This article is part of a series. Please enjoy reading the other articles in the series: Your Tax-Advantaged Investing Guide: Start here, 401(k) Contributions Up to Your Employer Match: Checklist included, Maxing Out Your Roth IRA: Checklist included, Maxing Out Your 401(k) Beyond Your Employer Match: Checklist included, College Savings Plans, 529s, and ESAs: Checklist included.
At Oberdorfer Financial, we believe your money should always be on a mission.
We help professionals and business owners navigate the financial strategies that can make a real impact on their wealth. One of the most underutilized, yet powerful, tools available is the Health Savings Account (HSA).
An HSA is a tax-advantaged account designed for individuals with a high-deductible health plan (HDHP) to save and pay for qualified medical expenses.
HSAs are funded through pre-tax contributions made by individuals, their employers, or both. Contributions can be deducted directly from a paycheck (if offered by an employer) or made independently by the account holder, with the ability to claim a tax deduction. Employers may also contribute to an employee’s HSA, and these contributions do not count as taxable income. Additionally, some individuals choose to roll over funds from a previous HSA when changing jobs or insurance plans. The IRS sets annual contribution limits, which can vary based on whether the account is for an individual or a family.
For the year 2025, the HSA contribution limits have been increased to $4,300 for individuals with self-only coverage and $8,550 for those with family coverage. Additionally, individuals aged 55 and older are eligible to make a catch-up contribution of $1,000, allowing for a total contribution of $5,300 for self-only coverage and $9,550 for family coverage.
To be eligible to contribute to an HSA in 2025, you must be enrolled in a High-Deductible Health Plan (HDHP). For that year, an HDHP is defined as a plan with a minimum deductible of $1,650 for self-only coverage or $3,300 for family coverage. The maximum out-of-pocket expenses (including deductibles, co-payments, and other amounts, but excluding premiums) cannot exceed $8,300 for self-only coverage or $16,600 for family coverage. These adjustments reflect the IRS’s annual cost-of-living updates to ensure that contribution limits and plan requirements remain aligned with inflation and healthcare cost trends.
But…
An HSA is more than just a way to cover medical expenses—it’s an investment account with triple tax advantages. When used strategically, it can serve as a long-term wealth-building tool, helping you save for both healthcare costs and retirement in the most tax-efficient way possible.
Who Should Consider an HSA?
Not everyone is eligible for an HSA, but for those who are, it can be a game changer. As previously mentioned, you must be enrolled in a High-Deductible Health Plan (HDHP), which typically comes with lower monthly premiums but higher out-of-pocket costs.
If you’re someone who:
- Is generally healthy and doesn’t expect frequent medical expenses
- Can afford to pay for medical costs out-of-pocket without relying on your HSA
- Wants to reduce taxable income and grow wealth tax-free
- Is looking for a flexible, tax-efficient way to save for future healthcare expenses
Then an HSA could be one of the best financial tools in your arsenal.
The Triple Tax Advantage of an HSA
What makes an HSA so valuable is its unique tax treatment, which is often referred to as a “triple tax advantage.” This means that:
- Contributions are tax-deductible, reducing your taxable income for the year. In 2025, individuals can contribute up to $4,150, while families can contribute $8,300. If you’re 55 or older, you can contribute an additional $1,000 per year.
- The money in your HSA grows tax-free when invested, similar to a 401(k) or an IRA. This means any capital gains, dividends, or interest earned within the account are not taxed.
- Withdrawals are tax-free when used for qualified medical expenses. Unlike a 401(k) or IRA, where you eventually owe taxes on withdrawals, an HSA allows you to use your money without ever paying taxes on it, as long as it’s for eligible healthcare costs.
These three tax benefits make an HSA one of the most powerful savings vehicles available today. That’s “triple tax advantaged.”
HSAs as a Long-Term Investment Strategy
This special tax treatment actually sets up HSAs to be a long-term investment strategy.
Most people treat their HSA like a checking account, using it for every doctor visit, prescription, and medical bill. While this is certainly one way to use an HSA, it doesn’t maximize its potential. A better strategy is to invest your HSA funds for long-term growth and pay for medical expenses out-of-pocket whenever possible.
Unlike Flexible Spending Accounts (FSAs), which have a “use-it-or-lose-it” rule, an HSA has no expiration date. The funds stay with you indefinitely, allowing your account to compound over decades.
A smart strategy is to save all your medical receipts and reimburse yourself later—potentially even decades down the road. Since there’s no time limit on when you can claim past medical expenses, you can use your HSA as a tax-free investment account while keeping detailed records of eligible healthcare costs.
Note: we recommend you create a shared Google Drive folder for those covered under your HSA, take a picture of your reimbursable medical expense receipt, upload it to the drive, then put that receipt in a fire-safe box for way down the road.
Imagine contributing the maximum amount to an HSA every year and investing the funds instead of spending them. With a conservative 7% annual return, a fully-funded HSA could grow to over $500,000 in 20-30 years. If you kept your medical receipts from past expenses, you could reimburse yourself for those costs in retirement, completely tax-free. So you could hand yourself $25,000 per year for 20 years. In fact, the money would last longer because the 20th year has 19 more years of growth when you take year 1’s $25,000 out.
A Supplemental Retirement Account
So an HSA can act as a supplemental retirement account once you reach age 65. At that point, you can withdraw money for any reason, not just medical expenses. The only difference is that non-medical withdrawals are subject to income tax, just like a Traditional IRA or 401(k).
However, if you continue using it for medical costs, the withdrawals remain completely tax-free. Since healthcare expenses tend to increase in retirement, having a tax-free pool of money to cover them can be a huge advantage.
