become even more versatile. The 20 percent penalty on non medical withdrawals disappears, and you can withdraw for anything. Though non medical withdrawals will be taxed just like an IRA, but there’s the benefit if you spend it on qualified medical expenses it will remain completely tax free.

Using HSAs to pay Medicare and other healthcare costs

That includes Medicare premiums, long term care insurance premiums, up to the IRS limits of course, dental, vision, even hearing aids. For retirees spending say maybe $5,000 a year on health care, paying those bills from an HSA may save thousands in taxes compared to pulling from a traditional IRA.

Beneficiary planning and estate considerations

Another advanced move is to plan your HSA beneficiaries very carefully. Because if your spouse is the beneficiary, the HSA simply just becomes theirs. They can continue using it tax free for medical expenses. But if a non spouse inherits your HSA, the balance becomes taxable income to them in that year. That can be a hefty tax bill.

So for high net worth households, it often makes sense to spend down the HSA during your lifetime or during your retirement to ensure your spouse is a beneficiary. If you’re single though, sometimes maybe you want to think about naming a charity that makes sense, since charities don’t pay income tax. Keeps it all tax free.

Coordinating HSAs with Medicare enrollment timing

One more important note. Once you enroll in Medicare, you can no longer contribute to an HSA. So if you’re still working past 65 and you want to keep contributing, delay enrolling in Medicare, but plan carefully. Because when you do sign up, Medicare Part A can retroactively apply up to six months, which may disqualify some of those HSA contributions. So this is where personalized planning really matters. Timing that last contribution around Medicare enrollment can help you avoid penalties and maximize the account.

So let’s put this together with an example. We got John and Jane, they’re both 60. They have $1.5 million saved and a $200,000 HSA account. They’re healthy, so they paid medical expenses out of pocket and just let the HSA grow. Over 10 years, it grows to $350,000. So at age 70, they start reimbursing themselves for old medical receipts. They’re let’s say about $25,000 worth. And they use that money to fund a trip. They also use their HSA to cover Medicare premiums and dental work, all tax free. Then when John passes away, Jane inherits the HSA and continues using it as her dedicated health care fund.

This kind of strategy can turn an HSA from a side account into an important part of the overall retirement plan.

So let’s recap the advanced HSA strategies. Maximize your contributions and invest for growth. Delay reimbursements, but save your receipts and let the account just compound. Use HSAs in retirement to cover Medicare, long term costs, all tax free and plan your beneficiaries wisely. And also, coordinate with Medicare.

For wealthy retirees, an HSA is not pocket change. It can be a six figure tax advantage health care fund that may save you money, give you flexibility, and help protect other assets.

How HSAs fit into a full Retirement Success Plan

If you’d like to see how an HSA fits into your overall retirement strategy, contact Oak Harvest Financial Group and our retirement success plan brings together investments, income planning, taxes, healthcare, and estate planning into one coordinated strategy. Click the link below or call us today to start building your plan. And don’t forget, like the video, subscribe to our channel, leave a comment, and share it with a friend who you think needs to hear this. Thanks for watching. I’m Nicole Reining with Oak Harvest Financial Group. Here’s to your health, wealth, and a successful retirement. We’ll see you next time.