Most HSA Holders Still Skip Investing, Ignore Tax Perks, EBRI Says
Most owners of health savings accounts are still leaving one of the tax code’s most generous benefits unused, according to new research from the Employee Benefit Research Institute.
Just 18% of HSA owners held any of their balance in investments other than cash in 2024, EBRI found in a report based on data that tracks 15.2 million accounts holding $53.7 billion in assets. The rest kept their entire balance sitting in cash, using the account largely as a specialized checking account to cover medical bills as they come due rather than as a long-term savings vehicle.
That matters because HSAs offer a triple tax break unmatched by any other savings account: contributions go in tax-free, growth is tax-free, and withdrawals for qualified medical expenses come out tax-free. EBRI’s report said that advantage is “maximized when accountholders contribute the statutory maximum and minimize withdrawals for current medical expenditures … and invest their HSA balances in assets other than cash.”
Few accountholders are doing all three.
Average individual contributions rose to $2,308 in 2024, even though employer contributions dropped to $727 on average, for a combined $3,035, according to the report. That’s well short of the $4,150 individual and $8,300 family contribution limits that applied that year.
Meanwhile, 56% of accountholders took a distribution in 2024, pulling out an average of $1,870, EBRI found, evidence that current expenses, not future ones, remain the primary use.
Still, the investing figures do show some momentum. The share of accountholders investing part of their balance has risen every year since EBRI began tracking it, climbing from just 2% in 2011 to 18% last year. And once clients start investing, they tend to commit meaningfully—among accounts with any investments, roughly 80% of the total balance was allocated to something other than cash, the report said.
Account tenure looks like the biggest driver of that behavior, more so than balance size alone. Only 4% of accounts opened in 2024 held investments, compared with roughly a quarter of accounts opened a decade or more ago, according to the report. Age plays a role, too, as 22% of account holders age 45 to 54 invested in 2024, versus just 5% of those under 25.
EBRI noted only weak evidence that clients wait to hit a specific dollar threshold before investing. Instead, most who do invest start within the first three years of opening the account.
The stakes for waiting are not small. EBRI has estimated that a married couple retiring today could need as much as $469,000 saved to cover health care costs in retirement.
Maxing out and investing contributions to HSAs to pay for future medical expenses, as opposed to treating the account like a pass-through for this year’s copays and prescriptions, can provide accountholders with a hard-to-beat tax minimization strategy.
