Is an HSA Worth It if You Are Over 55?

HSA Basics, Potential Savings, and Risks

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A health savings account (HSA) can be a good option for those who are younger, in good health, and eligible for such a plan, but you might want to look at other options for health insurance if you're older than age 55 or if you have health conditions or need prescriptions that will prevent you from building value in an HSA.

Key Takeaways

  • Health savings accounts (HSAs) can be paired with high-deductible health plans to save money on healthcare. They can provide a way to invest tax-free.
  • The funds in an HSA can be used to cover major health events. However, that will detract from their earning potential.
  • People who are young and healthy can use an HSA like a retirement fund, but those who are older and those with greater health needs might not see much benefit.

HSA Basics

HSAs can be paired with high-deductible health insurance plans that often come with low premiums, which can help you save tax dollars. The money you save on the lower premiums can be saved to an HSA instead, which generates earnings much like a retirement account would.

HSA funds can be used tax-free to pay for eligible medical expenses.


Contributions to an HSA can be made with pre-tax withholdings from your earnings. Distributions that are spent on medical expenses also are tax-free. Unused funds roll over each year, increasing the value and interest-earning potential of the HSA. Funds in an HSA can be used like an IRA after age 65.

You must be self-employed and responsible for purchasing your own health plan, or you must work for an employer who offers HSAs, to be eligible to establish one with a high-deductible health plan. Those enrolling in Medicare after age 65 are no longer eligible for an HSA.

An HSA Comparison

For example, a traditional health plan might cost you $600 per month with a $1,000 deductible. You're still responsible for paying 20% of your medical expenses up to the out-of-pocket maximum after the deductible, which is $2,500 per year.

Your annual premiums would add up to $7,200 per year. An expensive health event could increase that yearly cost by $2,500 (the out-of-pocket limit) to $9,700.


The annual difference between traditional health insurance and an HSA-eligible plan is minimal. The HSA can be depleted in years with a major health event.

Now, let's look at an HSA-eligible plan that costs $349 per month with a $5,500 deductible. The insurer pays 100% of medical expenses after the deductible is reached. Annual premiums add up to $4,188. Up to $3,650 (for self-only coverage) in pre-tax payroll deductions can be paid into the HSA as of 2022. This amount goes up to $7,300 in pre-tax deductions if you have full family coverage.

HSA funds can be withdrawn tax-free to pay for qualified medical costs. Total annual expenses would be $7,788 if you're saving the maximum amount to the HSA. An expensive health event would add another $1,900 of expenses to reach the deductible, which would result in annual expenses of $9,688.

Premiums for an HSA-eligible account can be about $3,000 cheaper in years with few or no medical expenses, and the funds that are saved to the HSA roll over year after year and keep earning interest.

Benefits and Risks

It can take at least a couple of years to save enough to an HSA to match an annual deductible. That might not be a problem for those in their 20s who open an HSA and have minimal annual medical expenses. The HSA can become a nice asset and a major part of a retirement plan after many years, or even decades.

Those who have medical conditions with expenses that match or exceed the HSA contribution limits will have a harder time building value in an HSA, which can make it a less-appealing option than traditional insurance plans.

Even those who are healthy and at low risk for major medical expenses can run into problems if they're involved in and badly injured in a major accident, or if they develop other health issues before they build value in their accounts.

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  1. Internal Revenue Service. "Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans."

  2. Internal Revenue Service. "Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans," Page 10.

  3. Internal Revenue Service. "Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans." Page 3.

  4. Internal Revenue Service. "Rev. Proc. 2021-25." Page 1.

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