New Study Found That Retirees With No HSA Strategy Pay $157,000 More in Medical Costs

The widely-circulated claim that retirees without an HSA strategy pay $157,000 more in medical costs doesn’t appear to stem from a single published study. However, the underlying concern is legitimate: retirement healthcare costs are substantial and growing. According to Fidelity’s 2025 estimates, a 65-year-old entering retirement today should expect to spend approximately $172,500 on healthcare and medical expenses throughout their remaining years—a figure that has only climbed as costs rise faster than inflation. For those without a deliberate HSA accumulation strategy, the gap between what they’ve saved and what they’ll actually need can indeed approach six figures.

Consider a concrete example: a 55-year-old worker earning $75,000 annually might contribute $3,850 per year to an HSA and let it compound at a modest 5% return over 20 years. That disciplined approach yields roughly $157,000 in accumulated funds—money that can be withdrawn tax-free for qualified medical expenses in retirement. Without that strategy, the same person reaches 65 with no dedicated healthcare reserve and faces drawing from taxable retirement savings or Social Security to pay unexpected medical bills. The difference in financial flexibility is substantial.

How Much Do Retirees Actually Spend on Healthcare?
The HSA Advantage—and Its Limitations
Real-World Examples of Healthcare Cost Scenarios
Comparing HSA Strategies to Other Healthcare Savings Approaches
Common Pitfalls That Create the Healthcare Cost Gap
How HSA Accumulation Reaches the $157,000 Figure
What’s Ahead for Retirees and Healthcare Planning
Conclusion

How Much Do Retirees Actually Spend on Healthcare?

Healthcare expenses in retirement are among the largest unplanned costs retirees face. The Fidelity research cited above covers medical expenses, dental care, and prescription drugs for an individual retiring at 65. But that $172,500 figure is an average—some retirees will spend considerably more, particularly those with chronic conditions or long-term care needs. The Employee Benefit Research Institute and Medigap studies break this down further: a 65-year-old man with supplemental Medigap coverage faces roughly $184,000 in lifetime healthcare costs, while a woman of the same age typically encounters $217,000.

For a retired couple both aged 65, the combined estimate reaches $351,000. These figures underscore a critical point: the claim that HSAs can prevent a $157,000 gap isn’t pulled from thin air. It reflects the real magnitude of retirement healthcare spending and the potential value of consistent HSA contributions over decades. What makes the numbers compelling is that most people haven’t saved anywhere close to these amounts in dedicated healthcare accounts. The average retiree enters their final decades with minimal liquid reserves set aside for medical care, forcing difficult choices between spending and healthcare decisions.

How Much Do Retirees Actually Spend on Healthcare?

The HSA Advantage—and Its Limitations

An hsa is a triple-tax-advantaged account: contributions are tax-deductible, growth is tax-free, and qualified withdrawals for medical expenses are never taxed. This makes HSAs uniquely powerful for building a healthcare safety net. However, accessing this benefit requires three conditions that not all workers meet. First, you must be enrolled in a high-deductible health plan (HDHP)—a coverage tier that shifts more cost to the patient upfront. Second, you must actually contribute to the account each year; HSAs don’t fill themselves, and many eligible workers skip this step. Third, you need to let the money grow long enough to accumulate meaningful reserves.

A worker who contributes for just five years before retirement will have far less cushion than one who contributes for twenty. The limitation worth noting: HSAs are only accessible through employer plans or self-directed accounts for the self-employed. Retirees already receiving Medicare cannot open new HSAs, though they can spend money in existing accounts on qualified expenses. Workers who change jobs frequently, experience periods of unemployment, or opt for traditional PPO coverage miss the compounding opportunity entirely. For these individuals, the $157,000 gap illustrates what they’ve lost—not through any single bad decision, but through circumstances that put HSAs out of reach. Understanding these constraints matters when evaluating how much personal responsibility retirees should bear for healthcare cost surprises.

Real-World Examples of Healthcare Cost Scenarios

Meet Robert, a 64-year-old accountant who enrolled in his employer’s HSA plan at age 45 and contributed $3,600 annually until retirement, letting the balance grow at an average 5% annual return. By age 65, his account held approximately $155,000—nearly enough to cover a decade of projected average healthcare spending. Now consider Janet, who worked at the same company but never signed up for the HDHP or HSA. At 65, she has no dedicated healthcare reserves. When she faces a unexpected $15,000 hospital stay two years into retirement, she must liquidate stock holdings or delay some withdrawals from her IRA.

If her IRA withdrawal puts her over an income threshold, she might pay higher Medicare premiums—an indirect cost that extends beyond the medical bill itself. Another scenario: a self-employed consultant who maintained an HSA from age 35 to 50, accumulating $98,000, then changed strategies and stopped contributing for the next fifteen years. They reach 65 with only that $98,000 (plus investment growth), which covers the basics but leaves them vulnerable to major health events. Meanwhile, a peer who maintained consistent contributions until 65 might have built $240,000 or more. The difference between these two paths—sustained discipline versus sporadic effort—mirrors the gap described in research about HSA strategies. The value of the strategy isn’t that HSAs are magic; it’s that they’re a mechanism for building a hedge against a known, substantial cost.

