A Health Spending Account is a great way to pay for healthcare or save for retirement. To help, we’ve surveyed the very best HSA accounts available today.
It used to be that consumers didn’t have much choice when it came to HSAs. Many of these accounts were little more than dedicated-use high-interest savings accounts.
Now more options are on the market. And this means more investing options for your health savings account.
This makes choosing an HSA a bit more work. But that work can pay off in the end.
Just think of your HSA as a way to invest an additional few thousand bucks a year. If you’re healthy and don’t generally have high medical costs, that money can roll over from year to year. Invested wisely, it can grow tax-free. And as long as you use withdrawals for qualified medical expenses, those will be tax-free, as well.
This can make a big difference in retirement, when your medical expenses will rise naturally. (Old age eventually catches up with the healthiest of us!)
So you’ll want to put some work into choosing an HSA. Even if you have a convenient employer-sponsored option available, you can still go off-route with an HSA of your own. You’ll just contribute post-tax income, and then take the contributions as a write-off when you file your taxes.
Here, we’ll talk about what to look for in an HSA and outline some of the best options available on the market today.
What to Look for in an HSA: Two Options
Looking at an HSA is similar to looking at an IRA. You want to look at a couple of factors, including:
- Fees: This is how much the account will cost you on a monthly basis, including any expense ratios. But you should also look at fees attached to trading or making new investment decisions within your account.
- Investment Options: You’ll also need to consider what investment options are available. This used to be a big weakness with HSAs, but things are getting better. Several of the accounts we’ll highlight here offer IRA-like investing options, including mutual funds.
While both of these factors are important, they shouldn’t carry equal weight. Depending on your circumstances, you’ll need to look at one factor more than the other.
If you’re planning to spend down much of your HSA, look more closely at the fees–especially any potential per-transaction fees. If the money isn’t going to sit in your account for long, you don’t need to worry much about your investment options.
This would be the case if you have a sick individual in your family, or if you have young kids with constant doctor’s appointments. This would also be the case if you can’t afford to max out your account annually. Maybe you can only put in $500 or $1,000. That’s fine. But in this case, you should be more concerned with fees eating away at your account balance each month than with investing options.
If you’re planning to invest your HSA for the long run, be concerned about investing options. You should also be concerned about investing fees. After all, fees can quickly eat up your earnings within your account.
However, you’ll also want to look closely at the investing options. It can be worth paying some small fees for access to investing options that can far out-earn those fees. If your goal is to get a good return on your money, be sure your account gives you options that can do that.
If you’re closing in on retirement, you may also want to look at accounts with a wide variety of investing options. As you get closer to retirement, you may want to pull your investments from high-risk, high-reward investments to low-risk but stable investments. This is just like you’d manage your 401(k) or IRA.
How We’re Assessing HSAs
There are plenty of HSA options on the market. So there’s a chance that we missed a good one. If so, let us know in the comments.
We looked at data from a Morningstar study called The 2017 Health Savings Account Landscape. The study did a deep dive into HSA investing options and fees. We dug through this data–as well as data from a couple of other reputable roundups–to find the lowest-fee and best-investment HSAs.
First, we’ll talk about the low-fee options. Then we’ll dive into those with the best investing possibilities. Finally, we’ll highlight the account we think balances both the best.
Best HSA for Low Fees
So you’re one of those people who will likely use your whole HSA balance this year? In that case, you need to search for an HSA that has the lowest possible fees. Otherwise, your balance will slowly get worn away by expenses that are not medical expenses.
This administrator specifically focuses on HSA options for individuals. It has two account options–one that allows you to invest only in Saturna’s affiliated mutual funds and another that’s a self-directed brokerage HSA.
As you might guess, the first account type comes with lower fees. Saturna doesn’t charge any fees for account opening, account maintenance, statements, low balances, or closing your account. It also charges no fees for contributions, trades or exchanges, or account transfers.
In fact, the only fees Saturna charges are for wire transfers and overnight delivery of reimbursement checks. These rates vary, depending on the industry rate.
Saturna offers conveniences like the ability to invest directly from your bank account, redemption requests by phone or in writing any business day, and reimbursements into your bank account at no charge.
