Health Savings Accounts and life-cycle saving: Implications for retirement preparedness

Research Dialogue
Insights Report

How can workers combine Health Savings Accounts (HSAs) with other savings vehicles to improve retirement outcomes?


Determining the ideal amount to save for retirement and when to withdraw assets depends on many factors. The challenge is further complicated when an individual has multiple accounts in which they can save. To help inform these decisions, this paper examines how HSAs, which provide powerful tax advantages and flexible distribution opportunities, can optimally be used alongside other savings vehicles to enhance retirement readiness.

Key Insights

  • By bridging health insurance and retirement saving decisions, HSAs complicate individuals' choices regarding how much to save and when to withdraw assets across accounts.
  • HSAs raise optimal tax-preferred saving, compared to a system with only tax-preferred illiquid retirement accounts and taxable liquid saving.
  • Workers can improve their financial security by using both HSAs and defined-contribution retirement plans.

Compared to using only tax-preferred illiquid accounts and taxable liquid saving, adding HSAs raises the optimal amount of total contributions to tax-preferred accounts.


The researchers built a life-cycle model that incorporates an HSA, a tax-advantaged defined contribution account, and a liquid taxable account. They then used machine learning techniques to determine how much people should save and withdraw from each account to maximize their retirement preparedness.

Savings flows over the life-cycle


Leora Friedberg

University of Virginia

Adam Leive

University of California, Berkeley

Jaeki Jang

Korea Institute for Industrial Economics and Trade

Eric R. Young

University of Virginia and Federal Reserve Bank of Cleveland

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