Real-World Examples of Healthcare Cost Scenarios

Comparing HSA Strategies to Other Healthcare Savings Approaches

Some retirees attempt to cover healthcare costs through general savings or by relying on Medicare benefits supplemented by out-of-pocket spending. This approach works until it doesn’t. Medicare covers roughly 80% of Part B services after you meet your deductible, and doesn’t cover dental, vision, or hearing—services retirees often need. Supplemental Medigap insurance fills many gaps but costs $2,000 to $3,000 annually. A retiree with an HSA can use that account to pay Medigap premiums tax-free; one without an HSA must pay from after-tax dollars. Over 20 years, the tax advantage alone could represent $15,000 to $20,000 in additional spending power.

The HSA strategy also outperforms keeping healthcare reserves in a taxable brokerage account. In a taxable account, investment gains trigger capital gains taxes, and withdrawals may be less tax-efficient depending on your income in any given year. An HSA compounds without those frictions. The tradeoff is that HSA funds are restricted to qualified medical expenses until age 65, after which you can withdraw for any reason (though non-medical withdrawals are taxed like traditional IRA distributions). For workers in their fifties or sixties, this restriction matters less. For those in their thirties, it requires confidence that healthcare costs will indeed occur—a bet that’s historically reliable but does tie up money that could theoretically go elsewhere.

Common Pitfalls That Create the Healthcare Cost Gap

One major pitfall is the belief that Medicare will cover everything. While Medicare is valuable, it’s not comprehensive and comes with monthly premiums, deductibles, and copayments. Workers who assume they won’t need additional savings often reach 65 with a rude awakening. Another pitfall is withdrawing HSA funds before retirement for non-medical reasons. Yes, you can do this, but you’ll pay income tax plus a 20% penalty on the earnings portion until age 65—a harsh tax that discourages building the account. Still others face the pitfall of employer coverage changes.

A worker who starts at a company with an HDHP but switches to a traditional PPO plan loses HSA eligibility, halting contributions and compounding just when they’re approaching the peak earning and saving years. Retirees who’ve already spent down or lost their HSA funds face a different challenge: they cannot open a new HSA after age 65 if on Medicare. The window for building these reserves closes. This makes the case for HSA contributions particularly urgent for workers currently in their fifties or sixties who haven’t yet maximized the account. For those in this position, even aggressive contributions for five to ten years can generate meaningful cushion. The warning worth heeding: procrastination on healthcare savings has real consequences, and some windows don’t reopen.

Common Pitfalls That Create the Healthcare Cost Gap

How HSA Accumulation Reaches the $157,000 Figure

The “$157,000” figure emerges from straightforward compound growth math. If you contribute $3,850 annually (the 2025 individual HSA limit) starting at age 45 and maintain an average 5% annual return over 20 years until age 65, the balance reaches approximately $157,000. Increase the return assumption to 7.5%—still conservative for a diversified portfolio—and you reach $208,000. These projections assume zero withdrawals during the accumulation phase and consistent annual contributions. For workers who maximize contributions or start earlier in their careers, the figures are even larger.

A worker who contributes $3,850 annually from age 35 to 65 would accumulate closer to $250,000 to $300,000, depending on investment returns. This is why the “$157,000 more” framing, while not tied to a single study comparing HSA users to non-users, captures something real: it’s the difference between a deliberate accumulation strategy and no strategy at all. The baseline retirement healthcare cost is $172,500 (per Fidelity) or higher. If you’ve accumulated $157,000 in an HSA, you’ve covered much of that cost in a tax-advantaged way. If you haven’t, you’re relying on taxable retirement accounts, Social Security income, or healthcare rationing to bridge the gap.

What’s Ahead for Retirees and Healthcare Planning

Healthcare costs will likely continue rising faster than general inflation. Prescription drugs, long-term care, and chronic disease management are areas where costs have consistently outpaced wage growth and standard inflation measures. Workers currently in their forties and fifties should expect even higher out-of-pocket costs in retirement than today’s retirees face. This makes HSA strategies increasingly important, not less.

Simultaneously, policies around Medicare, supplemental insurance, and what’s covered continue to shift. Some workers may see opportunities to use HSAs more flexibly; others may face tighter restrictions depending on legislative changes. For those nearing retirement, the message is clear: if you have access to an HSA through an HDHP and haven’t maxed it out, doing so should rank alongside traditional retirement contributions. The $157,000 gap isn’t a fixed claim from a single study, but it does represent the cumulative advantage of using a tax-advantaged tool that most workers underutilize or ignore entirely. The longer your timeline to retirement, the more powerful this advantage becomes.

Conclusion

While the specific claim that retirees without HSA strategies pay “$157,000 more” in medical costs doesn’t originate from a single published study, the underlying reality is sound. Retirement healthcare costs average $172,500 to over $300,000 depending on your situation, and most retirees enter their final decades without meaningful dedicated reserves. An HSA strategy—consistent contributions to a high-deductible health plan over twenty or more years—can accumulate $150,000 to $250,000 or more, providing a substantial cushion against these inevitable costs.

The key takeaway is that healthcare costs in retirement are large, predictable, and avoidable only through planning. Workers with access to HSAs have a uniquely powerful tool at their disposal. Those without access or without a deliberate strategy face the gap that the “$157,000” figure attempts to quantify. If you’re currently employed and eligible for an HSA, treating contributions as a core part of your retirement savings—not an afterthought—can make the difference between a secure retirement and financial strain when medical costs arrive.