With the decline of employer-sponsored pension plans, the U.S. retirement system today resembles more of a patchwork. In addition to Social Security, Americans increasingly rely on a mix of workplace 401(k) plans, Roth IRAs and their health savings accounts (HSAs).
“Health care costs are inevitable, so HSAs continue to represent a powerful — and often unrecognized — tool to not only prepare for various health-related spending, but also overall retirement readiness,” says Sabino Vargas, senior financial advisor at Vanguard.
HSAs are available to individuals enrolled in high-deductible health plans (HDHPs), who are neither enrolled in Medicare nor claimed as dependents on another taxpayer’s return. For 2026, that means a plan with an annual deductible of at least $1,700 for individual coverage or $3,400 for family coverage.
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HDHPs exist as a trade-off. They come with lower monthly premiums, but policy holders must pay more out of pocket before insurance coverage begins. To offset that burden, HSAs provide a valuable benefit to participants in these plans by allowing them to set aside money specifically for health care costs.
“HSAs are popular investment vehicles for covering medical costs due in part to their triple tax advantage: Contributions are deductible, investment growth is tax-deferred and withdrawals are tax-free for qualified expenses,” Vargas explains.
Eligible expenses can include common health care costs such as doctor visits, prescription medications and medical equipment. Dental work and vision care expenses are also generally eligible.
However, HSAs come with annual contribution limits. For 2026, individuals with self-only coverage can contribute up to $4,400, while those with family coverage can contribute up to $8,750. Individuals age 55 or older who are not enrolled in Medicare may also make an additional $1,100 catch-up contribution.
“An HSA can also be used as an additional ‘off-label’ retirement account,” Vargas says. “For those already maximizing contributions to tax-favored retirement accounts, funding an HSA and treating it like a retirement savings account can allow those assets to grow as long as possible.”
Because HSAs can be used both for near-term health care spending and long-term investing, fund selection matters. Investors should consider other factors rather than simply choosing the cheapest or most popular fund available.
“Consider focusing on your risk tolerance as well as the expected timing of future health care expenses when choosing your HSA investments,” says Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors. “Are you comfortable with taking on higher volatility, or do you prefer to be more conservative? Do you have an expensive medical procedure planned?”
Here are six of the best funds to add to your HSA in 2026, if offered by your plan provider:
| Fund | Expense ratio |
| Vanguard 500 Index Fund Admiral Shares (ticker: VFIAX) | 0.04% |
| Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) | 0.04% |
| Fidelity Zero Extended Market Index Fund (FZIPX) | 0.00% |
| Fidelity Zero International Index Fund (FZILX) | 0.00% |
| Schwab Prime Advantage Money Fund (SWVXX) | 0.34% |
| Schwab Target 2050 Index Fund (SWYMX) | 0.08% |
Vanguard 500 Index Fund Admiral Shares (VFIAX)
“The opportunity comes from investing your HSA contributions in low-cost funds that align with your financial goals,” Vargas explains. “In fact, our research estimates that this approach can potentially unlock more than $22,000 in additional wealth compared with actively spending funds, and over $91,000 compared with not utilizing an HSA at all.” For this role, an index fund like VFIAX may be ideal.
This Vanguard mutual fund passively tracks the S&P 500 index, which owns a portfolio of market-cap weighted U.S. blue-chip stocks screened for liquidity, size and earnings consistency. Vanguard offers VFIAX at a low 0.04% expense ratio. For a $10,000 investment, this means just $4 in annual fee drag. However, accessing VFIAX does require an initial $3,000 minimum investment.
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
“When choosing which investments to use, cost matters, so consider a low-fee, diversified index fund so that you can keep more of your investment returns,” Vargas says. “The smaller the expense ratio, the harder your HSA can work for you.” Another competitive option is VTSAX, which charges the same 0.04% expense ratio as VFIAX, but is more diversified in terms of holdings due to its benchmark.
VTSAX tracks the Dow Jones U.S. Total Stock Market Index. Unlike the S&P 500, this benchmark broadens its scope to over 3,500 stocks, including small- and mid-caps. However, VTSAX is market cap-weighted, so its top holdings still resemble those of VFIAX, albeit in a slightly less concentrated manner. The Admiral Shares class requires a $3,000 minimum investment and has a track record dating back to 2000.
Fidelity Zero Extended Market Index Fund (FZIPX)
“One strategy that can be particularly effective is paying current medical expenses out of pocket while leaving the HSA invested to grow tax-free in the meantime,” explains Sean August, CEO of the August Wealth Management Group. “As long as the expense occurred after the HSA was opened and you keep the receipt, there is no deadline to reimburse yourself.” This can be useful for younger investors.
Investors can potentially supercharge their HSAs by allocating to small- and mid-cap stocks, which have historically delivered a return premium. This can be achieved by investing in FZIPX, which tracks the Fidelity U.S. Extended Investable Market Index. This benchmark tracks the 2,500 U.S. companies, excluding the largest 500 companies. FZIPX is also one of few no-fee mutual funds.
Fidelity Zero International Index Fund (FZILX)
“HSAs become more flexible after age 65 because withdrawals for qualified medical expenses remain tax-free, while withdrawals for non-medical purposes are taxed as ordinary income like a traditional IRA,” August explains. “The 20% early withdrawal penalty no longer applies, which allows the HSA to function as a secondary retirement account if health care spending ends up being lower than expected.”
Investors planning to use an HSA in this way may also want to consider diversifying outside the U.S. stock market. Adding international exposure can help reduce the risk of a “lost decade,” such as the 1999 to 2009 period when U.S. equities produced negative real returns. One attractive option is FZILX, which holds more than 2,100 developed and emerging market stocks and carries a 0% expense ratio.
Schwab Prime Advantage Money Fund (SWVXX)
“The longer you can leave the money alone, the more risk you can take,” says Georgia Bruggeman, founder and CEO of Meridian Financial Advisors. “If you know you will need to spend some of the funds in an HSA for health care expenses within the next year, then consider leaving those funds either in cash equivalents or an ultra-short-term bond fund.” Money market funds can be a good option as well.
A money market fund like SWVXX is designed to maintain a stable $1-per-share net asset value by investing in high-quality, short-term debt securities. Barring extreme financial stress, SWVXX can be a very low-risk place to hold cash while still earning income. SWVXX currently offers a 3.5% seven-day SEC yield. The fund charges a 0.34% expense ratio and does not have a minimum investment requirement.
Schwab Target 2050 Index Fund (SWYMX)
“Some investment funds will automatically tailor the mixture of stocks versus bonds over time, so that your funds in the HSA may be more easily spent in the future,” says Jordan Taylor, independent financial advisor at Core Planning. “By investing in these funds, investors can better match their portfolio’s level of risk to their time horizon, or when they expect to cash out and spend their investment.”
For example, a middle-aged employee planning to retire around 2050 may prefer SWYMX. The fund uses a fund-of-funds structure that allocates across a mix of Schwab stock and bond index funds. SWYMX is currently positioned for growth with 90% in equities and 10% in bonds, though that balance will gradually shift as the target year approaches. SWYMX charges a 0.08% net expense ratio.
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6 Funds to Add to Your HSA originally appeared on usnews.com
Update 03/20/26: This story was published at an earlier date and has been updated with new information.
