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Consider using your HSA as an investment tool

A Health Savings Account (HSA) could be an effective way to help cover your current and future out-of-pocket health care expenses. You have the choice to keep your HSA funds in your cash account which can earn interest like a savings account, or you can leverage the investment choices in your HSA to take advantage of the potential for higher growth on your earnings with a variety of mutual funds available to you. Remember that investing in securities involves risk, including the possible loss of principal invested.

An HSA parked solely in cash and earning a low interest rate may cover your short-term out-of-pocket needs, but it won’t offer the growth potential you need to handle your health care expenses over the long term. With studies showing that you could need anywhere from $142,000 to $159,000 to pay for health care in retirement if you are single, and about $296,000 if you are married, you may want to consider the investment feature to give your account faster growth potential over the long term.1

So, if you haven't done so yet, it may be time to consider transitioning some of your HSA balance into investments. Don’t worry. You can keep things simple as you go. Here are some things to think about as you get started:

  1. Be proactive about your opportunity to save for future health care expenses

    Maybe you are thinking that you can’t afford to set aside money right now, however, there could be some simple trade-offs you can make in your monthly spending to free up a small amount. For example, going out for coffee every day can be something that adds up to over $1,000 per year. Assumes the average cost of a coffee $3.50 per cup daily for 52 weeks per year equals $1,092. Are there things in your budget that you could cut back on to enable you to save a bit more for healthcare in the future?

  1. Tap the power of time.

    Bottom line: Investing can provide you the potential of accumulation over time. Any money your account earns is tax-free, contributing to a compounding effect year over year. Look at the potential between treating your HSA as a saving vehicle only instead of a saving and investment vehicle:

  2. Diversify.

    You can invest your HSA in a broad selection of mutual funds. Depending upon your tolerance for risk and timeframe until retirement you’ll be able to choose from options that align with your long term investment strategy.2


Compare saving vs. investing over 25 years

Compare saving vs. investing over 25 years
Savings Investing
Annual contribution $    2,000 $     2,000
Annual expenses $    1,000 $    1,000
Interest/rate of return 0.03% 5%
Potential balance in 25 years $  25,139 $   49,202

Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than their original cost.

  1. Access to funds in your investment account.

    If you choose to set up your investment account, you can access those funds to pay for qualified health care expenses when you need to in the future.

  2. Investment account management

    View the User Guide to learn how to set up your investment account and become familiar with helpful tools to help you manage your account
    • View your individual rate of return
    • Select auto rebalance
    • Monitor fund performance
    • Change election percentages

1Source: Employee Benefits Research Institute, Issue Brief, no. 549, January 20, 2022. A 65-year-old couple, both with median drug expenses needs $296,000 to have a 90% chance of having enough money to cover health care expenses (excluding long-term care) in retirement. Savings needed for Medigap Premiums, Medicare Part B Premiums, Medicare Part D Premiums and Out-of-Pocket Drug Expenses for Retirement at age 65 in 2021. A 65-year-old man needs $142,000 or a 65-year-old woman would need $159,000 to have to have a 90% chance of having enough money to cover health care expenses (excluding long-term care) in retirement.

2Diversification does not ensure profit or guarantee against loss.