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Many people view their health savings accounts (HSAs) as a tool to pay for health expenses. It certainly can be used for that, and while that may have been the original intention of their creators, many forget that the funds contributed can end up being used in the same way as retirement plan funds. Withdrawals taken after age 65 are not subject to penalty (in the way they would be if taken before age 65 and used for non-qualified expenses) and can be used at the account owner’s discretion.

The individual must be covered by a high-deductible plan. They can contribute up to the annual maximum limit of $4,300 in 2025 (plus an additional $1,000 if they are age 55 or older by the end of the year) to contribute to an HSA. Suppose the same individual’s family is also covered under the high deductible health plan. In that case, the contribution limit rises to $8,550 (plus an additional $1,000 if they are 55 or older by the end of the year). There are no income limits that apply to HSA contributions. Employers can contribute to an employee's HSA. Just be aware that those contributions count towards the aforementioned annual limit. Because most HSA contributions are made through payroll, they avoid FICA tax and are deductible for federal income tax purposes. Even those who make contributions outside of payroll can take a subsequent deduction for federal taxes when filing their return.