Consumers missing HSA investment opportunity
Most using HSA as a specialized checking account
According to a study from the Employee Benefit Research Institute, the vast majority of Health Savings Account holders are not taking advantage of the investment potential of their accounts.
The study reported that most account holders use their HSAs as “specialized checking accounts,” using the funds to cover deductibles, coinsurance and copayments. But they aren’t taking advantage of the investment opportunity of HSAs, nor are they maximizing their contributions.
The report found that just 4 percent of account holders invested their HSA balance, and the average total contribution in 2016 was $2,922, less than one half of the allowable maximum for family coverage.
While using HSAs for healthcare expenses is valuable, maximizing contributions and investing funds can be the most effective way to benefit from the accounts.
Here are two tips for maximizing your HSA:
Contribute as much as you can
HSA funds roll over every year, so there’s no reason not to contribute as much as you can. In the event that you do have an expensive healthcare event, you will have a savings account to fall back on. Unused funds also function as a retirement account. If you withdraw them after age 65, you pay only income taxes.
Open at a bank with investing options
Do some research on which HSA institutions provide the most value. There are several types of HSA administrators—some are actual banks, while others are little more than custodians.
Banks that are linked with brokerages give you the ability to invest additional funds that you contribute. For example, HSA Bank has a partnership with TD Ameritrade, through which you can invest in mutual funds or in a range of securities.
You typically have to have a minimum amount in your HSA before you can invest surplus funds. This is why some advisor recommend actually paying for medical expenses outside of the HSA. THis may sound counterintuitive, but it allows the funds you do contribute to grow untouched and untaxed, allowing you to reach investment minimums more quickly.
Employers—Bernard Health optimizes HSA success. We have a first-year adoption rate of 81 percent and can help your organization develop a cost-saving strategy. Learn more here.
Click here to learn more about maximizing your HSA.
Want more information on effectively using health insurance? Download the “Buyer’s Guide to Health Insurance” here.
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