Health savings accounts are often overlooked and underutilized in the retirement planning process. High deductible health plans (HDHP) are quickly becoming the norm in the workplace, even for employees who have traditionally had access to top notch health insurance plans. This is a trend that is probably not slowing down any time soon. For people with chronic medical conditions, a HDHP can be very expensive. But it’s not all bad news. For those who are relatively healthy, a HDHP can present some attractive savings options.

For one, premiums are generally lower. But more importantly a HDHP affords employees the opportunity to put additional tax preferred funds away in a health savings account (HSA). On the surface  HSAs sound about as exciting as watching paint dry. But, if used properly they can provide a real boost to your retirement savings plan.

It goes without saying that we will all have medical expenses in retirement. It is estimated that the average couple retiring in 2021 will spend $300,000 on healthcare throughout the course their retirement. If expenses are paid from traditional retirement accounts, withdrawals are taxable. So the net effect after taxes is a bigger hit to your retirement savings. Conversely, qualified distributions from HSAs result in pre-tax funds coming out tax-free when distributed. It is also not commonly known that HSAs offer the ability to invest your contributions, providing attractive growth opportunities.

For 2021 the contribution limit to an HSA for a single individual is $3,600 and for a family the limit doubles to $7,200. At age 55 an additional $1,000 catch up contribution is allowed. There are no income limits for eligibility. This is a game changer for high earners whose options for tax deferral are limited. If you can cash flow current medical expenses, the HSA becomes a very effective tool for long-term tax-free savings. These contributions are treated as pre-tax and distributed tax-free if done correctly. Unlike Flexible Spending Accounts, there is no requirement to deplete funds, so they can accumulate and grow for decades. Finally at age 65, you can take penalty-free withdrawals for any reason. I’ll say it again… any reason.

So why doesn’t everyone do this? Quite simply not everyone is eligible. For a more exhaustive explanation of eligibility, check out the IRS website. (

Gin and Tonic

2-3 oz London Dry Gin

6 oz Tonic Water

Large Lime Wedge

A few ice cubes.

Stir in a lowball/ rocks glass and enjoy!