Older Americans should plan to retire with a 6-figure HSA, expert says. But many aren’t budgeting for this 1 costly roadblock. Are you?

“The plan is to go into retirement with a six-figure HSA,” certified financial planner Dan Galli with Daniel J. Galli & Associates, told CNBC (2). When coupled with other Roth and after-tax retirement funds, he said “this is the holy grail of retirement planning.”

But there’s one costly roadblock that many aren’t budgeting for. Here’s what you need to know.

Retirement health care costs are on the rise

Two-thirds of financial institutions that offer an HSA program also offer investment options for HSA contributions, according to the Plan Sponsor Council of America’s 2025 HSA Survey (3). Yet, on average, only one in five participants in these plans invested their contributions, and only an average of 27% of those balances were held in non-cash investments.

Fidelity research finds only 23% of Americans say they are contributing to an HSA as one way to prepare for health care costs in retirement, and just 3-in-10 are investing their HSA assets (4).

Experts say this is a big missed opportunity.

“HSAs are more than just a short-term savings tool — they can serve as a critical component of the retirement readiness equation,” said Steve Betts, head of Fidelity Health. “Our research consistently shows HSA users feel more prepared to cover health care expenses in retirement, yet many people don’t realize the full potential of the account. When used as a part of a well-crafted retirement plan, the tax-advantaged nature of your HSA savings can offer growth potential that can help reduce the burden of health care in retirement.”

A six-figure HSA may seem like a lot but, according to Fidelity, a 65-year-old retiring in 2025 can “expect to spend an average of $172,500 on health care and medical expenses throughout retirement.”

If the past is any indicator, working Americans can expect to pay even more when they eventually retire, as the average cost of health-related expenses throughout retirement was estimated to be $80,000 in 2002.

Even more daunting, these numbers don’t include the cost of long-term care. In a 2022 report, the Urban Institute estimated that 57% of Americans turning 65 today will develop a disability serious enough to require long-term services and supports (LTSS) (5). And, on average, “an American turning 65 today will incur $122,400 in future LTSS costs, measured in today’s dollars.”

About two-thirds of this will be covered by public programs and private insurance, but about a third will be out-of-pocket — and 15% of people will spend at least $100,000 of their own money on LTSS.

Despite these potential costs, the average HSA balance for account holders aged 55+ was $6,564, with balances peaking at $7,585 for those 65-69, according to Devenir Research.

How to budget for an HSA

So why aren’t people saving more? After all, in addition to helping meet the need for future medical expenses, HSAs offer a triple-tax benefit: Your contributions are tax-deductible, your investments grow tax-free and withdrawals made for qualified medical expenses aren’t subject to taxes or penalties.