How to Turn a Health Plan Into a Tax-Free Retirement Account
Don’t Just Cover Medical Costs—Build Wealth While You’re At It.
Let’s be honest: open enrollment feels like the DMV of workplace tasks—necessary, confusing, and usually avoided until the last minute. But hidden in those boring benefit forms is one of the best money hacks your employer offers. Yes, a health plan that can double as a retirement account. Stick with us—it’s worth getting excited about.
When it’s time to choose your health plan, There are generally two options:
Preferred Provider Organizations (PPO)
High Deductible Health Plans (HDHP)
The lower deductibles that PPOs offer can be enticing, but here’s why we always pick HDHPs:
Lower monthly premiums = more take-home pay
We get to access the most glorious tax-advantaged account ever known to mankind, meet the Health Savings Account (HSA)!
Unlocking the Power of the HSA
If you enroll in an HDHP, you can put your extra savings (from not paying as much for the insurance premium) into an HSA. Here is the cool part, monies that you contribute go into the HSA triple-tax-free. Yep! Your contributions are exempt from Federal, FICA, and State taxes.
Another major perk: when you use your HSA funds for qualified medical expenses, you won’t pay a dime in taxes on that money—ever.
Ready for more goodness? Most HSAs allow you to take your funds and invest them into the market and grow the assets, completely tax-free.
The money hack to get the most out of these perks:
Contribute as much as you can into your HSA
Use your own money to pay for medical expenses
Invest your HSA funds and they’ll grow tax-free
Now, to be clear: this isn’t one-size-fits-all. If you have high medical costs or can’t cash-flow expenses out of pocket, it might not be the right move. But if you can swing it, this is hands-down one of the most powerful financial hacks.
Let’s run the numbers:
If you put $2,000 a year into your HSA starting at age 40 and leave it alone. By 65, assuming a 5% annual return, you’ve got over $106,000—and every penny can be utilized tax-free on qualified medical expenses.
What to do next:
Call your HR rep. Ask about HDHP + HSA options. Run the numbers. You might find this “boring benefit” is actually a retirement goldmine.
Bonus: if you do rack up a big bill years down the road? You’ve got a pile of tax-free cash waiting in your HSA. No debt. No drama.
Other HSA details
There are annual HSA contribution limits pegged to inflation each year:
2025 Single: $4,300
2025 Family: $8,550
2025 Catch-up contribution (age 55 or older): An additional $1,000 to the amounts above if single or family on your health insurance plan.
HSA Contribution Limits – learn more >
HSA funds do not expire, you keep the money each year that you do not spend. There are steep penalties if you use funds for non-qualified medical expenses.
Qualified Medical Expenses – learn more >
Disclaimer: This newsletter is for informational and educational purposes only and is not intended as financial, investment, tax, or legal advice. Consult a licensed financial advisor or tax professional before making any decisions based on this information.