Use your HSA as an investment tool

A Health Savings Account (HSA) can be a powerful tool to 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 similar to a savings account, or you can leverage the investment option in your HSA to take advantage of the potential for higher growth on your earnings with a variety of mutual funds available to you.

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 $131,000 to $147,000 to pay for health care in retirement if you are single, and about $273,000 if you are married, it's clear that ignoring your HSA’s investment potential won’t help in the long run.1

So if you haven't done so yet, it may be time to transition 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. Start small if you need to.

    With a minimum balance of $1,000, you can begin investing in your HSA. If cash flow is a concern, take a minute to think about your everyday spending habits. For example, let’s say you buy a bottle of water and a cup of coffee six times a week. If you save the same amount of money into your HSA, after one year you’ll have over $1,000 2. Even a little can add up, and it’s okay to start small.
  1. Tap the power of time.

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

    Following a diversified approach* is a wise choice. 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.

    *Diversification does not ensure profit or guarantee against loss.

Compare saving vs. investing
over 25 years

Compare saving vs. investing over 25 years
Savings Investing
Annual contribution $    1,000 $     1,000
Rate of return 0.1% 5.0%
25 year balance $  25,314 $   48,390
Total interest earned $      314 $   23,390

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. It’s easy to manage your funds, plus get cash if you need it.

    You can watch this You can visit our user guide to see how easy is it to set up your investments. Once you set up your investment account, you will be able to manage it easily on the member website. And remember, if you need cash to pay for current medical expenses, you can get it.
  2. Stay informed.

    There are plenty of resources to learn more about investing your HSA, including many here on this site or on the member website. The more you learn, the more confident you will feel that you have a strategy in place to cover your costs when the time comes.
  3. Work your resources!

    For example, you can use the member website to:
    • View your individual rate of return
    • Select auto rebalance
    • Monitor fund performance
    • Change election percentages at any time

1Source: Employee Benefits Research Institute, December 2017. A 65-year-old couple, both with median drug expenses would need $273,000 to have a 90% chance of having enough money to cover health care expenses (excluding long-term care) in retirement. A 65-year-old man would need $131,000 or a 65-year-old woman would need $147,000 to have 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 2017.

2Assumes the average cost in 2017 for a bottle of water is $1.00 and cup of coffee costs $2.50. $3.50 six times a week equals $21.00, times 52 weeks a year, equals $1,092.