HSA vs. 401(k) vs. Traditional IRA — Tax Comparison
The HSA is the only account with a triple tax advantage: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free.
| Feature | HSA | 401(k) | Traditional IRA |
|---|
| Contributions | Tax-deductible ✅ | Tax-deductible ✅ | Tax-deductible ✅ |
| Growth | Tax-free ✅ | Tax-deferred | Tax-deferred |
| Withdrawals | Tax-free (medical) ✅ | Taxed as income | Taxed as income |
| Non-medical withdrawal | Income + 20% penalty | Income tax only (59½+) | Income tax + 10% early penalty |
| 2026 contribution limit | $4,150 / $8,300 | $23,500 | $7,000 |
| Investment options | Yes (after threshold) | Yes | Yes |
| Portability | Fully portable ✅ | Roll over | Roll over |
Frequently Asked Questions
What is an HSA and how does it work?
A Health Savings Account (HSA) is a tax-advantaged account available to people with a High-Deductible Health Plan (HDHP). You contribute pre-tax dollars, the money grows tax-free, and withdrawals for qualified medical expenses are tax-free. To qualify in 2026, you need an HDHP with at least a $1,650 deductible (individual) or $3,300 (family).
What are the HSA contribution limits for 2026?
2026 limits: $4,150 for individuals with self-only HDHP coverage, $8,300 for family HDHP coverage. If you're 55 or older, you can contribute an additional $1,000 catch-up contribution. These limits include both your contributions AND any employer contributions.
What's the "triple tax advantage" of an HSA?
1) Tax-deductible contributions — reduce your taxable income. 2) Tax-free growth — interest, dividends, and capital gains grow tax-free. 3) Tax-free withdrawals — when used for qualified medical expenses (doctor visits, prescriptions, dental, vision, etc.). No other account in the US tax code offers all three.
Can I invest my HSA money?
Yes — most HSA providers allow you to invest in stocks, bonds, and index funds once your balance exceeds a threshold (typically $1,000-$2,500). Once invested, your HSA functions as a powerful retirement account for medical expenses, with the flexibility to withdraw tax-free for medical costs at any age.
What can I use my HSA for after age 65?
After age 65, you can withdraw from your HSA for any purpose (not just medical) — you'll pay income tax on the withdrawal, but no penalty. This makes the HSA similar to a Traditional IRA for non-medical withdrawals, while still maintaining the tax-free medical withdrawal benefit.
HSA vs. FSA — what's the difference?
FSA (Flexible Spending Account) is "use it or lose it" — funds expire at year end. HSA funds roll over forever and are portable (stay with you if you change jobs). FSA requires employer sponsorship; HSA requires an HDHP. HSAs are vastly superior as a long-term savings vehicle.