Inside your HSA: There’s an investment opportunity waiting

If you had an opportunity to make more money, you’d likely consider it, right? So why not take a moment to look into the investment feature of your Health Savings Account (HSA). It offers federal tax-free earning potential that could add up over time. That’s money you can put toward paying for your health care expenses in retirement. And, with today’s inflating health care costs, it may be one of the smartest things you can do for your future.

Did you know?

A 65-year-old couple could need $351,000 for health care expenses in retirement.1

See the difference investing can make over time

The sooner you start investing, the more time your HSA dollars have the opportunity to grow — and the more prepared you’ll feel to manage the cost of health care in retirement. Let’s take a look at some hypothetical scenarios to see how proactively saving $2,000 more in your HSA each year and investing that money can add up over time vs. leaving it in cash.


10 years until retirement


25 years until retirement


40 years until retirement

Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Each scenario assumes annual contribution of $5,000 and $3,000 in withdrawals with cash accounts earning 0.7% in interest and investment accounts a 5% rate of return. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than original cost.

The potential tax advantage — like no other

You might be planning to withdraw money from your retirement savings to pay for health care expenses—but withdrawals from a traditional 401(k) are taxable, while withdrawals from your HSA for qualified medical expenses are tax-free. This unique tax benefit could potentially save you thousands of dollars in taxes.

In addition, keep in mind that your HSA investment feature allows you to select mutual funds to align with your overall long-term investment strategy. That means your HSA investments can work alongside investments in your 401(k) or IRA to help you reach your financial goals.

Taking the first step

Now that you understand how HSA investing can be an important part of your long-term savings strategy, let’s look at how you can get started.

When setting up investments, you decide how much to keep in cash and how much you want to invest. First, estimate how much you’ll need to keep on hand in your account to pay for short-term health care expenses. Then, contribute an amount that’s more than what you expect to spend, up to the annual limit, so you have money available for investments. And, don’t worry, if any unanticipated or big expenses come up, you can move money back to your cash account to cover them.

A few simple steps, and you’re ready to go. Learn how.

Your future self will thank you

Making the decision now to start investing your HSA could pay off in the long run.
Set up your investment account today.
Go to Home > Accounts > Investment Summary > Start Investing.

1 Employee Benefits Research Institute, Issue Brief, no. 599, January 18, 2024. A 65-year-old couple, both with median drug expenses needs $351,000 to have a 90% chance of having enough money to cover health care expenses (excluding long-term care) in retirement.
Potential Tax Advantages: You can receive federal income tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax, unless an exception applies. Any interest or earnings on the assets in the account are federal income tax-free. You may be able to claim a tax deduction for contributions you, or someone other than your employer, make to your HSA directly (not through payroll deductions). In addition, HSA contributions may reduce your state income taxes in certain states. Certain limits may apply to employees who are considered highly compensated key employees. Bank of America recommends you contact qualified tax or legal counsel before establishing an HSA.