Why You Must Have an HSA at Age 55

Added: 2026-05-11

[00:00:00]If you're 55 and approaching retirement, you need to have a health savings account that is going to help you battle and cover in a strategic way the second largest expense you're going to have in retirement, and that's your medical cost. A health savings account is the most powerful account you can have under the federal tax code. When you use an HSA, not only do you get tax deductions and incentives to put the money in, you also get to invest the money, and that grows with zero taxes on the gains and returns, and it comes out tax-free for your qualifying medical expenses that you're absolutely going to have, particularly in retirement. I'm going to go over the HSA, how you get the money in, how you invest it, and it grows, and how you're going to draw on that, and how long it's going to actually last you as you age and are in retirement. And it's important for you to understand the HSA is better than any other place you can put your money. It's better than a Roth IRA. It's better than a Roth 401k or even a traditional IRA because it has all of the tax advantage and benefits, and we know we're going to need to use it and rely on it as we age. Let's first talk about setting up the HSA and getting the money in. Now, in order to have an HSA, you must first qualify. You do not qualify for an HSA once you hit age 65. So, that's why it's imperative now as you're approaching that age, maybe you're around age 55, this is the time to make sure you're getting something into the HSA. You must also have a high deductible plan. Now, that deductible amount for a family is $3,400 bucks and for someone who's single is $1,700. That is your deductible amount.

[00:01:38]Now, that is an HSA qualifying plan.

[00:01:41]Now, if you have one of those plans, which many Americans do, or if you want to change to that plan in this year or the following year, that will allow you to make HSA contributions. So, let's talk about the contribution amounts and getting the money in. The family HSA contribution amount you can put in each year is $8,750.

[00:02:01]However, if you are age 55 or older, you get to put an extra $1,000 in. If your spouse is age 55 or older, you get to put another extra,000 in. This could mean if both of you are age 55 or older, you could be putting 10,750 bucks a year into the HSA as a contribution. Now, when you do that, when I put in $10,750, I get a tax deduction on my return right now. And for someone that's in a $ 35% tax bracket, putting 10 grand into their HSA, you're saving $3,500 in taxes right now. In other words, I have $10,000 in this HSA account, but it really only cost me $6,500 because that other 3500 was about to go to the IRS, but I got to keep it because I put 10 grand into my HSA. I have a massive head start and already a 35% plus rate of return on putting the money into the HSA. Now, let's talk about investing it.

[00:03:04]We can't just put the money in an HSA.

[00:03:06]Please do not do an HSA at a bank where they put the money in an account that pays you a half a percent of interest every year. You need to put the money into an HSA where you can go invest it.

[00:03:16]Whether this is a self-directed HSA where you're doing stocks or maybe it's a truly self-directed HSA where you're investing in crypto or private companies or real estate, whatever it is, I want to make sure that that money is invested. And at a minimum, you could invest the HSA into an ETF, an S&P 500 fund that's getting, let's say, an 8% annual rate of return. And again, let's say we have that 10,750 bucks that we put in for that year. Let's say you keep doing that every year for the next 10 years at an 8% rate of return that's compounding annually. Now, over time, that's around $100,000 that you put into the HSA, but you're going to end up with $191,000 in your HSA because of the investment returns and growth. And remember, in the HSA, I'm not paying taxes on that 90,000 so of extra growth that I've had from the investment returns. And I don't pay taxes when I pull that money out for my qualifying medical, which I'm inevitably going to have. So the value of this HSA becomes massive because I already saved money on taxes every year I was putting money in. I got to grow it and invest it and it's coming out entirely tax-free.

[00:04:25]Every penny coming out to cover my qualifying medical. I have a word of caution here. One of the biggest mistakes I see people make with an HSA is they literally do a health savings account. They put that money at a bank or a credit union getting a half a percent rate of return. Don't do that.

[00:04:42]your 100,000 that you put in an HSA is going to be 110,000 instead of 191,000.

[00:04:48]We don't want that. We want to have a bigger account we can rely on in retirement. You must invest the money.

[00:04:54]Whether this is an HSA at TDM trade or Fidelity and an S&P 500 fund or some other ETF you're into getting, let's say, that 8% return or maybe you're someone doing an HSA at our company directed IRA where your HSA is invested in a real estate deal, a private fund, or even crypto. Whatever it is, whatever asset you believe in, let's just make sure we invest it. Smart and sophisticated people invest. They don't just set money in the bank and let it save and the bank make the returns.

[00:05:22]Let's make sure that that HSA is growing so that our money is going further in retirement. Next, we need to talk about, well, what is qualifying medical? Matt, if I've got this account now with 191 grand, what qualifies that I can pull the money out tax-free? Well, the nice thing is quite a bit. Your Medicare premiums when you hit age 65, your HSA can pay for those. Let's say you have long-term care, your HSA can pay for that. Doctor visits, prescription costs, any medical expense you have, dental, vision, your HSA can cover those costs.

[00:05:55]And when it does, it is all qualifying medical. The other nice thing about the HSA, and this is an important tip a lot of people don't know, if I'm age 65 and I've had an HSA for 10 years where I've been contributing, I can draw money out of that HSA at 65, 66 or later for any qualifying medical I had for the last 10 years. It doesn't need to be qualifying medical in the exact year I pull it out.

[00:06:19]So, if I had qualifying medical when I was age 56 or age 57, as long as I have a receipt for that, I can pull the money out of the HSA at age 65 or age 66. So, the qualifying medical doesn't need to be in that exact year. The qualifying medical you've had for prior years still counts and you can pull the money out of your HSA tax-free to reimburse you for that medical you already paid for. Let's next talk about how long this HSA will last. Let's go to that example where I have saved $191,000.

[00:06:51]I'm age 65 now. I'm going to still keep investing that money and at an 8% annual rate of return where I'm paying no taxes on the gains and no taxes on the money coming out. Taking $1,500 every month.

[00:07:03]18 grand a year I'm taking out of this HSA for any of my qualifying medical, including my Medicare premiums. That money will last me 23 years. Likely enough for most of us as we are in our later years. Now, let's contrast this savings and investing in a taxable situation where I'm paying a total of 25% in taxes between federal and state.

[00:07:24]This money will only last me 16 years.

[00:07:28]So, the benefit of the HSA in addition to the tax deduction I already got the benefit for for the last 10 years on getting the money in and the HSA at a 0% tax as I'm pulling the money out is going to last seven more years. This HSA strategy is so powerful and every savvy investor, someone who's being strategic about how their money is going to be used in retirement is using the HSA.

[00:07:52]Remember, you're incentivized with a tax deduction on the way in. As you're contributing when you're in a higher tax bracket cuz you're in your working years, that benefits you drastically. we get to invest that money and make sure you're investing that HSA and then we're pulling it out for our qualifying medical we have in retirement or for qualifying medical we had even before retirement as we were putting money into the HSA. That means this money is going to last longer. It's a tax advantaged account and it's one that's going to give us safety and comfort as we hit our later years and are trying to address and cover the number two greatest cost we have as we age, medical. If you need help on establishing an HSA or implementing this strategy in your specific situation, my team at Directed IRA can help. We have HSA accounts that can be invested in crypto and real estate and private funds. These are self-directed HSA accounts. Click the link in the description below and book a call with my team. We'd be happy to help you take control of your retirement, your financial future with any type of accounts, but specifically the HSA. And if you like today's video and you're still watching right now, which I think that means you actually liked it, maybe you learned something. Please like the video, share, and make sure you're subscribed to my channel so you don't miss out on future videos. I'm Matt Sasonson. See you in the next one.