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Investing HSA Funds

Updated: Jul 2

Did you know you can invest your HSA funds in the stock market? Investing your HSA funds could help you boost retirement savings, save for a future medical procedure or pay annual medical expenses.


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What is an HSA?


Health Savings Accounts (HSA) work in conjunction with a High-Deductible Health Plan (HDHP). It works as a savings account to pay medical bills and lets you set aside pre-tax income to cover healthcare expenses that your insurance doesn’t pay. For 2023, the maximum contribution is $3,850 for individuals and $7,750 for a family. If you are 55 or older, you can contribute an additional $1,000 in “catch-up” savings.


What’s great about an HSA is that funds can be rolled over indefinitely!


Who can open a HSA?


They can be opened by anyone who holds a qualifying High-Deductible Health Plan with a maximum out of pocket. Individuals cannot be covered by another medical plan (like a spouse or parent’s plan) and not enrolled in Medicare. Participants can’t have other medical savings accounts like FSAs or Health Reimbursement Accounts for the year.


How can you spend your HSA?


HSA contributions are tax-deductible, and employers can contribute to the plan as well (up to the max limits). Qualified medical expenses, including vision and dental care, are eligible for HSA use. Most HSAs issue a debit card to pay for the expenses. You can change health coverage and the HSA follows YOU, whether you change jobs, retire, etc.


BONUS: The money can grow tax-free, so here’s how to invest your HSA funds.


How to invest your HSA funds in the stock market


There are many platforms that offer investing options for HSA funds, such as Optum Bank, Vanguard, Lively and TD Ameritrade/HSA Bank. Some HSA platform providers require the annual healthcare deductible be kept in cash, while others allow for investing after you reach a minimum balance of $1,000. Like a 401k, there are limited HSA investment options, but you can pick the best of the bunch! Reference my 50/25/25 rule for general investing, looking for ways to model your HSA account the same. Be sure to look at annual fees of the underlying fund options. It’s also important to consider your annual medical expenses, time horizon, financial situation and risk tolerance.


Overall, investing HSA funds can help boost your retirement savings, provide funds for a future planned medical procedure or pay annual qualified medical expenses.



 

This is not an advertisement or solicitation for business, and my personal experience does not constitute universal application. Information is for informational and recreational purposes only. Each financial situation is unique, and you should do your own due diligence. Past performance does not guarantee future results. Some content may contain affiliate or referral links.

Jordan is the creator of Lifetime Tidbits and has spent more than 10 years working in finance, primarily as a securities trader. She holds her CFA charter and has been Series 7 & 63 licensed.

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