401(k) Millionaires and Maximizing Your HSA

In this podcast, Motley Fool personal finance expert Robert Brokamp, CFP® chats with Roger Young, CFP® and touches on topics including:

• 401(k) millionaires are at an all-time high. How did they do it?
• Making the most of your HSA.
• The bond market is having its best year since 2020.
• Gold is crushing the Nasdaq and the S&P 500, and silver is doing even better.
• What determines your home's cost basis, and how to keep track of all the necessary documents.

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This podcast was recorded on Sept. 13, 2025.

Robert Brokamp: What does it take to be a 401(k) millionaire, and how to make the most of your HSA? You're listening to the Saturday Personal Finance Edition of Motley Fool Money. I'm Robert Brokamp. This week, we talked to TR Prices Roger Young about how to best use your health savings account, but first, let's kick things off with last week at Money. Despite a rocky start, it's been a good year for investors, which means most people have more saved for retirement. In fact, savings are at record levels.

That's the takeaway from Fidelity's recently released retirement analysis, which is based on the more than 50 million retirement accounts at Fidelity, as of the end of June. Here are some of the takeaways. The average 401(k) balance increased 8% from a year ago to almost $138,000, the highest figure ever. The average IRA balance rose 5% year over year to a bit more than $131,000, and the average 401(k) contribution rate was 9.5% from the employee, 4.8% from the employer match for a total savings rate of 14.2%, an all-time high and close to the 15% Fidelity and others recommend nowadays. The number of 401(k) accounts with a balance of $1 million or more jumped to 595,000, also a new record. What does it take to be a 401(k) millionaire? Well, a long career, decades of saving, and a high savings rate. According to Fidelity, the average 401(k) millionaire is around 59 years old, has been contributing to their account for 25 years, and has a contribution rate of 25.9%, that includes the employer match. That rate is 10% points higher than the average for all workers in the 50 to 59 age group. Moving on to our next item, we love to talk about the stock market here, the Motley Fool, but there's another even bigger market, and that is the bond market. Not only is the bond market important for our portfolios, it also influences the rates individuals, businesses, and governments pay to borrow money. It's been an interesting few weeks for bonds.

At his August 22nd speech at Jackson Hole, Wyoming, Federal Reserve Chair Jerome Powell suggested that the Fed could soon cut interest rates because the weakening job market appears to be a bigger risk than inflation. In the weeks after the speech, short-term rates came down, but long-term rates held steady and even rose a bit. Going theory was that bond investors were worried about the rising federal government budget deficits, which would have to be financed with increasing levels of debt, but that changed this past week as rates of all maturities came down, and that is despite the fact that the Bureau of Labor Statistics announced on Thursday that inflation increased from 2.7% to 2.9% in August. A category that saw one of the biggest price increases, roasted coffee, which is up 21.7% over the past year. It breaks my caffeine addictive heart. The good news is the rate on the 30-year mortgage is now down to 6.27%, according to Mortgage News Daily, the lowest rate in almost a year. So far, 2025 has been a good year for bond investors, since prices go up as rates go down. The Vanguard total bond market ETF is up 6.6% so far this year as of this taping on Thursday afternoon. If the year ended today, this would be the best year for bonds since 2020.

Now the number of the week, which is 109%. That is how much the SPDR Gold Shares ETF, ticker GLD, it's the world's biggest gold ETF, has returned over the past three years, according to YCharts. That is 13% points more than what the NASDAQ has returned over the same period, and 40% points more than what we've gotten from the S&P 500. You know it's done even better? Silver. The iShares Silver Trust ETF, ticker SLV, is up 118% over the past three years. Are there many possible explanations for this rise of precious metals? Investors could be just worried about the economy, about higher inflation due to tariffs and deglobalization. The independence of the Federal Reserve that's an explanation that was recently offered by Goldman Sachs, and the decline of the US dollar, which is down more than 10% so far this year. Some of the biggest buyers of gold have been central banks from around the world, which, by some measures, now own more gold than US treasuries. We here at the Fool tend to favor investing in actual businesses which generate cash by providing goods and services. We don't tend to talk too much about gold, plus, there have been some really long periods when gold has been a lousy investment. It was the same price in 2007 as it was in 1980, but there's no question that gold occasionally could be a good portfolio diversifier in times of turmoil or just general times of uncertainty, which is why I own a little gold myself. Up next, wisely managing your HSA when Motley Fool Money continues.

Robert Brokamp: No account has more tax benefits than the health savings account. Contributions go in pre-tax, the money grows tax-deferred, and withdrawals are tax-free if used for qualified healthcare expenses. You can maximize those tax benefits by being smart about how you manage your HSA. Here to share some suggestions is Roger Young, thought leadership director at T Rowe. Price and the author of a report entitled How to Best Use Your Health Savings Account. Roger, welcome back to Motley Fool Money.

