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Wurz Financial Services

The Stealth IRA: Health Savings Accounts

By Darren Wurz


Are you making the most of your retirement savings? You’ve probably heard that question a million times! Conventional wisdom will tell you to max out contributions to your 401(k), 403(b), and IRA accounts. But what do you know about health savings accounts (HSAs) and, more importantly, their application as tax-advantaged retirement vehicles? Research suggests that HSAs are vastly under-utilized, with only 13% of account holders maximizing their contributions. (1) Despite their recent rise in popularity, HSAs still seem to be the road less traveled as far as retirement funding goes. But sometimes the road less traveled is the one that makes all the difference. Here’s how to tell if an HSA is right for you.

What Are HSAs?

HSAs are tax-advantaged savings accounts meant for people enrolled in high-deductible health plans (HDHP) to help make out-of-pocket medical expenses more affordable. HDHPs are defined by the IRS as $1,400 per year for individual coverage or $2,800 for family coverage. (2) If your deductible meets or exceeds these limits, you qualify for an HSA. Prior to the pandemic, roughly 46% of Americans were enrolled in an HDHP and thus qualified for an HSA. (3)

Triple Tax Benefits

HDHPs can be quite intimidating due to the risk of high out-of-pocket healthcare costs. To help alleviate this gap in coverage, HSAs were created. They combine the benefits of a 401(k) with a Roth IRA, offering unparalleled tax savings, including: 


  • Tax-deductible contributions with no income limits

  • Tax-free earnings

  • Tax-free withdrawals (if used to pay qualified medical expenses)


HSAs are the only savings vehicle that allows you to both contribute and withdraw money tax-free!

Retirement Savings

If HSAs are so unparalleled in their benefits, why aren’t more people using them? It’s important to note that an HSA doesn’t make sense for everyone. If you know you’re going to have high medical expenses, it’s unwise to enroll in a high-deductible plan and pay more out of pocket. 


HSAs are better utilized by those who anticipate minimal healthcare costs and they are best utilized by those who can afford to pay those costs out of pocket, rather than from accumulated HSA funds. This is because, if possible, saving all of your contributions in an HSA account can act as another way to save for retirement. An incredibly cost-effective way to save for retirement, in fact! This is why they are often referred to as “stealth IRAs.” (4)


Here’s how it works.


Contributed funds can be withdrawn tax-free at any time to pay for qualified medical expenses. Or they can be saved until 65, withdrawn at your marginal tax rate, and used for any retirement expense. This essentially converts the HSA into a traditional IRA or 401(k) account. It’s important to note that funds withdrawn before 65 and used for non-medical expenses will be taxed and incur a 20% penalty. 


Additionally, HSAs do not have required minimum distributions. This means that your money can continue to grow up to and during your retirement years. Annual contribution limits for 2021 are $3,600 for individual coverage and $7,200 for family coverage, additional $1,000 catch-up contributions are allowed for individuals over the age of 55. (5) Over time, maxing out these contributions can build a sizable retirement nest egg, especially when combined with other workplace savings plans.

Investment Options

Lastly, HSAs can be invested in a multitude of ways. They are much more flexible than 401(k) plans, but most HSAs are initially set up in low-yield savings accounts. At Wurz Financial Services, we have a wide range of investment options and strategies for HSAs. If you have an HSA somewhere else and you’re looking to achieve better investment results, you can transfer or roll your HSA to a new account that we will manage for you.

How We Can Help

HSAs are not for everyone, but they may be right for you. If you’re interested in the potential benefits of a stealth IRA, schedule a no-obligation consultation, and together let’s find out if we can help you on your journey to a comfortable retirement. Contact us at 859-291-9879 or today!


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About Darren

Darren Wurz is a co-owner and financial planner at Wurz Financial Services, an independent, family-owned and operated financial services firm dedicated to helping its clients transition from their working life to a comfortable retirement with confidence. Darren received his Master of Science in financial planning from Golden Gate University and also holds the CERTIFIED FINANCIAL PLANNER™ (CFP®) designation. He operates the Northern Kentucky/Cincinnati office of Wurz Financial Services and is an active member of the Northern Kentucky Bar Association, the Northern Kentucky Chamber of Commerce, and the Covington Business Council. To learn more about Darren, connect with him on LinkedIn.







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