Health savings account balances reached a record high in 2024, yet new data from the Employee Benefit Research Institute (EBRI) reveals that most accountholders are still not using these vehicles to their full retirement-saving potential. The average HSA balance climbed to $5,532, up from $4,747 in 2023, a 16.5% increase. However, that figure covers only about two-thirds of the individual out-of-pocket maximum under a high-deductible health plan, which was $8,050 in 2024. For families, the gap is wider: the family out-of-pocket cap stood at $16,100, more than triple the average balance.
The numbers underscore a persistent disconnect between how HSAs are marketed and how they are actually used. While HSAs offer a triple tax advantage—tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses—most accountholders treat them as short-term spending accounts rather than long-term investment vehicles. According to EBRI's August 2026 analysis, more than half of accountholders made a withdrawal in 2024, pulling out an average of $1,870. That pattern suggests a significant portion of users are spending down their balances instead of letting them compound over time.
Contribution shortfalls persist
On the contribution side, the average accountholder put in $2,308 in 2024, with employers adding an average of $727, for a combined $3,035. That falls well short of the IRS contribution limits for the year: $4,150 for individuals and $8,300 for families. EBRI also noted that, after adjusting for inflation, contributions and distributions were meaningfully higher during the 2010s than in 2024. The trend may reflect broader affordability pressures squeezing household budgets, as rising healthcare costs and inflation eat into disposable income.
The investing gap
Perhaps the most striking finding is the low rate of investment within HSAs. Only 18% of accountholders had invested any portion of their balance in equities, funds, or other non-cash assets in 2024, according to EBRI. The remaining 82% held their balances in cash, forgoing the long-term compounding potential that makes HSAs one of the most tax-efficient savings vehicles available under current U.S. law. The share of investors has grown for eight consecutive years, but adoption remains low—a persistent advice gap that advisors are increasingly looking to close.
For advisors, the data reinforces the need to educate clients about the dual nature of HSAs. As passive core ETFs continue to attract record inflows, a similar shift toward investing HSA balances could help clients build substantial retirement nest eggs. A client who maximizes contributions starting in their 30s and invests those funds in a diversified portfolio could accumulate a significant balance by retirement age, usable tax-free for medical expenses or, after age 65, for any purpose (subject to ordinary income tax, similar to a traditional IRA).
A younger account base
The composition of HSA holders is also shifting. More than 40% of all HSA accounts were opened since 2022, according to EBRI, suggesting that a large portion of the account base is relatively new and may not yet have accumulated significant balances. That demographic reality could explain some of the low average balance figures, as newer accounts simply have had less time to grow. But it also presents an opportunity: younger accountholders have longer investment horizons and could benefit most from early adoption of an invest-and-hold strategy.
What advisors should be asking
The EBRI findings add empirical weight to what many advisors already observe anecdotally: most clients are underusing HSAs as a retirement savings tool. The average balance of $5,532 looks less impressive when measured against either current-year out-of-pocket maximums or the six-figure medical costs many Americans will face in retirement. According to separate EBRI projections, a 65-year-old man today may need $184,000 in savings to cover medical expenses in retirement with a 90% probability of success; for a woman, that figure rises to $217,000.
Advisors should consider integrating HSA planning into broader retirement discussions, particularly for clients with high-deductible health plans. Questions to explore include: Are clients contributing up to the IRS limit? Are they investing surplus balances rather than leaving them in cash? And are they using other assets to pay current medical expenses, allowing HSAs to grow tax-free? As home equity and other balance-sheet items fluctuate, HSAs offer a relatively underutilized tool for retirement income planning.
The data also suggests a potential role for active ETFs and other investment options within HSA platforms, as more accountholders begin to invest. With only 18% currently invested, there is ample room for growth. Advisors who help clients navigate this transition could differentiate their practices while addressing a critical retirement funding gap.
