401(k) vs. Health Savings Account (HSA) for Retirement: What's the Difference?

Your expected health spending could help you decide

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When you think about saving for retirement, you might think about an employer-provided retirement plan like a 401(k) or 403(b). But your employer might also offer a health savings account, or HSA, which can not only help you save but can help you spend less in retirement too.

Health savings accounts, as the name suggests, are intended to help pay for health-related expenses. If utilized correctly, they can provide you with a substantial source of value in retirement.

Learn how to use HSAs for retirement planning and how they compare to 401(k)s.

Key Takeaways

  • A 401(k) is an employer-sponsored retirement plan in which you contribute a portion of your salary each year up to a specific limit.
  • An HSA is not a retirement plan but an account designed to help pay for health-related expenses—which are likely to be higher in retirement.
  • You must be enrolled in a high-deductible health plan to qualify to contribute to an HSA.
  • An HSA can help you in retirement since it's a dedicated account for medical expenses, so you won't need to withdraw money from your retirement accounts.

What's the Difference Between a 401(k) and an HSA?

401(k)  HSA
Type of qualified retirement plan Intended to help pay for health-related expenses
Higher annual individual contribution limit Lower annual individual contribution limit
Pay taxes on withdrawals during retirement Don't pay taxes when withdrawals are for qualified medical expenses

Plan Structures

A 401(k) is a type of qualified retirement plan offered by your employer into which you can contribute a portion of your salary each year up to a certain limit.

An HSA is not a specific retirement savings plan. Instead, it's a savings account meant to help pay for health-related expenses—which are likely to be higher in retirement. However, you must be enrolled in a high-deductible health plan (HDHP) to qualify to contribute to an HSA.

A high-deductible health plan is a traditional health insurance plan with a relatively high deductible that you must meet before the plan pays benefits for anything other than in-network preventive care services.

Contribution Limits

Both 401(k)s and health savings accounts have a limit on the amount that you can contribute each year.

401(k) Contribution Limit

The Internal Revenue Service (IRS) establishes a limit on the amount that can be contributed each year to retirement plans like 401(k)s.

  • For 2022, you can contribute up to $20,500 of pre-tax income to a 401(k), and if you are 50 or older, you can contribute another $6,500 as a catch-up contribution.
  •  For 2023, you can contribute up to $22,500 to a 401(k) and another $7,500 in catch-up contributions if you are 50 or older.

Employer Matching Contributions

Your employer may also match your contributions up to a certain percentage as long as you contribute as well. For example, your employer might contribute 3% of your salary as long as you contribute 6% each year to your 401(k).

Total Contributions for the Employee and Employer

The combination of your contributions—called elective deferrals—and your employer’s matching contributions cannot be more than $61,000 in 2022 ($67,500 including catch-up contributions) or 100% of your salary, whichever is less. For 2023, total contributions cannot exceed $66,000 ($73,500 including catch-up contributions).


Your employer can contribute to both plans, but any employer contributions count towards your annual contribution limits.

HSA Contribution Limit

Like 401(k)s, HSAs have annual contribution limits, though they are much lower. In 2022, you can only contribute $3,650 ($3,850 for 2023) if you have self-only coverage under a high-deductible health plan.

If you have family coverage under a high-deductible health plan, you can contribute up to $7,300 in 2022 ($7,750 for 2023). Once you turn age 55, you're eligible to make a $1,000 catch-up contribution to your HSA.

Tax Considerations

If you have a traditional 401(k), you can contribute on a pre-tax basis, meaning your contribution amounts decrease your taxable income in the year of the contribution. The trade-off is that you’ll have to pay income tax on the withdrawals you make in retirement.


Money within your 401(k) grows on a tax-deferred basis until you withdraw it. 

Like 401(k)s, health savings accounts also allow pre-tax contributions. However, unlike 401(k)s, withdrawals from your HSA are tax-free when used to pay for qualified medical expenses. IRS Publication 502 provides a partial list of qualified expenses, including dental treatment, eye exams, and hearing aids. 

In other words, there are three key tax benefits of HSAs:

  • Contributions to an HSA are made with pre-tax dollars, lowering your tax bill in the year you contribute.
  • Any earnings over the years within your account grow tax-free.
  • Withdrawals to pay for qualified medical expenses are also tax-free.