Just to hammer-home the point, home health care is considered an HSA-eligible expense as long as the services provided are for medical care as defined by the IRS. This can include:
- Skilled nursing care provided in the home
- Physical therapy, occupational therapy, or speech therapy prescribed by a doctor
- Home health aide services if medically necessary and prescribed by a physician
- Medical equipment needed for in-home care, such as wheelchairs, oxygen, or diabetic supplies
- Hospice care and some long-term care services related to a medical condition
Keep in mind that non-medical home care services, such as household help, cooking, cleaning, or companionship, do not qualify as HSA-eligible expenses. Always check with the IRS Publication 502 or consult a tax professional to confirm eligibility before using HSA funds for home health care expenses.
An HSA can be a great supplemental retirement fund, giving you flexibility when it comes to funding your later years.
Unlike many advisors who charge high all-in fees (1.65% is what investors tend to pay, not 1% like they think, per Kitces), Arena Investor offers investment management with clear, straightforward pricing—no hidden fees, no conflicts of interest, just sound investment strategy. We are a fee-only advisory. No commissions, no [fill-in-the-blank] fees.
There is no audio for the checklist. Please refer to the article to use the checklist.
Maximizing Your HSA Strategy – A Checklist
If you’re serious about Financial Independence and wealth-building, an HSA should be a key part of your plan. Here’s a checklist for how to get the most out of it:
Step 1: Confirm Eligibility
___ Ensure you are enrolled in a High-Deductible Health Plan (HDHP) – this is required to contribute to an HSA.
___ Verify that your HDHP meets the IRS minimum deductible and maximum out-of-pocket limits for the current tax year.
___ Confirm that you are not covered by any other non-HDHP health insurance, Medicare, or a Flexible Spending Account (FSA) that would disqualify you.
Step 2: Open an HSA Account
___ Open an account through their provider to take advantage of payroll deductions and possible employer contributions, if your employer offers an HSA.
___ Open an HSA through a trusted financial institution – preferably one that allows investments in index funds, mutual funds, or ETFs – if your employer does not offer an HSA (or if you’re self-employed).
___ Ensure there are no or low monthly fees and that the investment options align with your long-term strategy.
Step 3: Make Contributions
___ Contribute up to the IRS maximum for the year:
- 2025 Individual Limit: $4,300
- 2025 Family Limit: $8,550
- Age 55+ Catch-Up Contribution: Additional $1,000
___ Your contributions are tax-free upfront and reduce your taxable income, if contributing through payroll deductions.
___ Ensure you deduct the contributions on your tax return to receive the tax benefits, if contributing directly.
Step 4: Invest for Long-Term Growth
___ Review investment options* – Your HSA will offer a selection of mutual funds, index funds, ETFs, and possibly some other options.
___ Align your portfolio with your Investor Profile* – Choose investments based on your Investor Profile – key factors such as age, risk tolerance, long-term goals, and your overall financial picture. Arena Investor can help align your HSA with your broader financial plan, including real estate and other investments.
*Oberdorfer Financial’s Investment Management offering can professionally manage your 401(k)s for you so you don’t need to make the investment decisions, especially the selection of portfolio holdings, weighting adjustments over time as you grow closer to your goals, and the market ups and downs that challenge one’s decision-making.
*We also offer Portfolio Checkups that are a one-time look at how well your Investor Profile and your actual Investment Portfolio aligns – we then make specific recommendations for which stocks, bonds, funds, etc to buy, sell, or trim to realign a misaligned portfolio.
___ Avoid keeping too much cash in your HSA (keep it invested), as the real growth potential comes from investing.
___ Opt for automatic rebalancing (if available) – This helps maintain your preferred stock/bond mix without manual adjustments.
Step 5: Pay Medical Expenses Strategically
___ Pay for current medical expenses out-of-pocket whenever possible, allowing your HSA investments to compound tax-free for decades.
___ Keep all medical receipts indefinitely—you can reimburse yourself at any time in the future, even in retirement, providing financial flexibility.
___ Upload digital copies of receipts to a secure cloud folder to ensure easy access later.
Step 6: Maximize Tax-Free Withdrawals
___ HSA funds can be withdrawn for any purpose after age 65—medical expenses remain tax-free, while non-medical withdrawals are taxed as income (just like a traditional IRA).
___ Use HSA funds for qualified healthcare expenses in retirement (e.g., Medicare premiums, long-term care, prescriptions) to avoid taxes entirely.
___ Keep track of past unreimbursed medical expenses—you can withdraw those amounts anytime, tax-free, even years later.
Step 7: Integrate HSA into Your Overall Investment Strategy
___ View your HSA as a long-term asset—just like a 401(k) or IRA, it should be aligned with your investment strategy.
___ Review your HSA’s growth, investment allocation, and contributions annually to ensure you’re maximizing its long-term benefits.
___ Work with a financial advisor – Oberdorfer Financial provides Financial Planning, Investment Management, and integrated Real Estate services to comprehensively understand your entire financial picture and cohesively manage your journey to Financial Independence.
Is an HSA Right for You?
For professionals and business owners focused on tax-efficient investing and financial independence, an HSA is a must-have tool. If you can handle the higher deductible of an HDHP, the long-term benefits far outweigh the short-term trade-offs.
At Oberdorfer Financial, we specialize in helping professionals integrate HSAs into their financial plan. Whether you need help maximizing contributions, investing your funds, or integrating an HSA into your retirement plan, we can guide you through it.
If you’re ready to start optimizing your financial future, reach out to Arena Investor today. Let’s build a strategy that puts your money to work—tax-free.
Thank you for your continued trust in Oberdorfer Financial.
Truly,
The Oberdorfer Financial Team
At Oberdorfer Financial, we help The Ones in The Arena — hardworking men, women, and owners of America. Together, we’ll keep your Money on a Mission.
Schedule a Discovery Meeting here to learn more.
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