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HSA lifetime-value calculator

An HSA that you fund, invest, and leave alone works more like a stealth retirement account than a way to cover copays. This grows your contributions forward to retirement and shows how much more the balance is worth than the same dollars in a taxable account, with the catch that the tax-free withdrawal holds only for qualified medical expenses.

Background reading: Tax-advantaged accounts

HSA lifetime value
$408,067
$8,550/yr invested for 25 yrs at a 5.0% real return, in today's dollars
Hypothetical illustration. These figures are illustrations under the assumptions you set, not a guarantee or a promise you will reach any number. Changing the return, horizon, or contribution moves the figures.
  • Results are hypothetical and illustrative, not a guarantee of any future result. Changing the return, horizon, or contribution moves the figures.
  • The HSA withdrawal advantage holds only for qualified medical expenses. Non-qualified withdrawals are taxed as ordinary income and, before the HSA penalty-free age, carry a penalty.
  • A constant-return projection hides sequence-of-returns risk, and a real medical need may force spending before the balance compounds. The single number papers over a range of outcomes.
Tax saved vs the same dollars in a taxable account
Tax saved vs taxable$181,461
Deduction the taxable saver forgoes$133,086
Growth drag the taxable account pays$48,376
Taxable account after drag$226,605
Marginal rate used37.0%
An HSA matches a traditional 401(k) going in (deductible, untaxed growth) and also escapes the withdrawal tax, but only when the withdrawal pays a qualified medical expense; a 401(k) is taxed as ordinary income on withdrawal.
Where this goes next

Whether maxing and investing an HSA fits you depends on your cash flow, your ability to cover current medical costs out of pocket, your health, and your broader plan. That judgment belongs with a CFP.

Assumptions and simplifications
  • A single constant real return, a level annual contribution, and a fixed marginal rate; figures are in today's dollars via a real return rather than an explicit inflation model.
  • Contributions are a year-end ordinary annuity; a begin-of-year convention would multiply the result by (1 + r).
  • The taxable comparison funds with after-tax dollars and is dragged by annual tax on the ordinary slice of return (taxableOrdinaryShare, default 50%, of the return taxed at the marginal rate); the deferred slice's eventual long-term tax is omitted, a conservative simplification that understates rather than flatters the HSA advantage.
  • Ignores contribution-limit growth over time, changing income or rates, and the possibility the reader needs the HSA for current care.