If you’re reading a personal finance blog geared towards lawyers and professionals, that tells me that you care about your financial future.
If I’m right about that, there is no excuse for not maxing out a Health Savings Account (HSA) every year.
An (HSA) is a tax-advantaged investment account, linked to high-deductible health plans (HDHP), that are designed to help you pay for eligible medical expenses.
With an HSA, you can invest your contributions in a preselected pool of mutual funds and index funds. In this way, investing in an HSA is very much like investing in a 401(k) plan.
HSAs have only been available since the early 2000s. I think it’s because they are still relatively new that a lot of really smart people are not taking advantage of them.
That’s a problem.
Why is that a problem?
Because an HSA is the single most powerful investment account available to supercharge your retirement savings.
What makes HSAs so powerful?
First, HSAs offer triple tax benefits.
Second, HSAs offer the most flexibility when it comes to accessing your money before age 59 1/2 without penalty.
Combined, that means that you can strategically use an HSA to supercharge your retirement savings in a way unlike any other type of investment account.
Today, we’ll look at all the reasons why you should be investing in an HSA if you want to accelerate your path to financial freedom.
Let’s start with those triple tax advantages.
You can invest in an HSA with pre-tax dollars.
When you invest in an HSA, you are contributing pre-tax dollars. This is a great way to lower your taxable income in the year you contribute.
In this way, HSAs are just like 401(k) plans.
For example, if you earn $100,000 per year and choose to contribute $5,000 to your HSA, you have reduced your taxable income to $95,000. That’s an immediate tax savings for you.
At the same time, you can invest that entire $5,000 without having to pay any taxes on that amount in the year you contribute.
That means more money for investments rather than taxes. When you have more money invested, you can obviously earn more in returns. That’s the magic of compound interest.
Your HSA earnings grow tax-free.
In addition to not being taxed on your contributions, you also won’t be taxed on your earnings.
That’s a double tax advantage that acts to magnify the power of compound interest.
Let that marinate for a minute. If you start contributing in your 20s and don’t withdraw from your HSA until your 60s, that’s 40 years of tax-free, compounded growth.
This is a major incentive to invest in an HSA, even more so than the ability to reduce your taxable income in the year you contribute.
If these double tax advantages excite you, just wait.
It gets even better.
Your HSA withdrawals are also tax-free when used for eligible medical expenses.
With an HSA, your withdrawals are also tax-free if you use the money for elegible medical expenses. More on that in a minute.
That means that your contributions, earnings, and withdrawals are all tax-free, if you follow some basic rules.
It’s worth highlight that point again:
HSAs offer triple tax advantages.
No other investment account type offers triple tax breaks (with the exception of minimal state tax benefits sometimes offered for 529 college savings plans)
This is why HSAs are the most powerful investment accounts around.
Compare the triple tax advantages of an HSA to the double tax advantages of a 401(k) or Roth IRA.
With a 401(k) plan, your contributions and earnings are nontaxable, but your withdrawals are taxable.
With a Roth IRA, your earnings and withdrawals are nontaxable, but your contributions are taxable.
HSAs combine the tax benefits of a 401(k) and Roth IRA in a single account. It’s the only type of investment account that offers these triple tax benefits.
The only catch is that to get the triple tax benefits, you need to follow some basic rules.
Let’s take a look at those rules.
You can withdraw from an HSA at any time for qualified medical expenses.
Unlike 401(k) and Roth IRA accounts, you don’t have to wait until you are 59 1/2 to withdraw your HSA money without penalty.
This flexibility is another major benefit of HSAs.
You can withdraw your HSA money whenever you need it, without penalty or taxes, if you follow one key rule:
To access your HSA money tax-free and without penalty, you must use your withdrawals for eligible medical expenses.
Don’t worry. It’s easier than you might think to follow this rule.
That’s because “eligible medical expenses” is a very broadly defined term.
In fact, you’d probably be surprised at some of the items that count as qualified medical expenses.
Some examples include Band-Aids, Tylenol, contact lenses, and flu shots.
You can take a look here for a comprehensive list of eligible medical expenses.
You don’t have to use your HSA funds right away.
Not only is the list of qualified medical expenses very broad, you also don’t have to use your HSA funds right away.
This is another major benefit.
As long as you keep your receipts, you can reimburse yourself for eligible medical expenses years, or even decades, later.
In other words, there are no time limits for when you have to use your HSA funds.
That means you can choose to pay out-of-pocket for your current medical expenses, and then reimburse yourself years later from your HSA.
Why would anyone choose to pay out-of-pocket?
Because you get to keep your HSA money invested for the long-term and benefit from compound interest and the triple tax advantages.
In other words, as long as you can pay out-of-pocket for your current medical expenses, you can allow your pre-tax HSA contributions to grow tax free for years.
That means you can take advantage of the magic of compound interest for decades, tax-free.
