HSAs: What’s the Best Account for You?

Health Savings Accounts (HSAs) are often described as a tax-advantaged account that can be used as a means to assist individuals and families with high deductible health insurance plans manage current medical costs. More recently, however, the benefits of using HSAs as a supplemental retirement plan has become more widely identified as an attractive financial planning tool for many individuals.

There isn’t a lot of data available, so choosing the most appropriate plan can be a difficult decision to make. HSA assets are growing: total accounts grew to 23.4 million at the end of June, 2018, up 11.2% from the same time on year before, according to Devenir, an HSA research firm. Total assets in plans were close to $10 billion. Most of the growth is attributable to employer sponsored HSAs which accounted for 42% of new HSAs opened through June, 2018 also from Devenir research.

How do you decide which HSA is best for you? Your employer may offer an HSA with a contribution made on behalf of employees who elect a high deductible health insurance plan. You certainly should enroll in this HSA if eligible so that you will receive that benefit. Depending upon the investments options available in this HSA, you may want to select another HSA for your own contributions. There is no requirement that you use an employer sponsored HSA for your own contributions. If you are a participant in a high deductible plan and don’t have an HSA at work, many financial institutions offer HSAs to eligible individuals and families.

One important variable when selecting an HSA is whether you intend to use funds for current expenses or save them for retirement. Fees vary among HSAs and can be significant. People who expect to spend these accounts should pay special attention to maintenance fees, limited additional fees and reasonable interest rates on deposits. A variety of investment products coupled with maintenance fees will impact an HSA owner saving for retirement. The individuals who view HSAs as investment accounts will have different fees and investment requirements. An HSA can become an integral part of the health care component of a broader financial plan focused on retirement.

in 2019, HSA contribution limits have increased to $3,500 for individuals and $7,000 for families. Maximum catch up contributions for people over age 55 remain at $1,000. Employer contributions are included in these limits. Also, the House passed two HSA-related bills in 2018, but the Senate has yet to vote on them. These bills would expand eligibility, HSA contribution limits and allowable expenses.

Explore the HSA market and find the best one that meets your objectives.

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