Most people treat their health savings account like a rainy-day fund for copays and prescriptions — not a retirement account. But new, higher contribution limits for 2026, combined with expanded HSA eligibility rules under the One Big Beautiful Bill Act, have made the HSA one of the most powerful — and most overlooked — tools in the tax code.
In his latest column for Forbes Finance Council, Managing Partner Gregory S. Ostrowski, CFP®, breaks down why 2026 may be the best year yet to take your HSA seriously, including a counterintuitive strategy for turning it into a tax-free reserve fund for retirement healthcare costs. Read Greg's full column on Forbes.com here.
Most people think of their health savings account (HSA) as a place to park money for this year’s deductible. That’s a missed opportunity. For the right saver, the HSA can be one of the most powerful retirement accounts in the entire tax code—and 2026 may be the best year yet to take it seriously.
Why is 2026 different?
Two things changed.
First, contribution limits moved up. The 2026 HSA limits are $4,400 for self-only coverage and $8,750 for family coverage, plus a $1,000 catch-up for those age 55 and older.
Second, the One Big Beautiful Bill Act (OBBBA), signed in July 2025, represents the most significant expansion of HSA eligibility since the account was created in 2003. Effective for 2026 and beyond, the law permanently allows pre-deductible telehealth coverage, makes bronze and catastrophic ACA Marketplace plans HSA-compatible, and treats direct primary care service arrangements as qualified expenses.
In short, if you previously concluded you weren’t eligible for an HSA, it may be worth a second look.
Nothing else in the tax code does this.
The HSA is the only account that offers three distinct tax benefits in one place:
1. Contributions go in pre-tax (and through payroll, they also escape the Federal Insurance Contributions Act (FICA)).
2. Investment growth is tax-free—no taxes on dividends, interest or capital gains.
3. Qualified medical withdrawals come out tax-free, at any age.
Compare that to anything else: A traditional 401(k) defers taxes but bills you on the way out. A Roth IRA goes in after-tax. A brokerage account taxes you every year along the way. The HSA avoids taxation at all three stages. There is no other account quite like it.
Layer in long-term compounding—untaxed compounding, year after year, decade after decade—and the math gets compelling fast. For savers in their 30s, 40s or even 50s with a long runway, the difference between taxed growth and tax-free growth across 20 or 30 years is substantial.
Here's the counterintuitive strategy I like most.
Below is one no-nonsense planning approach that stands out for households with the cash flow to support it:
In this approach, you max out your HSA each year, but don't spend it. Instead, you pay current healthcare expenses out of pocket and save your receipts. Then, you let the HSA balance grow, untouched, for as long as possible.
It sounds counterintuitive, but consider what it accomplishes. The HSA continues compounding tax-free, uninterrupted, while building a dedicated, tax-advantaged bucket earmarked for future healthcare costs—which most retirees will face in meaningful size. And not spending the HSA is, in effect, almost like saving more into it. Every dollar not withdrawn is a dollar that keeps compounding.
There’s a lesser-known wrinkle that makes this strategy even better: There is no time limit on reimbursement for qualified medical expenses. So, if you pay $2,000 of medical bills out of pocket today and hold on to the receipts, 25 years from now you can reimburse yourself from the HSA—tax-free—for that same $2,000. The HSA effectively becomes a tax-free reserve fund, backed by years of accumulated medical receipts.
This isn’t the right strategy for everyone. You need the cash flow to absorb out-of-pocket medical costs without disrupting other priorities. But for households with the means, it’s one of the most efficient long-term moves available.
An HSA belongs at the center, not the side.
Healthcare is one of the largest and least predictable retirement expenses. Yet most retirees end up funding it with taxable distributions from their 401(k) or IRA. A well-funded HSA solves that problem cleanly: future medical costs paid with tax-free dollars instead of taxable ones.
And after age 65, the HSA gains additional flexibility—funds can be withdrawn for nonmedical reasons and are simply taxed as ordinary income, similar to a traditional IRA. No 20% penalty. No required minimum distributions during the owner’s lifetime, either. There is essentially no risk of over-saving.
As Greg noted in his Forbes Finance Council piece on 2026 401(k) contributions, tax diversification matters—and the HSA adds a uniquely tax-advantaged bucket that complements both pre-tax and Roth contributions. In a tax environment that may not get simpler, that flexibility is valuable.
How does your HSA fit into your overall retirement strategy?
Triple tax-free. Portable across jobs. Compounds for decades. No RMDs. Expanded eligibility under new law. The HSA is no longer just a health care account—for the right saver, it’s a retirement account, a tax-planning lever, and an estate-planning tool in one.
Schedule a free, no-obligation consultation at SCMadvice.com — or call 800-200-3870. We'll review your HSA and overall retirement strategy and help you decide whether this approach makes sense for you.
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