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Health / THE DECISION DESK

HSA Growth Calculator

Model an HSA left invested for decades against the same gross pay in a taxable account, counting all three of its tax advantages.

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Compare up to three snapshots of inputs and headline results. Snapshots clear when you leave this page.

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What you put in

The IRS sets an annual cap that changes each year — check the current limit.

Whole years, rounded to the nearest year. Assumes medical costs are paid from cash flow and the account stays invested.

Assumptions

Federal + state. Sets what the deduction is worth up front.

What the taxable comparison pays on its growth at the end.

HSA balance after 25 years

$291,009

$106,571 more than the same gross pay routed through a taxable account, because nothing is taxed going in, growing, or coming out for medical costs.

Against a taxable account

HSA$291,009
Taxable, after gains tax$184,438
HSA advantage$106,571

Where it comes from

Total contributed$107,500
Income tax avoided$32,250
Untaxed growth$183,509

HSA against a taxable account

HSATaxable account
$0$100k$200k$300k01020Years invested

Both lines start from the same gross pay. The taxable line begins lower because the contribution was taxed first, and it is shown net of the capital gains tax that would be due — which is why the gap widens rather than staying constant.

View as table
Years investedHSATaxable account
year 0$0$0
year 1$4,601$3,189
year 2$9,524$6,570
year 3$14,792$10,156
year 4$20,428$13,961
year 5$26,459$18,001
year 6$32,912$22,292
year 7$39,817$26,852
year 8$47,205$31,699
year 9$55,111$36,854
year 10$63,569$42,339
year 11$72,620$48,176
year 12$82,305$54,389
year 13$92,667$61,006
year 14$103,755$68,055
year 15$115,619$75,566
year 16$128,313$83,570
year 17$141,896$92,104
year 18$156,430$101,203
year 19$171,981$110,907
year 20$188,620$121,259
year 21$206,425$132,304
year 22$225,475$144,091
year 23$245,860$156,671
year 24$267,671$170,100
year 25$291,009$184,438
This only works if you leave it alone. The entire advantage above depends on paying current medical costs from cash flow and letting the account compound. An HSA spent down each year on routine care is still worth having, but it is a tax-free spending account rather than the retirement vehicle modelled here.
Keep your receipts. There is no deadline for reimbursing yourself. A qualified expense paid out of pocket today can be reimbursed tax-free decades later, so saved receipts effectively let you withdraw against past expenses whenever you want — which is what makes leaving the balance invested practical rather than merely theoretical.
Not modelled. Annual contribution limits and catch-up contributions after 55; account fees; state tax treatment, since a few states tax HSA contributions; and the fact that after 65 non-medical withdrawals are taxed as income rather than penalised.

How this is calculated

Both accounts start from the same gross pay, which is what makes the comparison fair. The difference is what survives to be invested and what is taken at the end:

hsa     = (hsa + contribution) × (1 + return)

taxable = (taxable + contribution × (1 − tax rate))
           × (1 + return)
reported net of gains × capital gains rate

The taxable account starts smaller every year, because the contribution was taxed before it could be invested. It then compounds on that smaller base, and finally pays capital gains on its growth. Those three effects compound together, which is why the gap widens rather than staying constant.

The taxable line is shown net of the gains tax that would be owed on liquidation, so the two lines are directly comparable at every point rather than only at the end. Cost basis is tracked as the sum of after-tax contributions.

Compounding is annual here rather than monthly, matching how contribution limits are set — the difference against monthly compounding is small at these horizons and errs slightly conservative.

Not modelled: IRS contribution limits, which change annually; catch-up contributions after 55; account and fund fees; state tax treatment, since a small number of states tax HSA contributions; dividend drag on the taxable account, which would widen the gap further in the HSA’s favour.

Common questions

›What is the triple tax advantage?

Contributions are deducted from income, so they avoid income tax — and when made by payroll deferral they avoid FICA as well, which no other account offers. Growth inside the account is untaxed. Withdrawals for qualified medical expenses are untaxed. No other US account is untaxed at all three points, which is why an HSA left invested outperforms both a taxable account and, on medical spending, a 401(k).

›Why compare against a taxable account rather than a 401(k)?

Because that is the honest alternative for this money. A 401(k) shares the deduction going in but is taxed as income on the way out, so for medical costs the HSA strictly beats it. The taxable brokerage is the comparison that isolates all three advantages at once: it starts with less because the contribution was taxed first, and it pays capital gains at the end.

›Should I really not spend it on medical bills?

Only if you can comfortably pay current costs from cash flow. The entire advantage modelled here depends on the balance staying invested for decades. If paying out of pocket would mean carrying a credit card balance at 23%, that is plainly worse — use the HSA. This strategy is for people with enough slack to leave it alone, not a rule everyone should follow.

›What happens to an HSA after 65?

Qualified medical withdrawals remain tax-free with no age limit. Non-medical withdrawals stop carrying the 20% penalty at 65 and are simply taxed as ordinary income, which makes the account behave like a traditional IRA for anything other than healthcare. In practice most people have substantial medical costs in retirement — including Medicare premiums, which are qualified — so much of the balance can still come out untaxed.

›Why do receipts matter?

Because there is no deadline for reimbursing yourself. A qualified expense you pay out of pocket today can be reimbursed tax-free decades later, provided the expense occurred after the account was opened and you kept the record. That turns saved receipts into a standing option to withdraw tax-free whenever you want, which is what makes leaving the balance invested practical rather than merely theoretical.

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