Roger Young: Robert, thanks for having me again.

Robert Brokamp: Let's start with the fact that not everyone has an HSA. You first have to be covered by a high-deductible health plan, and we'll talk a little bit later about what to consider when deciding whether that type of plan is right for you, but for now, let's assume someone has an HSA. How does someone determine the amount that they should contribute, especially if they have other goals like saving for retirement or saving for college?

Roger Young: There are a lot of things to weigh there, and you brought up a very important point, which is HSAs are great from a tax perspective. There's nothing better, but that's not the only consideration in your life. First principle to think about is, it's usually best to maximize your company match on a retirement account. Some HSAs actually do have matching structures, not many, but some do. Either way, whichever plan, it's best to maximize that company match first. Then, once you're putting money into the HSA, it is a good idea to build up at least, say, the amount of your deductible so that you have that covered when you need it, and possibly even put enough in to cover your out-of-pocket maximum, which is a much higher number. Now, you don't have to do that all at once, you can do that over time. Of course, you're limited, you might not be able to do that all at once because there is a limitation in your contributions for 2025. It's $4,300 for individual coverage, $8,550 for family coverage, so it can take some time to build those up. Company contributions can also help you get to that level where you're covering your deductible. Now, because there is a steep 20% penalty if you take withdrawals for things other than qualified health expenses, this should not be your all-purpose emergency fund. You might consider it, however, your medical emergency fund. As you mentioned, it also depends on your other financial goals, such as college funding, but at the other end of the spectrum from people who are worried about managing a lot of different challenging goals, if you have a lot of savings capacity and you can invest that money in your HSA long term, by all means, do what you can to max it out. The tax benefits are definitely tremendous, and you can get a benefit now, and you can get a benefit later in retirement.

Robert Brokamp: You mentioned about investing the money. You make the contribution, and you do have to make a choice about how to invest the money, there's this balance. You want to play it safe with anything you're going to need near term. Here at the Motley Fool, we say you shouldn't be investing any money you need in the next three, five years or so, but because of the tax advantages, it would be great if you could get that account to grow more and invest some of it for the long term. How do you find that balance?

Roger Young: I think this goes hand in hand with what we were just talking about in terms of how much to contribute and the factors there. As you say, time horizon is the key to it. Money that you might need short-term, like for those out-of-pocket medical expenses, you do want to keep that in cash. If you're holding it long term, we would say it makes sense to invest it fairly aggressively, and you might even want to be more aggressive than in your retirement accounts until you get pretty close to retirement. Once you get close to retirement, then you have to start thinking about when you're going to take that money out, and that can affect how you want to invest it relative to, say, putting it into your retirement account, but it could be similar, it could be a little more aggressive potentially.

Robert Brokamp: We'll talk a little bit more about how it changes once you get closer to it in retirement, but I just want to touch on one thing. There are people who look at HSAs as almost an alternative retirement account, and they are adamantly against touching it. No matter what happens, I'm not touching my HSA. If I have any medical issues, I'm paying out of pocket. I'm just paying out of my checking account. Whereas there are other people who are like, no, this is my healthcare account. Of course, I should be using it day to day. If there's anything leftover, it's gravy, but I'm not going to not touch it.

Roger Young: This is going to sound familiar, but again, it depends on your situation, depends on your stage of life. I am personally in the situation now where I want to leave it alone until I need it in retirement. However, if you need that money for an unexpected medical expense, for example, or just because in terms of managing your cash flow, you need to use it for your expenses for medical as you're building up your wealth, absolutely, use the HSA money instead of going into debt, for example. On the other hand, if you are in strong shape financially, generally, we would say, yes, let it grow tax-free, at least until retirement. Now, one thing to keep in mind here is that approach does mean that you want to keep good records of your medical expenses over the years. That way, you can take those amounts out tax-free in retirement. We'll talk a little more about things to think about when you're in retirement.

Robert Brokamp: Let's get on to that. Let's say you're getting close to retirement, regardless of what you do with your HSA, you're all everyone's hoping to have somebody left over there. You're getting close to retirement, you retire, how does that change what you do with your HSA?

Roger Young: Well, there are a lot of things that change and are affected when you go into retirement. First thing to be aware of is once you're on Medicare, which is typically age 65 for most people, you can't contribute to an HSA anymore, so people should be aware of that. Medicare also has an impact in that Medicare premiums are considered qualified expenses for HSAs. That's different from most insurance premiums. While we're working, we can't count our medical insurance premiums as qualified expenses. We can't get a reimbursement from that out of the HSA and have it be tax-free, but Medicare premiums are an exception to that. They are qualified expenses. On the other hand, in retirement, if you get a Medigap policy or supplemental insurance, those premiums are not qualified, so you've got to be aware of what counts and what doesn't.