If you make a withdrawal for any reason other than to pay for (or reimburse) medical expenses, you'll have to pay income tax on the distribution. You'll also be subject to a 20% penalty unless you’re disabled or at least 65 years old.


If you don’t use the entire balance of your HSA during the year, then you can let that money roll over into the next year and accumulate.

How To Maximize HSA Savings

So how can you best use your HSA for retirement savings

  1. Contribute to your HSA.
  2. Don’t take withdrawals from it (so the balance can accumulate). 
  3. Once you retire, use HSA funds to pay for qualified medical expenses.
  4. Keep good records of all qualified medical expenses you incur before you retire and claim them during retirement.

The first three steps are simple enough and effective as well. But with some planning and a little recordkeeping, you can make it even better. The key to getting the most out of your HSA is knowing that there is no time limit for when you can claim medical expenses.

According to the IRS, “An account beneficiary may defer to later taxable years distributions from HSAs to pay or reimburse qualified medical expenses incurred in the current year as long as the expenses were incurred after the HSA was established.”

In other words, once you open an HSA, any qualified medical expenses can be claimed at any time, even years into the future. With good records, the amount of qualified medical expenses you incur now and in the future can be withdrawn tax-free from your HSA in retirement. That money is reimbursing qualified expenses you already paid for; you can use it for whatever you want.

For example, suppose you are 40 and have a $3,000 eye surgery that qualifies for a tax-free distribution from your HSA. If you maintain records verifying the amount of the surgery, you can withdraw that $3,000 any time—whether you’re 40, 60, or any other age—as long as you established the HSA before the procedure and the procedure wasn’t otherwise reimbursed.


Once you reach 65, you’ll no longer be subject to the 20% penalty on withdrawals taken for non-qualified expenses.

Which Is Right for You?

So which should you choose, a 401(k) or an HSA? Fortunately, you don’t have to choose—you can save with both.

If you need easy access to savings specifically for medical expenses, saving in an HSA should be a priority. 401(k)s may allow hardship withdrawals to pay for some medical expenses, but the rules are much more stringent, and income taxes apply.

If you’re in a position to max out your retirement contributions, it makes sense to save in both plans. But if you only max your HSA each year, it would likely be inadequate to fund your retirement fully. So, you’d want to supplement it with a 401(k), which has significantly higher contribution limits.

If you only have one available to you, choose the one offered. Not everyone qualifies to contribute to an HSA, and you may not work for an employer that provides a 401(k).

The Bottom Line

There are many different types of ways to save for retirement and then maximize those savings. 401(k) retirement plans have higher contribution limits and can grow tax-deferred, but you'll still have to pay taxes when you make withdrawals.

HSAs, on the other hand, aren't retirement accounts, but you can still use them to provide income in retirement. While they have lower contribution limits, any withdrawals used for qualified medical expenses will be tax-free.

Frequently Asked Questions (FAQs)

Is an HSA the same as a 401(k)?

A Health Savings Account (HSA) can help you save for qualified medical expenses, but you must be enrolled in a high-deductible health plan (HDHP). A 401(k) is an employer-sponsored retirement savings plan in which you defer a portion of your salary, and your employer might match up to a certain percentage.

Both HSAs and 401(k)s allow pre-tax contributions, but withdrawals from 401(k)s are taxed, while withdrawals from HSAs are tax-free if used for qualified medical expenses.

Can HSA accounts be used for retirement?

Although an HSA is not a retirement account, it can help you pay for health-related expenses, which are likely to be higher in retirement. In other words, you get the tax advantages of an HSA and a dedicated account for medical expenses, so you don't need to withdraw money from your retirement accounts for your deductible or co-pays.

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  2. IRS. "Retirement Topics—401(k) and Profit-Sharing Plan Contribution Limits."

  3. IRS. "401(k) Plans - Deferrals and Matching When Compensation Exceeds the Annual Limit."

  4. Health Insurance Marketplace. "What’s a Health Savings Account?" Page 2.

  5. IRS. "401(k) Plans."

  6. IRS. "Publication 502 (2021), Medical and Dental Expenses."

  7. IRS. "Publication 969 (2021), Health Savings Accounts and Other Tax-Favored Health Plans."

  8. HealthCare.gov. "Health Savings Account (HSA)."

  9. IRS. "Internal Revenue Bulletin: 2004-33."

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