The Best Way to Save for Retirement Nobody Talks About

Photo by Marek Studzinski on Unsplash

You’re finally at the point where you can start putting real money toward retirement. Maybe the kids are a little older, or you got a raise, or you’re just tired of watching the years go by without a plan. You’re looking at 401(k)s, IRAs, Roth conversions - trying to figure out where to start.

They are important options, but here’s another almost nobody tells you - there’s one account that’s more tax-advantaged than all of those. And it’s probably unused or underused.

It’s called a Health Savings Account. And if you’re not maximizing it, you’re leaving serious money on the table.

An HSA is a special savings account for medical expenses - and what makes it unique is the triple tax advantage. Money goes in tax-free (reduces your taxable income, just like a 401(k) contribution). Money grows tax-free (no taxes on interest or investment gains - ever). And money comes out tax-free when used for qualified medical expenses.

No other account does all three. Your 401(k)? Taxed when you withdraw. Your Roth IRA? Taxed when you contribute. The HSA? Neither - as long as you use it for healthcare. It’s the only account in the tax code that can be completely tax-free from start to finish.

To qualify, you need to be enrolled in a High Deductible Health Plan (HDHP). For 2026, that means a health plan with a deductible of at least $1,700 for individuals or $3,400 for families. Many employer plans now offer this option - it’s often the one with the lowest premium.

Let me make this concrete with a realistic example.

Mike is 52, married, household income $80,000. He works for a mid-sized company. During open enrollment, he switches from the standard PPO to the High Deductible Health Plan. His monthly premium drops by $120 compared to the PPO. He opens an HSA and starts contributing through payroll deduction - $350/month, which gets him to $4,200 for the year. Not quite the max, but what he can afford.

In year one alone, Mike comes out almost $3,000 ahead. Here’s the math: He’s in the 22% federal bracket and pays 4% state income tax, so his $4,200 contribution saves him $1,092 in income taxes. Because he contributes through payroll, he also skips FICA taxes (7.65%) - another $321. Add in his premium savings of $1,440 ($120/month × 12), and his total first-year benefit is $2,853. And he hasn’t even touched the investment growth yet.

Now let’s look at the long game. Say Mike keeps contributing $4,200/year, invests it in a simple index fund averaging 7% returns, and doesn’t touch it for 12 years until he’s 64. He’ll have contributed $50,400 total. But his account value? Approximately $76,000. Taxes paid on that growth? Zero - if used for healthcare.

Here’s where it gets interesting. The average 65-year-old couple will spend roughly $315,000-$350,000 on healthcare in retirement (that’s a Fidelity estimate that gets updated every year). Mike’s HSA won’t cover all of that - but $76,000 of tax-free money toward those expenses? That’s real.

And after age 65, even if Mike uses the money for non-medical expenses, there’s no penalty. He’d just pay regular income tax - exactly like withdrawing from a traditional 401(k). So it doubles as a backup retirement account.

Compare that to doing nothing. If Mike had just kept that $350/month in his checking account and paid for medical expenses as they came, he’d have no tax savings, no investment growth, and roughly $50,000 in today’s dollars. With the HSA strategy, he’s looking at $76,000+ and he got tax breaks every year along the way.

This play isn’t for everyone. It works if your employer offers an HDHP option (or you buy insurance through the marketplace), you can cover routine medical expenses out of pocket while you let the HSA grow, and you’re looking for another tax-advantaged savings bucket beyond what you’re already doing.

It doesn’t work if you have ongoing medical conditions that require frequent doctor visits or expensive prescriptions - the higher deductible might cost you more than you’d save. It also doesn’t work if you’re already on Medicare (you can’t contribute to an HSA once enrolled, though you can still spend what’s in there). And if the out-of-pocket maximum on the HDHP genuinely scares you and you’d lose sleep over it, this might not be your play.

But if it fits your situation, here’s how to run it.

First, check if you’re HDHP-eligible. Pull up your employer’s benefits portal or your healthcare.gov account. Look for plans with a deductible of at least $1,700 (individual) or $3,400 (family). These are often labeled “HDHP” or “HSA-eligible.” Compare the premium to your current plan - often it’s significantly cheaper.

Second, open an HSA. If your employer offers one with their HDHP, start there - contributions come out pre-tax through payroll, which saves you FICA taxes too. If your employer doesn’t offer one, or you’re self-employed, you can open one directly with Fidelity, Schwab, or Lively. All have no monthly fees and solid investment options.

Third, contribute what you can and aim for the max over time. 2026 limits are $4,400 (individual) or $8,750 (family). If you’re 55 or older, you can add $1,000 more. Start with what’s comfortable - even $200/month adds up - and increase it when you can. If you already have an HSA, you have until April 15, 2026 to make contributions that count toward 2025.

Fourth - and this is critical - invest it. Only about 13% of HSA holders invest their funds. The rest leave it sitting in cash earning almost nothing. Log into your HSA provider, find the investment menu, and put it in a low-cost index fund. A target-date fund or total market fund works fine. This is long-term money - treat it that way.

Fifth, pay medical expenses out of pocket and save receipts. Here’s the power move: if you can afford to pay your doctor bills, prescriptions, and copays from your regular checking account, do that. Let your HSA grow untouched. Save every receipt. You can reimburse yourself from your HSA at any time in the future - even 10 or 20 years later - completely tax-free. It’s like a tax-free time capsule.

A few mistakes to avoid along the way.

Don’t treat it like a spending account. If you spend your HSA as you go, you’re just getting a tax deduction on medical expenses - nice, but not life-changing. The real power is letting it compound for 10-20 years.

Don’t leave it in cash. Most HSA providers default to a savings account earning 0.5% or less. You have to actively choose to invest it. Don’t let thousands of dollars sit there doing nothing.

Don’t forget to keep receipts. If you pay medical expenses out of pocket and want to reimburse yourself later, you need documentation. Start a folder - digital or physical - and keep every medical receipt. Your future self will thank you.

And don’t assume the HDHP is “bad” insurance. Run the actual numbers. For many people - especially those who don’t go to the doctor often - the lower premiums plus HSA tax benefits make the HDHP the smarter financial choice, even accounting for the higher deductible.

So where does this leave you?

If you don’t have an HSA yet, open enrollment runs October through early December for most employers. When it comes around, compare the HDHP option to what you have now. Run the numbers - premiums, deductibles, and tax savings. For many people, it’s not even close.

If you already have an HSA but you’re contributing less than the max, here’s good news: unlike most benefits, you can usually increase your HSA contribution anytime. Check your benefits portal or ask HR. Even an extra $100/month adds up fast.

And if you have an HSA but it’s sitting in cash? Log in today. Find the investment options. Move it. This is 15 minutes that could be worth tens of thousands of dollars.