Fidelity estimates a retiring couple will face $410,000 in healthcare expenses, which HSAs can cover tax-free if invested properly.
A Health Savings Account (HSA) offers triple tax advantages—deductible contributions, tax-free growth, and tax-free medical withdrawals—unmatched by 401(k) plans. Fidelity projects a retiring couple will incur roughly $410,000 in healthcare costs over 25 years, a figure HSAs are designed to address when invested rather than spent immediately.
Current estimates place post-tax medical expenses for a 65-year-old couple at $345,000, with individuals facing $172,500. Including long-term care, dental, and Medicare surcharges from large 401(k) withdrawals, the total climbs to $410,000. HSAs can reimburse these costs without triggering IRMAA thresholds, avoiding monthly surcharges up to $440 per person.
Despite eligibility, most workers treat HSAs as short-term spending accounts rather than retirement vehicles. Investing HSA funds instead of depleting them annually could cover future healthcare expenses while reducing taxable 401(k) withdrawals.