The Most Underrated Retirement Account for High Earners | VIP Wealth Advisors

What if I told you there's a retirement account that's triple tax-free, has no income limits, and doesn't require you to wait until age 59½ to access your money?

It's called the Health Savings Account—or HSA—and most Americans are using it completely wrong.

According to a recent report from the Employee Benefit Research Institute (EBRI), a staggering 85% of HSA account holders aren't investing their funds. Instead, they're using their HSA like a glorified medical checking account—spending every dollar they contribute on short-term expenses, such as co-pays, prescriptions, and urgent care visits.

That's a costly mistake, especially for high-income earners.

If you're a tech professional, founder, or real estate investor aiming to minimize taxes and build wealth over the long run, it's time to treat your Health Savings Account (HSA) as the tax-advantaged investment it truly is. Let's explore why this account should be a key part of your financial plan.

Before we get tactical, let's start with the basics.

A Health Savings Account (HSA) is a special savings and investment account available to people enrolled in a high-deductible health plan (HDHP). In 2025, the IRS defines a high-deductible plan as one with:

• Minimum deductible: $1,650 individual / $3,300 family
• Maximum out-of-pocket: $8,300 individual / $16,600 family

If your plan qualifies—and many employer-sponsored plans do—you can contribute up to:

• $4,300 if you're single
• $8,550 for family coverage
• + $1,000 catch-up if you're age 55 or older

The HSA is the only account in the U.S. tax code that offers triple tax benefits:

• Contributions are tax-deductible (or pre-tax via payroll)
• Investments grow tax-deferred
• Withdrawals are 100% tax-free if used for qualified medical expenses

And here's the kicker: there are no income limits, unlike with Roth IRAs, or tax-deductibility phaseouts, like with traditional IRAs. Even if you're making $400k+ a year, you still qualify—assuming you have the right health plan.

It's essentially a stealth IRA for health care, and if used correctly, it can be one of the most powerful wealth-building tools in your arsenal.

Despite all this, most Americans fail to realize the full potential of their HSAs. According to the EBRI study:

"Only 15% of account holders are investing their HSA assets. The rest keep them in cash and spend them on current medical costs."

Why?

• Short-term mindset: They treat it like an FSA (which is "use-it-or-lose-it") instead of a long-term investment account.
• Low balances: Many providers require a minimum balance (e.g., $1,000) before you can invest.
• Lack of education: Most people are unaware that funds can be invested or how powerful compounding can be.

💡 Strategy: Pay Medical Costs Out of Pocket

If you can afford to, pay for your medical expenses out of pocket and let your HSA balance compound, untouched.

Yes, you can reimburse yourself tax-free later, even years or decades later. Just save your receipts. There's no statute of limitations.

You're essentially building a tax-free slush fund for future medical expenses—or even a backdoor tax-free income stream.

💡 Strategy: Invest Your HSA Like a Roth

Once you reach your provider's minimum investment threshold (typically $1,000–$2,000), allocate the remaining funds into a diversified portfolio. Many HSA providers offer low-cost index funds, ETFs, or even brokerage windows.

For example, let's say you contribute $8,550 a year for 20 years and invest it in a 70/30 portfolio returning 7% annually:

• You could end up with $360,000 or more tax-free for healthcare in retirement.
• That's in addition to your 401(k), IRAs, taxable accounts, etc.
• Think of it as a dedicated health care endowment fund, funded by Uncle Sam.

Let's not forget why this matters. According to Fidelity's 2024 estimates:

The average 65-year-old couple will need approximately $315,000 to cover healthcare costs in retirement.

That's not counting long-term care, dental, or hearing. Medicare doesn't cover everything, and your premiums, deductibles, and prescriptions don't magically go away just because you retired.

Wouldn't it be smart to have a tax-free pool of money set aside specifically for that purpose?

Here's a tactic most people (and even many advisors) miss:

Let's say you pay $2,000 out of pocket for medical expenses this year and save the receipt. You don't reimburse yourself right away. You just keep it on file.

Ten years later, your HSA has grown to $50,000, and you want to withdraw some funds.

You can now reimburse yourself tax-free for that $2,000 expense—using current dollars that grew tax-free over the last decade.

Multiply that by 10, 20, or 30 years of saved receipts, and you've got a backdoor tax-free income strategy that's completely legit under IRS rules.

Just keep good records. I recommend clients scan and organize their receipts by year using cloud storage or a secure document vault (many fintech platforms like Wealth.com make this easy).

Worried you won't have enough medical expenses to use your HSA?

Not likely. But even if that's the case, after age 65, you can take penalty-free distributions from your HSA for any reason (you'll just owe income tax if it's not for a medical expense, just like a traditional IRA).

It becomes your most flexible account in retirement—a hybrid between an IRA and a medical reimbursement fund.

• Confusing HSAs with FSAs: Flexible Spending Accounts are "use-it-or-lose-it." HSAs roll over forever.
• Choosing a poor HSA provider: Look for low fees, strong investment options, and user-friendly interfaces. (Fidelity and Lively are two of the best.)
• Neglecting to name a beneficiary: If you die with a large HSA and no spouse beneficiary, it becomes taxable to your estate. Coordinate it in your estate plan.
• Spending the account too early: Letting compounding do its job is the whole point.

If you're already saving six figures annually and looking for smart ways to outmaneuver taxes and build long-term optionality, the HSA isn't a throwaway account. It's a high-leverage tax play hiding in plain sight.

So, stop thinking of it as your co-pay fund. Think of it as your tax-free retirement buffer—one that's built to grow, not shrink.

At VIP Wealth Advisors, we help high-income professionals and entrepreneurs build custom tax-forward plans, integrating tools such as HSAs, equity compensation, real estate, and legacy planning into a unified wealth strategy.

Whether you've been ignoring your HSA or simply want to ensure it's doing more than collecting dust, let's talk.

👉 Schedule a free consultation to review your tax and investment strategy.