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HSA is short for a “health savings account.” HSAs are tax-advantaged accounts used to save and invest in medical costs. If you have a qualifying high-deductible health plan (HDHP), you can save and invest with any HSA account provider you choose. Let’s take a look at how HSAs work and which one is the best for you.

At a Glance – Comparing The Best HSA Accounts

Account provider Minimum balance to invest Investments Fee for investments
Lively $0 TD Ameritrade $0
Fidelity $0 Fidelity $0
HSA Bank $1,000 TD Ameritrade or Devenir $0
HSA Authority $0 Pre-selected fund list $36 per year
Optum Bank $2,000 Pre-selected fund list $1 per month

The Best HSA Accounts To Open Right Now

If you’re ready to open and invest through an HSA, these are some of the top providers you can consider.

Lively

Lively brings a win-win of low fees and great investment choices. The account is free for individual users. There are no recurring fees and no minimums. Funds are housed in an FDIC-insured bank account that comes with a modest interest rate. You can also open a connected HSA investment account through a partnership with TD Ameritrade. This allows you to invest in virtually all U.S. stocks and ETFs with no fees.

The main downside of Lively is that you currently earn just 0.01% APY on all cash balances. This is far worse than a high-yield savings account.

However, the ability to invest your balance through a linked account at TD Ameritrade is such a valuable part of the overall Lively account experience. TD Ameritrade investment accounts allow you to buy and sell stocks and ETFs for free, among other great features.

Fidelity Investments

Fidelity is already a top investment firm for retirement accounts, so HSA accounts are a natural fit as well. And with a Fidelity HSA, there are no recurring fees and no minimums. Plus, the account has many bells and whistles available with regular Fidelity brokerage accounts too, which makes it worth consideration.

For example, Fidelity offers no-fee stock and ETF trades and its own family of mutual funds with no trading fees or load fees. It’s actually an excellent broker for mutual funds for this reason and is competitive with the likes of TD Ameritrade.

Other notable perks include:

  • No monthly or recurring fees for personal HSAs (employer-sponsored accounts may cost up to $48 per year)
  • No commissions to trade stocks and ETFs
  • No minimum balance

Like Lively, Fidelity only pays 0.01% APY on cash balances at this time. This isn’t too enticing, but Fidelity also has its new Fidelity Go HSA. This is a managed HSA account that’s similar to a robo-advisor, and Fidelity manages your money for you and invests in various mutual funds that match your goals and risk tolerance.

HSA Bank

HSA Bank is another free provider of health savings accounts. It used to charge a monthly account fee but has since dropped to $0. However, you pay $1.50 for paper statements and $25 if you ever want to close your account. There’s also a $1,000 minimum balance requirement unlike Lively and Fidelity.

What’s nice about HSA Bank is that you can invest through TD Ameritrade or work with Devenir’s Guided Portfolio Self-Directed Investment program to invest in a range of index and managed funds to match your goals. Funds are also quite diverse and include bonds, real estate, international holdings, and growth-focused holdings. Devenir charges 0.30% in annual management fees which is similar to leading robo-advisors like Betterment and Wealthfront, but this is for your HSA.

Currently, HSA Bank also pays 0.05% APY on balances above $5,000 and 0.15% on balances over $25,000. Again, this doesn’t beat most mobile banks, but it’s higher than many leading HSA providers that only pay 0.01% currently.

HSA Authority

HSA Authority comes from Old National Bank. HSA Authority has no minimum balance and no recurring bank fees. The account costs $36 per year for investments and an additional $2 per month if you want paper statements. You need $1,000 to get started with investing. HSA Authority like with HSA Bank.

The $36 annual fee is a downside since many HSA providers are going fee-free. But you can invest in a range of assets, including a list of pre-selected investment funds from Vanguard, American Funds, PIMCO, and others.

The main selling point of HSA Authority is that it provides excellent customer service to employers and can create educational material to help employees understand how to best use their HSAs. But if you want to avoid fees entirely, other HSAs on this list are better options.

Optum Bank

Optum Bank is a part of the same company as insurer UnitedHealthcare. If you have insurance through UnitedHealthcare already, which is very common at many large employers, your default HSA option to consider is Optum Bank. While it is highly integrated and relatively easy to use, it comes with a $2.50 monthly fee, which may be covered by your employer.

You need at least $2,000 to invest, and that costs an additional $3 per month. While there are some excellent investment choices, the list of available funds is limited. However, you can invest through Betterment, which is good news if you prefer working with a robo-advisor.