Then, years later, you can withdraw those funds to reimburse yourself for eligible medical expenses you paid for years prior.
Powerful stuff.
If all these benefits were not enough, here are a few more major advantages to HSAs.
Your HSA can serve as another layer of protection during emergencies.
Because it is so easy to use your HSA for eligible medical expenses, at any time, you can treat your HSA like another form of emergency savings.
Should an unanticipated expense pop up at an inopportune time, you can access your HSA funds without penalty.
You don’t want to make your HSA your only, or even first, line of defense in desperate times. But, the fact that you can withdraw funds without penalty or taxes offers another layer of financial protection.
Consider it another important string on your parachute.
Your HSA contributions are automatic.
Another benefit is that once you enroll in an HSA, your employer will automatically deduct money from your paycheck and invest it directly into your investment selections.
Because the money never hits your checking account, you won’t be tempted to spend it on things you don’t really care about.
You also don’t have to worry about consistently making transfers into your account because it will happen automatically.
It’s like having a forced savings account where you don’t have to do anything at all.
It doesn’t get easier than that.
Your employer will oftentimes contribute to your HSA.
Oftentimes, employers will make an annual contribution to help fund your HSA.
This contribution can be a meaningful sum. It is not uncommon for employers to contribute $1,000 to $2,000 annually to your HSA.
Just like when your employer matches your 401(k) contributions, this is like “free money.”
HSA contribution limits for 2026.
Like 401(k) plans and Roth IRAs, there are annual contribution limits for HSAs.
In 2026, the contribution limit for an individual with self-coverage is $4,400 and $8,750 for family coverage.
The main downside to HSAs are the high deductibles.
The major trade-off to having an HSA is that you’ll need to enroll in a high deductible health plan (HDHP).
To qualify as an HDHP, your plan will have a minimum annual deductible.
For 2026, the minimum deductible for an HDHP is $1,700 for self-only coverage and $3,400 for family coverage.
Additionally, for 2026, the maximum out-of-pocket expenses may not exceed $8,500 for self-only coverage or $17,000 for family coverage.
Keep in mind that a high deductible does not mean worse insurance coverage.
In fact, you will likely have access to whatever premium insurance plans your employer offers to everyone else.
The difference is that while you are still covered by insurance, you’ll pay more out-of-pocket each year for medical treatment. That’s the “high deductible” part.
Don’t let high deductibles dissuade you.
My family has been covered by high deductible plans for years. All three of my kids were born with these plans in place.
Yes, you might end up paying more per year, but only if you have high medical costs. And rest assured that the out-of-pocket maximums will protect you in the event you have a catastrophic injury or illness.
Plus, if you only need your insurance for routine appointments throughout the year, your costs will remain low. That means you get all of the benefits of an HSA without even worrying about the high deductible.
I have maxed out my HSA for years.
HSAs are my personal favorite investment account. I have maxed out my HSA ever since my law firm started offering the plans a handful of years back.
HSAs are so powerful that I prioritize maxing out my HSA over a Roth IRA and even my 401(k) because of the triple tax benefits and ultimate flexibility.
The actual investment part couldn’t be easier. I invest my money in a Vanguard Target Date Retirement Fund, very similar to the types of funds available in a 401(k) plan.
With low fees and consistent, automatic contributions, my account has steadily grown over the years.
My plan is to let this account grow without withdrawals until I retire.
That said, because I’ve kept my receipts, it gives me peace of mind to know that I can withdraw from my HSA without penalty should an emergency arise.
There is no excuse for a lawyer or professional to not invest in an HSA.
If you’re a lawyer or professional and you care about your financial future, there is no excuse for not maxing out an HSA every year.
You earn enough money to handle whatever out-of-pocket medical expenses may pop up without tapping into your HSA funds.
You just need to commit to prioritizing long-term gains over short-term spending.
That might mean making slight adjustments to your budget elsewhere. Or, it might mean fully funding your emergency savings account to help cover your deductible should the need arise.
Whatever it takes, do it.
The HSA is that powerful of an investment account that it’s more than worth it.
The bottom line is that if you want to escape the middle class trap, you need to take advantage of gifts from the IRS, like investment accounts that offer triple tax benefits and maximum flexibility.
You have the income to do it.
It’s up to you to take advantage.
Do you invest in an HSA?
If you are relatively healthy and/or have the means to pay for your present day medical care, you stand to benefit immensely down the road by investing in an HSA.
That’s because you can choose to invest your HSA contributions just like you might invest in a 401(k) plan.
If you do so, your contributions, earnings, and withdrawals are all tax-free if you follow some basic rules.
Plus, you can withdraw your money at any time without penalty.
Because of these triple tax benefits and the flexibility of withdrawals, HSAs are my absolute favorite investment account.
If you haven’t considered HSAs before, I would encourage you to take a look.
Do you have an HSA?
Do you agree with me that HSAs are the most powerful investment account?
Let us know in the comments below.