How advisors can use HSAs in retirement planning conversations

Many clients underestimate how much health care may cost in retirement. When they're younger, it can be hard to imagine needing a hip replacement, ongoing prescriptions, or frequent medical care. Even in middle age, clients may assume their health needs (and costs) will stay more or less the same.

That's where advisors like you can play an important role helping clients anticipate and plan for future costs using tools such as health savings accounts (HSAs). HSAs can help with retirement planning by giving eligible clients a tax-advantaged way to save, invest, and pay for qualified medical expenses today and in retirement. HSA funds can roll over year to year, be invested to grow over time, and may be used for non-qualified expenses without penalty after age 65. No matter how old your clients are, now's a good time to talk with them about how HSAs might fit with their broader financial plan.

What is the triple tax advantage of an HSA?

An HSA is designed to help individuals with high-deductible health plans (HDHPs) pay for qualified medical costs. Depending on the account administrator, clients may also be able to invest HSA assets for potential long-term growth. The core benefits of an HSA are often called the triple tax advantage:¹

1. Contributions are tax-deductible.
2. Investment growth and interest are tax-exempt.
3. Withdrawals for qualified health expenses are tax-free.²

Other basic HSA account benefits include:³

• Savings accrued in HSAs can be rolled over year to year, meaning there's no "use it or lose it" provision as is the case with flexible spending accounts (FSAs).
• Funds can be withdrawn from HSA accounts for any reason without penalty after age 65, (though income taxes will be owed if the money is used for non-qualified expenses).
• Eligible HSA owners may make the maximum contribution allowed each year regardless of how much they save in other retirement plans, such as IRAs and 401(k) plans. HSA owners 55 and older are allowed to contribute extra.

Basically, eligible clients can set aside money for health care, allow unused dollars to potentially grow tax-free, and use qualified withdrawals tax-free. After age 65, remaining HSA funds can be treated as retirement savings.

Are your clients eligible for an HSA?

Start by asking your clients if they are enrolled in an HSA-eligible HDHP and if they already have access to an HSA through an employer. If they do have access, take time to explain potential tax benefits and how an HSA can be part of their overall retirement plan. And if your client is an employer, you may want to discuss whether adding an HSA option could help the business and its employees tap into this tax-saving opportunity.

However, if your client's employer doesn't offer an HSA, they can still open one independently as long as they're enrolled in an HDHP. Their contributions won't be deducted from their paycheck but can be deducted when they file their taxes.

This is also a good time to run the numbers on potential future medical costs. Getting a health care estimate gives clients a baseline for how much they may want to contribute to an HSA.

According to a 2025 Employee Benefit Research Institute report, couples enrolled in a Medigap plan with average premiums may need $243,000 saved to have a 50% chance of covering medical expenses in retirement and $366,000 to have a 90 percent chance.⁴

What HSA questions should you ask your clients?

As you continue the conversation about HSAs, consider asking your clients a few more questions.

• Are you contributing to your HSA? Many HSAs go unfunded every year. Your client may not understand how they work. Spell out the basics and benefits of these accounts before getting into the long-term planning discussion.
• Are you investing your HSA contributions? HSA contributions are not automatically invested. To potentially grow their savings, clients need to choose investments.
• Are you spending your HSA contributions? Those who are actively using their HSA accounts to manage day-to-day health care expenses might not understand all the advantages an HSA can offer. Beyond the tax benefits, investing HSA assets and letting them grow over time can mean more dollars to spend on health care later when costs are higher or more money to spend in retirement.
• Does your HSA offer a variety of investment choices? Go over the options available to them and help them decide how to invest. You can also help them analyze the fees they are being charged. If their investment options feel too limited or high-priced, they may be able to move to a health savings brokerage account (HSBA), which gives them more freedom to invest how they want.
• Have you maxed out your retirement plan contributions? Clients who've reached the IRS limit for retirement plan contributions, and are eligible for an HSA, may be able to contribute more toward their retirement via an HSA.

Talking about HSAs also opens the door to broader conversations about what it means to plan for longevity. What else should clients be doing to prepare for life in retirement? Do they have big decisions ahead about family? Fun plans? Will their house be too big at some point? What if they lose close friends or a spouse? Their HSA may be a gateway to important conversations they've been avoiding.

Adding HSAs to your retirement planning playbook

More financial advisors are focusing on helping clients save for health care costs as medical expenses can put real pressure on hard-earned retirement savings. HSAs give you a practical way to connect today's decisions to tomorrow's retirement savings needs.

By helping clients understand when to contribute, invest, and use their HSA funds strategically, you're helping ease common concerns and reinforcing the value of your holistic financial planning support. These "extra mile" conversations and services can be the competitive advantage you need to strengthen loyalty and win more referrals.

What you can do next

• Learn how our Health Savings Brokerage Accounts (HSBAs) help you integrate clients' HSAs into their overall financial plan.
• Curious about how Schwab helps RIAs? Wealth services, technology, and business support are just the beginning. Whether you're exploring independence or considering a custodian swap, we're here to help you take your next step.