Robert Brokamp: What about long-term care, both in terms of the actual long-term care expenses, but also, maybe, if you're paying long-term care insurance premiums?

Roger Young: Long-term care would be qualified, and true long-term care insurance premiums would be qualified. The challenge there is increasingly popular insurance options for long-term care are what they call hybrid policies. With a hybrid policy, it's really a life insurance chassis, so to speak, with some benefits for long-term care. That would not be considered a qualified expense type of medical insurance. Good thing you asked about that, that's a nuance people should be aware of. Another thing to consider in terms of age 65 specifically is at that point, that 20% penalty for non-qualified withdrawals goes away. You can take the money out, and it would be similar to taking money out of a tax-deferred account. You pay taxes on it, but not penalties. It's still way better to take tax-free distributions for medical expenses, even when you get to retirement and you don't have the penalty. Let me give you a quick example. Suppose you start your HSA or you started that five years ago, and since then, you've incurred, say, $3,000 of out-of-pocket medical expenses, and you didn't use your HSA to pay for any of them, but you actually paid for it out of pocket. Anytime down the road, you can take out that $3,000 tax-free from your HSA, even if you don't have any expenses that qualify during that year. Again, you need to keep good records to be able to do that because you're adding up potentially years and years worth of those medical expenses, and you want to be able to justify that just in case you're audited. Keep those good records, and then it gives you a lot of flexibility in retirement to use your HSA money. Now, how do you use it in combination with other things? Well, tax-free cash flow can help you in a lot of ways. Broadly, it should be part of a comprehensive tax-efficient retirement income strategy, so that should factor in Social Security and your other types of accounts and work income, if you have a pension income, all of that.

It's especially helpful, though, to use that tax-free money to stay under key income thresholds. One big one would be coming back to Medicare premium income level. If you go over certain income thresholds, two years later, that's going to result in a sharp increase in your Medicare premiums, even if you only go $1 over a threshold. You want to stay under those thresholds and tax-free income, such as income from an HSA withdrawal, that can help you to avoid those thresholds. Another example would be there are a few big jumps in tax brackets, say, from 12% to 22% federal tax rates and 24% to 32%. Staying within those lower brackets might be helpful. Some years, you might have unusually high expenses of any sort, whether it's medical or not. Those would be good years where you might want to take some tax-free income to stay in a lower tax bracket or minimize the amount in a higher tax bracket. Another thing I would consider here is anytime that you might want tax-free income in retirement, I would say, use your qualified HSA withdrawals before you use Roth distributions. The big reason I say that is that the Roth account is much more tax-friendly for a non-spouse beneficiary than an HSA. With an HSA, if it's passed to a spouse, well, that becomes treated like their HSA. But for non-spouses, other people, then they need to take the full value of that HSA account as ordinary income in that first year. Now, in the paper that you mentioned, I call that suboptimal use of an HSA. I have a colleague, Patrick Delaney, here, who jokes with me about that. He says, is it really suboptimal to inherit a bunch of money? I said, well, I'm not saying it's bad, I'm just saying it's suboptimal. I will stand by my use of the word sub-optimal in that case.

Robert Brokamp: Just to make it clear, if you're a non-spouse beneficiary of an HSA, it basically stops being an HSA, and you have to withdraw the entire amount, and it's all taxes ordinary income. Of course, it's always nice to get money, but that could be a big tax bill.

Roger Young: Yes, you'd rather get it than not get it, but you'd rather get all of it in a Roth than some smaller percentage in an HSA.

Robert Brokamp: Another interesting thing about that is you can use the HSA to pay for maybe end-of-life expenses for the person who passed away. You have, I think, a year to do that, but even that is only possible if you name a specific beneficiary. If you don't name a beneficiary, and it just goes to the estate, you can't use it to cover any of those end-of-life expenses as tax-free, which gets back to the point we always make about all tax-advantaged accounts. You should always name a specific beneficiary to inherit it because your heirs are going to have a lot more flexibility.

Roger Young: That's a great point.

Robert Brokamp: As we mentioned earlier, you can only have an HSA if you have a high deductible health plan. We're just two months away or so from when most companies have their open enrollment period. A lot of people are going to have to make this decision about whether they want this type of plan. How should someone evaluate whether a high deductible health plan is right for them, given the benefits of the HSA?

