Maximize Your HSA: Tax-Free Medical Reimbursements
Most people think of an HSA as a place to stash money for today’s doctor visits, prescriptions, or the occasional urgent care moment when life gets chaotic. But with the right strategy? You may be able to maximize your HSA to serve as a highly tax-advantaged long-term savings vehicle for retirement. Yes… retirement.
HSAs offer what’s commonly referred to as a triple tax advantage- tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Still, as with any investment account, HSAs involve market risk, and access to certain features — such as investing or reimbursements — depends on plan rules and IRS requirements.
The real magic, though, is the part almost everyone overlooks: As long as you’ve kept your receipts, you can reimburse yourself at any point in the future.
No IRS reimbursement deadline under current law means you may create tax-free reimbursement opportunities in the future.
Used intentionally, an HSA may serve as a long-term savings tool that quietly compounds in the background until you’re ready to tap it.
For example, some people choose to let their HSA grow for decades and later reimburse themselves for past expenses, assuming they’ve kept receipts and IRS rules allow it. As long as (1) those expenses happened after you opened your HSA and (2) you kept the documentation, you may be eligible to reimburse yourself tax-free, assuming IRS rules are met.
This may give your money time to compound without interruptions, which is the real wealth-builder here.
Why this strategy matters
Your invested HSA dollars may grow for years while you cover your current medical costs out of pocket. Later in life, if you want extra cash for anything – a trip, a new car, a buffer in your emergency fund – you can pull up those old receipts and withdraw the exact amount you need, tax and penalty-free.
It gives you the flexibility to reimburse yourself later, provided you have documented qualified expenses.
How to use your HSA like a pro
1. Treat it like a “stealthy IRA”
If you have the cash flow to cover today’s medical expenses yourself, let your HSA grow. Invest it. Leave it alone. It becomes a dedicated bucket for retirement healthcare costs – which, fun fact, tend to be significant later in life.
2. Save your receipts
You don’t need to match reimbursements to the same year. Keep digital or physical records now, and you may have years’ worth of tax-free withdrawals available when you want them, depending on IRS rules.
3. Don’t let it sit in cash
After you build a small cushion for near-term expenses, consider investing the rest in long-term, growth-focused investments. This is where that compounding magic actually happens.
4. Max it out annually
2025 contribution limits:
- $4,300 for individuals
- $8,550 for families
- + $1,000 catch-up if you’re 55+
2026 contribution limits:
- $4,400 for individuals
- $8,750 for families
- + $1,000 catch-up if you’re 55+
Maxing it out may help you get the full benefit of all three tax advantages – something not typically found in other account types.
5. Think long-term (Medicare, LTC, all the fun stuff)
In retirement, HSA funds may be used tax-free for Medicare premiums (not Medigap), long-term care insurance, and other qualifying medical expenses. It pairs beautifully with your IRA or 401(k) as part of a bigger strategy.
Where it fits in your bigger financial picture
Your HSA can serve several purposes — from covering current medical costs to supporting future savings needs — and many people use it to blend both. Whether you’re using it for everyday healthcare expenses or allowing the balance to grow over time, your HSA can be thoughtfully incorporated into your broader financial planning.
About the Author: Katy McDonald, CFP®, is a Lead Advisor at Brighton Jones. She helps high-income professionals and families design tax-efficient investment strategies and retirement plans aligned with their values and long-term goals.
This content is for informational and educational purposes only and should not be construed as individualized advice. For individualized advice tailored to your specific circumstances, please consult with your adviser.Brighton Jones, its affiliates, and employees do not provide personalized investment, financial, tax, or legal advice through this communication.