Finally, Optum has a useful storefront where you can shop fo HSA-eligible categories like prescription refills and various health products. Orders ship right to your door, and the online store makes it easier to spend your HSA dollars. And, you can get 5% off OTC products for additional savings.

What Is an HSA Account?

A health savings account, or HSA, is a type of account used to save for future medical expenses. Contributions to HSA accounts are pre-tax. But you don’t pay any tax on withdrawals for qualified medical costs. That makes an HSA arguably the most tax-friendly account around.

You can keep your HSA in cash or invest a portion in stocks, exchange-traded funds (ETFs), mutual funds, bonds, and other investments.

Any investment gains in an HSA are also tax-free as long as you use the funds as intended. That’s due to the tax-free withdrawals.

What to Look For in an HSA Account?

  • Account fees: Some HSA accounts charge a small fee, usually a few dollars a month. Others have no recurring fees. Some charge when you use investment features. Check this crucial detail before signing up.
  • Interest on savings: Bank account interest isn’t always great, but you should get something for the cash in your account. Higher rates are better.
  • Investment options: Some HSAs are essentially a bank account. But others have a connected brokerage account to invest in anything from a limited set of funds to the entire stock, bond, mutual fund, and ETF markets.
  • Ease of use: Getting reimbursed for medical expenses shouldn’t feel like pulling teeth. Some HSAs are integrated with a specific insurance provider or employer system. But others work anywhere, independent of particular providers.

Downsides to an HSA

With an HSA, the tax savings and potential for long-term investment growth are huge. The main downside of the HSA is dealing with the administrative hassle of tracking medical and dental spending and keeping the bills and receipts.

I tackle this chore by sticking all the bills and receipts in a file box during the year. Then each January, I spend an hour or two with my trusty spreadsheet to summarize the medical expenses paid during the previous year. Then the receipts and a print out of the spreadsheet go into the “HSA expenses” folder in my file cabinet.

So far, two hours of recordkeeping per year has been a reasonable cost to participate in the HSA, given the huge benefits.

Using an HSA as an Investment Account

The basic use of the HSA is to cover your out-of-pocket medical expenses from year to year. A lesser-known use of the HSA is as a long-term tax-advantaged investment vehicle. Most HSA’s come with a cash account as the default savings option where you could earn around 1% interest per year. Many custodians allow the account owner to move their HSA balance into a variety of investment choices similar to what is available in a typical IRA.

The trick to using an HSA as “another investment account” comes from the reimbursement rules. Qualified medical expenses can be reimbursed out of the HSA at any time, even years or decades after the medical expense is incurred.

This feature allows the HSA account owner to grow the HSA’s balance year after year completely tax-free. In retirement (or in a financial emergency), the HSA owner can withdraw from the HSA without paying taxes or penalties on any amount up to the total lifetime medical bills paid since the HSA was opened.

I’ve personally used my HSA as an additional investment account to help fund my early retirement. By making the maximum family contributions for seven years and getting modest investment returns, we’ve managed to accumulate $55,000 in our HSA.

I have a stack of paid medical and dental bills in a file cabinet that sums to $8,000. That means I can take an $8,000 tax-free and penalty-free withdrawal whenever I want.

I can also pay any unexpectedly large medical bills out of the HSA without worrying about tax impacts of drawing on an IRA or 401k (where most of my money is held). My expectation is that the HSA account balance will continue to grow enough to fund our out-of-pocket co-pays and deductibles for many years or decades to come.

Methodology

To select our top HSA providers, we considered factors such as fees, ease-of-use, integrations with other brokers and robo-advisors, and minimum balance requirements.

The companies included in our list didn’t influence their inclusion or position in any way. Rather, these rankings reflect the research and opinions of our authors and editors. You should always do your own research as well, and don’t be afraid to speak with a financial professional to see if an HSA makes sense for your current situation.

Bottom Line

If you qualify for an HSA, it can be a powerful tax-advantaged account that you use to pay off medical expenses. And unlike flexible spending accounts (FSAs), money rolls over every year, so there’s no “use-it-or-lose-it” risk. However, you need to make sure having a high-deductible health plan (HDHP) is worth it for you and your family before even considering an HSA.

That said, there are many top HSA providers on the market, and competition has helped drive fees down. If you want to save money on taxes and think an HSA is what you need, hopefully one of the providers on our list is the right fit.




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