Roger Young: It's an interesting topic. Eight years ago, a famous behavioral economist named Richard Thaler, you've probably heard of. Richard Thaler wrote about this very topic, specific for a guy as prominent as Richard Thaler. He noted that with a lot of companies, they structure their health plan choices in such a lopsided way that it virtually never makes sense to choose a traditional lower deductible plan instead of a high deductible plan. He called that the high deductible plan dominates the lower deductible plan. I'd actually seen a situation like this at one of my former employers. Currently, no, but at a former employer, yes. I'm not sure how many companies make the choice that lopsided today, but you do want to make that assessment based on the options that you have and your expected expenses. I do think this is primarily an insurance decision, but you can hopefully get some help from your company with tools to make that decision. If you don't, I'm going to go through a couple of numbers in an example here. The key numbers to consider, the parameters are the premiums and the deductibles. Co-insurance has an effect but less. Let's give an example, let's assume that the difference in your premiums between your two choices is less than the difference in your deductibles. It's not obvious that one is always better than the other. Now, if you add the difference in the premiums, plus the deductible in the lower deductible plan, you get a certain number. Suppose a high deductible plan saves you $1,500 per year in premiums, and the lower deductible plan has a $1,000 deductible. You add those together, 1,500+1,000, that's $2,500. That's approximately what we'll call the break-even point. The point in medical expenses where one becomes better than the other. If you expect those expenses to be over $2,500, then the low deductible plan makes sense because you save money later, above that level. Under $2,500 of expenses, the high deductible plan is better in that example. Just an example, of course, everyone's got to look at their own plans. Now, how do you estimate those expenses? That's tricky. I don't know about you, Robert, but when my kids were younger, it often came down to how many emergency room visits did we have in a given year. Did we have one?

Robert Brokamp: At least a few.

Roger Young: Yes. Now, even despite that, often cases, a lot of years, the high deductible plan worked out for us. But if you have chronic conditions, if you have expensive specialists, if you have expensive prescriptions, the traditional plan might be better. Again, hopefully your employer helps you with that decision. Then, after you've considered the health insurance decision, then you can factor in the tax benefits of an HSA, a health savings account. Really, you primarily want to do that if you can invest it for the long term. That's when you get the full triple tax benefit. Another set of numbers to think about is, depending on your tax bracket and time horizon, a $4,000 HSA contribution, that could be worth 1,000 to $2,500 more in today's dollars than a comparable Roth contribution. Think about it that way, that's because you get the tax break both upfront and later. If the math is a close call on the health insurance piece, the HSA benefit could then tip the scales toward choosing the high deductible plan and putting money into an HSA.

Robert Brokamp: Well, Roger, as always, this has been very educational. Thanks so much for joining us.

Roger Young: Thank you, Robert.

Robert Brokamp: It's time to get it done, Fools. This week, I'm going to encourage you to come up with a system for keeping track of what you spend on your home. Inspired by a question I got from a Motley Fool member who asked, ''Is there somewhere to find out how much I originally paid for my house if I lost my mortgage documents? How would I calculate capital gains?'' Let's start with the basics. The cost basis of your home begins with the price you paid at settlement. Then added to that are many of the closing costs, including abstract fees, legal fees, title search, owner's title insurance, surveys, transfer taxes, and any amounts the seller owed but that you agreed to pay, such as back property taxes. However, keep in mind that the costs associated with taking out a mortgage are generally not added to the basis. Now, the cost basis at your home can be further increased by any renovations, upgrades, or additions you made to the home. These must be actual improvements, standard repairs, and regular old maintenance, that doesn't count. My suggestion is keep all this information. You're closing documents as well as evidence of any improvements you make over the years in one folder, so that it's all in one place when you sell your home and need to calculate cost basis. Now, what happens if you no longer have all that information? Well, you should be able to get the price you paid for the home from the county or city property records, these are offered online. As for all the other costs, you may have to do some digging. You can start by contacting your mortgage broker or mortgage provider to see if they still have the list of all the settlement costs you paid.

Do a search of your computer files, your backup files, your email inbox for the document that lists the costs. It may be called your HUD-1 settlement statement or closing disclosure. If you've made any improvements, search through your bank or credit card statements to find past payments. You might also find records in your email inbox. If you still have the contact info for the company that did the work, they may have copies of past invoices. Finally, keep in mind that due to the home sale exclusion, also known as the Section 121 exclusion, up to $250,000 of capital gains if you're single or 500,000 of gains if you're married and you file jointly, will be tax free, as long as you meet certain criteria, such as you owned the home and it was your primary residence in two of the past five years before the date of the sale. Check out IRS Publication 523 for more of the requirements. That's the show, as always, people on the program may have interest in the investments they talk about. The Motley Fool may have formal recommendations for or against, so don't buy or sell investments based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. See our Fool advertising disclosure. Please check out our shows dates. I'm Robert Brokamp, Fool on, everybody.

Robert Brokamp has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and T. Rowe Price Group. The Motley Fool has a disclosure policy.