“Lifetime Accumulations and Tax Savings from HSA Contributions” and “IRA Withdrawals in 2012 and Longitudinal Results, 2010–2012”

July 2014, Vol. 35, No. 7
Paperback, 24 pp.
PDF, 1,969 kb
Employee Benefit Research Institute, 2014

Download Notes PDF pdf

Executive Summary

Lifetime Accumulations and Tax Savings from HSA Contributions



  • 2014 marks the 10-year anniversary of the introduction of health savings accounts (HSAs), created by Congress in 2003. HSAs provide account owners a triple tax preference. Contributions to an HSA reduce taxable income. Earnings on the assets in the HSA build up tax free, and distributions from the HSA for qualified expenses are not subject to taxation.

  • A person contributing for 40 years to an HSA could save up to $360,000 if the rate of return was 2.5 percent, $600,000 if the rate of return was 5 percent, and nearly $1.1 million if the rate of return was 7.5 percent, and if there were no withdrawals.

  • In order to maximize the savings in an HSA to cover health care expenses in retirement, HSA owners will need to pay the medical expenses they incur prior to retirement on an after-tax basis using money not contributed to their HSA. Many individuals may not have the means to both save in an HSA and pay their out-of-pocket health care expenses. Also, HSA balances may not be sufficient to pay all medical expenses in retirement even if maximum contributions are made for 40 years.

IRA Withdrawals in 2012 and Longitudinal Results, 2010–2012



  • Just under 21 percent of all traditional and Roth IRA accounts together had a withdrawal in 2012, including 24.3 percent of traditional accounts and 3.6 percent of Roth accounts. The overall IRA withdrawal percentage was largely driven by activity among traditional IRAs owned by individuals ages 70-½ or older, a point at which the individuals were required by law to make withdrawals from these accounts. In contrast, among individuals under age 60, 10 percent or fewer had a withdrawal.

  • The median withdrawal rate for those taking a withdrawal from a traditional IRA was 5.9 percent, compared with 32.1 percent for those taking a withdrawal from a Roth IRA.

  • The percentage of Roth IRA owners who took a withdrawal was almost constant at 2.8 percent in 2010, 3.5 percent in 2011, and 3.5 percent in 2012. The percentage of traditional IRA owners in the sample who took a withdrawal increased each year from 18.2 percent in 2010 to 22.7 percent in 2011 to 23.7 percent in 2012, as the individuals in the sample aged.