Would you believe there’s a financial tool that allows you to grow your wealth, pay for healthcare expenses, and enjoy significant tax advantages all at once? For individuals enrolled in high-deductible health plans (HDHPs), this opportunity is already available through a Health Savings Account, or HSA.
Despite being underutilized, the HSA is one of the most powerful and tax-efficient tools available to investors today. Far from a “get-rich-quick” scheme, it’s a legitimate, IRS-sanctioned account designed to help you prepare for both current and future medical expenses—with unmatched tax benefits.
What Is an HSA?
A Health Savings Account is a tax-advantaged investment account specifically designed to cover qualified medical expenses, including everything from prescription medications to surgeries. But what truly sets the HSA apart is its “triple-tax advantage,” making it a unique pillar of long-term financial planning.
Understanding the Triple-Tax Advantage
1. Tax-Deductible Contributions Contributions to your HSA reduce your taxable income in the year they’re made, providing immediate tax relief. Whether you contribute directly or through payroll deductions, your savings can add up quickly.
2. Tax-Free Growth Many mistakenly treat HSAs like static savings accounts, but in reality, they offer robust investment options. Funds can be invested in mutual funds, ETFs, or other assets, allowing your contributions to compound over time, free from capital gains tax.
3. Tax-Free Withdrawals When used for qualified medical expenses, withdrawals from your HSA are completely tax-free. This makes the HSA one of the only accounts that offers this level of tax efficiency on both the front and back end.
Who Qualifies?
To contribute to an HSA, you must:
- Be enrolled in a High-Deductible Health Plan (HDHP)
- Not be enrolled in Medicare
- Not be claimed as a dependent on someone else’s tax return
For 2025, contribution limits are $4,300 for individuals and $8,550 for families. Those ages 55 or older can contribute an additional $1,000 as a catch-up contribution.
Importantly, HSAs are portable, which means they remain yours even if you change jobs or health insurance providers. However, you must be enrolled in a HDHP to continue making contributions.
Penalties and Considerations
Withdrawals for non-qualified expenses before age 65 are subject to both income tax and a 20% penalty. After age 65, the penalty is waived, though non-qualified withdrawals are still taxed as ordinary income, similar to a traditional IRA.
The Long-Term Potential
While annual contribution limits may seem modest, the long-term growth potential of an HSA is significant. Consider this scenario:
- Contribute the maximum of $4,300 annually for 30 years
- Earn an average annual return of 7%
- Account for average out-of-pocket medical expenses along the way
By retirement, your HSA could be worth over $319,000, with an additional $36,000+ in tax savings from deferred growth alone. When integrated with your 401(k), Roth IRA, and other investment vehicles, your HSA becomes a powerful complement to a well-rounded retirement strategy.
To illustrate the impact of proactive HSA planning, consider a couple I work with in their early 40s. Over the past several years, they’ve consistently maxed out their HSA contributions and invested the funds rather than spending them. Today, they’ve accumulated over $150,000 in their HSA—money that is growing tax-free and can be withdrawn completely tax-free for any qualified healthcare or long-term care expenses in retirement. This strategic move not only gives them peace of mind about future medical costs, but it also helps preserve their other retirement accounts for lifestyle and legacy goals.
Maximize Your Strategy Today
If you're looking to build a more tax-efficient, healthcare-conscious retirement plan, now could be a great time to incorporate an HSA into your strategy. A Curi Capital advisor can help you understand how this underutilized tool fits into your broader financial picture, so you can invest with confidence in both your health and your future.
The opinions and analyses expressed in this newsletter are based on Curi Capital, LLC’s (“Curi Capital”) research and professional experience are expressed as of the date of our mailing of this newsletter. Certain information expressed represents an assessment at a specific point in time and is not intended to be a forecast or guarantee of future results, nor is it intended to speak to any future time periods. Curi makes no warranty or representation, express or implied, nor does Curi accept any liability, with respect to the information and data set forth herein, and Curi specifically disclaims any duty to update any of the information and data contained in this newsletter. The information and data in this newsletter does not constitute legal, tax, accounting, investment or other professional advice. Returns are presented net of fees. An investment cannot be made directly in an index. The index data assumes reinvestment of all income and does not bear fees, taxes, or transaction costs. The investment strategy and types of securities held by the comparison index may be substantially different from the investment strategy and types of securities held by your account.
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