Discover the potential of investing with your HSA

Tax-free earning potential1

A Health Savings Account earns interest like any traditional savings account, but money sitting in a cash account could be working harder for your future. With the option to invest a portion of your HSA balance in a range of mutual funds; you have the opportunity for federal tax-free earning potential that could help you build your account balance over time so you're prepared to cover qualified health care expenses for years to come and into retirement.

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Cash Account

Cover your short-term health care needs.

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Investment Account

Increase your tax-free earnings potential1 to cover future needs

Why invest?

Investing money each year in your HSA can help your balance grow over time so you are prepared when you need it. See how investing just $2,000 annually can really add up.

Chart shows comparison between the balances in two types of accounts over time: a cash account with a 0.30% return and an investment account when investing $2,000 annually with a 5% return. Over 10 years, the investment account balance would be $25,833 and the cash account balance would be $20,031. Over 25 years, the investment account balance would be $98,022 and the cash account balance would be $50,190. Over 40 years, the investment account balance would be $248,099 and the cash account balance would be $80,484.

Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Each scenario assumes annual contribution of $5,000 and $3,000 in withdrawals with cash accounts earning 0.03% in interest and investment accounts a 5% rate of return. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than original cost. Many retirees are likely to withdraw funds from their retirement savings to pay for health care expenses—but it's important to note that withdrawals from a traditional 401(k) are taxable while withdrawals from your HSA for qualified medical expenses are tax-free.

Note: When selecting investment funds for your HSA, take into consideration your overall portfolio strategy in other longer-term investments such as a 401(k) plan or IRA to ensure you are aligned with your financial goals and priorities.

Health care in retirement

Did you know a 65-year old couple could need $296,000 for health care expenses in retirement? 2 Using the investment feature of your HSA provides growth potential. Keep in mind investing involves risk including possible loss of principal value invested. In retirement you can make a tax-free withdrawal from your HSA to pay for eligible medical expenses, potentially saving you thousands of dollars in taxes.

How does the automatic investment feature work?

You establish an investment threshold3 for your account—this is the amount you want to keep as your cash balance. Once established, your funds will automatically transfer between cash and investments to maintain that balance when contributions or withdrawals are made.

Graphic shows that when your cash account reaches the investment threshold you set, in this example $1,000, money automatically transfers into your investment account. As you continue to use your account, money will automatically be transferred between your cash and investment accounts to maintain your cash threshold amount. Once your balance is $100 above your investment threshold,  $1,100 in this example, you can make an investment transaction.

Not sure how much to set as your threshold?

Here are some suggestions to help you determine how much to set.

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Choose a dollar amount you are comfortable having on hand to cover short term expenses3

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The annual deductible for your health insurance plan

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Estimated amount of money that you plan to pay out of pocket this year

Find out more about setting up investments—you have the option to set up automatic investment transfers or you can make manual transfers.

1 About Tax Benefits: You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. Any interest or earnings on the assets in the account are tax-free. You may be able to claim a tax deduction for contributions you, or someone other than your employer, make to your HSA. Certain limits may apply to employees who are considered highly compensated key employees. Bank of America recommends you contact qualified tax or legal counsel before establishing an HSA.
2 Source: 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 2019.
3 Minimum investment balance requirements are located on the member website

Investments in mutual funds:


Certain associates are registered representatives with MLPF&S and may assist you with investment products and services.