7 Ways an HSA Can Help You Cover Healthcare Costs in Retirement

Saving in a health savings account (HSA) could be one of the best retirement planning decisions you make thanks to its unique triple tax advantage. Contributions to your HSA reduce your taxable income for the year, your earnings are tax-deferred, and medical withdrawals are tax-free at any age.

You can also use your HSA for non-medical expenses, but there's a 20% penalty if you're under 65. Even if you're over this age, you'll come out ahead if you restrict yourself to health-related HSA withdrawals. In the government's eyes, that covers a broader range of services than you might think, including the following seven things.

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1. Paying for medical services and items

The most obvious use of your HSA funds is to pay for medical treatments, hospital stays, prescription drugs, or medical equipment you need. Generally, you won't owe taxes on your HSA withdrawals if you use them to cover these things. However, cosmetic surgery is not considered a qualifying medical expense.

2. Dental, hearing, and vision care

Original Medicare has notable gaps, including no coverage for dental and vision care or hearing aids. You typically have to pay for this out of your own pocket unless you have a Medicare Advantage plan or a Medicare supplement (Medigap) policy. You can use your HSA to cover these costs as well.

3. Paying select health insurance premiums

HSA withdrawals you take to pay for health insurance premiums are only tax-free if you're using the HSA funds to do one of the following:

• Pay for a health insurance policy through COBRA after separating from your employer.
• Pay for health insurance while receiving unemployment compensation.
• Pay for a Medicare policy (excludes Medigap).
• Pay for a long-term care insurance policy.

The amount of long-term care insurance premiums that is treated as a qualifying medical expense varies depending on your age and the year. Check your Schedule A tax form for the limit on long-term care premiums you can deduct.

4. Guide dog and service animal care

If you're hearing or visually impaired or you have another physical disability, you may be able to use your HSA funds to cover the cost of buying, training, and maintaining a guide dog or another service animal. This includes its food and veterinary costs.

5. Modifying your home to accommodate a medical condition

Changes to your home that make it safer or easier to navigate for someone with a medical condition may be qualifying medical expenses. Some examples of these changes include:

• Adding entrance or exit ramps to your home for a wheelchair
• Widening doorways in your home
• Installing support bars in a bathroom
• Installing lifts to help you get up and down stairs

The key here is that there has to be a medical reason for the change. If you're just doing it for the aesthetics, it doesn't count.

6. Health-related travel

You can use your HSA to cover any travel-related costs, including food, transportation, and lodging, if you need to visit a medical facility that's far from your home. The medical visit must be one of the principal reasons you make the trip in order for it to count as a qualifying medical expense.

7. Nursing services and nursing home care

If you require care from a nurse at home or if you end up in a nursing home, you can use your HSA funds to cover the cost of this service. This can include the cost of food.

Start building your HSA now

Chances are, you'll face at least some of these situations in retirement, so the more money you have saved in your HSA, the better. You can contribute up to $4,300 to an HSA in 2025 if you have an individual health insurance plan with a deductible of $1,650 or more. Those with family plans that have deductibles of $3,300 or more can contribute up to $8,550 this year. And those 55 and older can save $1,000 more than the above limits. HSA limits typically increase annually, so you may be able to save even more money in 2026.

If you hope to use your HSA funds for retirement healthcare expenses, avoid taking earlier withdrawals if you can. Budget for upcoming procedures outside of your HSA and keep an emergency fund for unplanned ER visits. Be sure to invest your HSA funds as well so they grow even faster.

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