The deadline for the first phase of Obamacare, insurance exchanges for individuals, has passed. You may have chosen a health savings account (HSA), or you have been using one through your employer.
In either event, they are becoming more popular and are worthwhile looking into because they allow you to save up to $3,300 for individuals and $6,550 for families. The money can grow tax-free and be withdrawn tax-free as long as the expenses are for approved health related expenses.
HSAs are available on newly established exchanges, but they are not easy to find, so you have to look and ask your insurance provider.
I wrote this blog, because I have received several questions recently from clients in Denver, Colorado and thought it was timely to address this topic. The vendor or distributor for this blog neither pays me, but if you eventually find this helpful, I would appreciate your payment.
HSA accounts began as bank savings accounts. Now, providers allow you to invest these funds in the stock market. Should you invest some of your HSA account? Only if you have enough for at least a year’s worth of medical expenses.
It is permissible to open an HSA account of your choosing, rather than remain with the HSA of your employer’s choosing.
Providers include Optum Health, the one my company uses, which has 1 million accounts and indicates that they offer multiple mutual funds options.
Wells Fargo indicates they have over 400,000 accounts and they offer their own mutual funds. HSA bank offers self-directed investments through TD Ameritrade. Other providers include Bank of America, JP Morgan Chase, local banks and credit unions.
For more research and a way to compare HSA account, go to www.HSAresearch.com.
Fees include account setup, closing fees, monthly or annual maintenance, but check with each provider because they all have different fees.
There are three criteria to consider: how can you access the money, investment options, and fees.
You will want to shop around. Think of what is most important to you among the three things above and then list out each provider for comparison.
There are now about nine million HSA’s with total assets of more than $18 billion. The average account balance is about $2,000, but accounts with funds in investment options (rather than just F.D.I.C.-insured accounts) average to about $10,000, according to Devenir, which is based in Minneapolis and provides investment plans for HSA’s.
HSA’s are helpful retirement planning tools. They allow you to save for healthcare costs, but can grow tax-free as well. Knowing your options when choosing to use an HSA and selecting an HSA provider is a good way of improving your financial plan.
By James Cornehlsen, CFA
Keywords: Health Savings Accounts, HSA