The one thing that Saturna is missing is a debit card or checkbook attached to your account. This is one of the reasons it’s able to charge such low fees. This can be problematic if you’re on a tight budget, as you’ll have to first fund the account, then pay medical expenses out of pocket, and then wait for a reimbursement. It sounds like reimbursements come quickly, but for a few days, maximum, you’ll basically have paid those medical expenses twice.
Still, even with this limitation, Saturna looks like an excellent option for consumers who want to spend down their HSA balances frequently. We’ll talk more about their self-directed account option in the section on investing.
I actually came across loads of local credit unions in my search that offer very low–or even no–monthly maintenance fees on HSAs. They often specialize in FDIC-insured accounts earning a bit of interest based on average daily balance.
However, I’ve chosen not to list all the credit unions here because many have very specific eligibility requirements for members. But the bottom line here is that if you’re looking for a low-fee, no-frills HSA that you don’t particularly want to invest, check your local credit unions first.
Best HSAs for Investing Options
Of course, all good investors also care about fees. But if you want to invest your HSA funds for the long-term, it’s important to have investing options. Here are the accounts we think have the best ones.
One thing to note is that the individual investments you choose with your HSA funds may have fees of their own. Read this article to learn more about these types of fees, and be sure to pay attention to these as you choose invest.
Health Savings Administrators
This administrator offers first-dollar investing. So even if you start out contributing a few bucks a month, you can invest it. They don’t charge investment transaction fees, either, which can keep more of your money around for investing.
These accounts let you choose from over 100 investment options, including options from Vanguard, Dimensional, and Franklin Templeton, among others. The account investors should choose is the InvestorSelect option. It has a $45 per year administrative fee plus a 6.25 basis points per quarter custodial fee.
Health Savings Administrators’ transactional fees look pretty hefty, but you can avoid most of these fees.
Optum Bank has relatively low fees, though its monthly fees are variable and difficult to suss out. But they do have a good variety of investing options, including access to the Charles Schwab target date funds.
It offers access to a variety of mutual funds, which you’ll find here. Optum does not charge trading fees, and all the funds are available without paying any fees. Again, you’ll have to check the fees for the individual funds you choose, though, as they will carry fees.
Best Balance of Both Worlds
What if you want a bit of both? You’ll spend some of your HSA each year, but you also want to invest it? These are the two accounts I think win out in that arena:
I actually stumbled on HealthEquity when looking for Alliant Credit Union. Alliant’s HSAs were the highest-scored option in the Morningstar spending account category. But they’re actually transitioning over to HealthEquity accounts in 2018.
According to their list of fees, there’s an account setup and monthly administration fees are typically paid by the plan sponsor. However, if you use one of these accounts independently, HealthEquity will charge up to $3.95 per month in maintenance fees.
You can use a debit card to pay your qualified healthcare expenses for free. Or you can order reimbursement checks, but those cost $2 each.
The interesting thing about HealthEquity is the variety of account types they offer. You can choose to keep your funds in an FDIC-insured account that earns a basic–pretty low–interest rate. Or you can invest in one of three account types:
- Auto-Pilot: This account offers full service advice, automatic implementation and rebalancing, and portfolio alerts. It charges monthly service fees of .08% and monthly investing administration fees of .033%.
- GPS: This account option splits the difference between full-service and self-directed. You can get some investing guidance from HealthEquity, but you’ll be primarily responsible for doing your own investing. You can, however, get portfolio alerts. The fees are slightly lower: .05% monthly service fees plus .033% investing administration fees.
- Self-Driven: With this type of account, you’re totally on your own. You’ll have plenty of investing options, but you’ll be totally responsible for checking out your account and making choices. There are no monthly service fees, but the account still carries the monthly investing administration fees of .033%.
If you want to take complete control over your HSA investing and have lower fees, Saturna is, again, a great option. Again, it lacks some of the conveniences of other HSAs. But if your primary goal is long-term investment, that’s not a big deal. You could always invest for the long term with Saturna, then move your account to a spending-oriented, FDIC-insured account with a debit card when it’s time to spend down the money.
Saturna’s self-directed Saturna Brokerage HSA has very low fees. The only monthly fee is a potential inactive account fee if you have had no trades for the entire year. Other investing-related fees are charged according to this commission schedule. In general, trading online by yourself will be cheaper than broker-assisted trading.
Saturna offers a wide range of investing options. It’s a good choice if you’re planning to do very little shifting of your investments over the year, but want to invest for the long term.