A Health Savings Account (HSA) is a great way to save money for medical expenses if you have an HDHP (high deductible health plan) plan. For most people, employers offer these plans and choose an HSA administrator for the plan.
But in some cases, you may have to choose your own HSA administrator. To choose the right HSA provider, you must consider several factors.
Choosing the right HSA administrator
Choosing the HSA provider can be daunting. Not all major financial institutions offer the HSA. Then, you have to navigate through a number of fees they charge – minimum balance fees, inactivity fees, and investment fees HSA is one of those things where it is worth it to shop around for the best deal.
Here are the things you should look for when choosing an HSA account.
Maintenance fees
Many HSAs charge monthly fees. Some charge monthly fees if you don’t maintain a minimum account balance. The HSA administrators included in this list don’t have maintenance fees.
Investing options
HSAs are secret IRAs. You can invest your HSA funds in mutual funds or stocks. A self-directed brokerage account is best because it gives you many options to invest with fewer fees, compared to a managed account, which may have fees.
Debit cards
It’s convenient to have an HSA debit card that you can swipe for medical expenses, rather than go online and complete a form to get reimbursed for qualified medical expenses.
Best HSA Accounts
Lively HSA and Fidelity are our two top choices for HSA accounts. The reasons are simple. Both don’t have monthly fees and offer options to invest through a self-directed brokerage account. While Fidelity is a financial behemoth offering everything from brokerage accounts, mutual funds, and IRAs, Lively only offers HSA accounts. Lively was founded in 2016, so it’s a relatively new player on the scene.
Lively offers self-directed brokerage through TD Ameritrade whereas Fidelity offers it through its brokerage arm. If you already have other accounts with Fidelity, it may be worthwhile to open an HSA account with Fidelity as well.
Other HSA administrators on the list may work for you if you maintain higher monthly balances.
| Ranking | HSA Administrator | Monthly Fees | Investment Options |
|---|---|---|---|
| 1 | Lively HSA | $0 | Self-directed brokerage thru Ameritrade, 0.5% fee on managed accounts |
| 2 | Fidelity HSA | $0 | Self-directed brokerage thru Fidelity |
| 3 | HSA Bank | $0 if balance $3000+, otherwise $2.50 | Self-directed brokerage thru Ameritrade |
| 4 | Elements Financial HSA | $0 if balance $2500+, otherwise $4 | Self-directed brokerage thru Ameritrade if balance is greater than $2500 |
| 5 | Optum Bank HSA | $0 if balance is $5000+, otherwise $3.75 | 31 funds available through Betterment |
| 6 | Health Equity USA | $0 if balance is $2500+, otherwise $3.95 | 23 funds available through Vanguard, |
Advantages of HSA
Contributions to HSAs are pre-tax. Withdrawals are also tax-free if you use the money for qualified medical expenses.
HSAs are secret IRAs. At age 65, you can withdraw money from HSAs just like an IRA. There are no penalties but you must pay tax on your withdrawals if you use them for non-qualified expenses.
HSAs are portable. You can take the funds from one employer to another, or even transfer them to your individual account.
There is no age limitation but to contribute to an HSA account, you must have an HDHP plan
Not happy with your employer’s HSA account – Choose your own
Sometimes employers choose HSA administrators that have fees and complicated policies. In those cases, you can choose to have your HSA account. Note that employers typically only direct payroll deductions to their sponsored HSAs. It’s up to you to set up contributions if you pick your own HSA administrator.
Bottom Line
HSA accounts are tax-efficient vehicles to save money for medical expenses if you have an HDHP plan. You can invest your HSA funds in mutual funds or stocks. When choosing HSA administrators, keep an eye on monthly fees and the investment options offered by the administrator. Lively and Fidelity are our top picks for HSA accounts, though others on the list might work for you if you maintain a high monthly balance.