I recently wrote a post about why the health savings account (HSA) is probably the best investment tool to save for your retirement if you are enrolled in a high-deductible health plan. This is because HSA contributions are tax-deductible, funds grow tax-free while within the account, and when withdrawals are used for qualified health expenses, you do not pay taxes on the distributions. The HSA is the triple crown of tax efficiency.
All the other retirement accounts available either make you pay taxes before you put money in (Roth IRA), or they tax you when you take money out (401k and Traditional IRAs).
You will find many banks, brokerages, credit unions, and insurance companies offering health savings accounts. At HSASearch, they have compiled a database of over 429 providers with many more being added regularly. With so many choices, choosing a HSA provider that meets your needs can be a little challenging.
If you or your employer chose a poor provider, you are not stuck with them forever. Just like with normal banking and brokerage firms, you are able to switch to another provider at any time if you are unhappy with your provider’s fees, policies, or investment options. To get your employer’s matching contribution, you might have to keep the HSA account with their provider open, but you can transfer the funds out of it to the provider of your choice.
The Employee Benefit Research Institute (EBRI) estimates there are 20 million HSAs containing $37 billion in assets as of 2016. With 97% of HSA funds being in cash, it is no surprise that there are more and more companies offering HSAs as part of their services.
There are so many banks and credit unions that are jumping on the HSA account bandwagon because accounts with lots of cash sitting in them lets them make loans with that money to earn even more money while only giving you a fraction of interest back in return. With interest rates being so low, all those people with accounts that are in cash are actually losing money to inflation as health care costs continues to increase each year. This is why it is better to find a provider that lets you invest your HSA money.
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List Of The Best HSA Providers For Investing
Here is a list of popular HSAs that allow investing of your funds in your account and their fees:
Last updated: October 2018
Further
Fees: $12 to $48 per year + $18 per year investment fee
Further, based in Minneapolis, MN has been offering HSA products since 2004 and is one of the largest health savings account custodians in the nation. They have a variety of HSA plans with administrative fees that range from $1 to $4 per month.
Further has a $1,000 minimum balance that you need to keep in your HSA account. Once your balance exceeds the $1,000 minimum threshold, you can open a Basic Investment Account that gives you access to a variety of no-load and load-waived pre-selected mutual funds. Once your Basic Investment Account exceeds $10,000, you can open a self-directed brokerage account with Charles Schwab that gives you access to more than 4,000 mutual funds, 200+ commission-free ETFs, and $4.95 online equity trades.
HealthEquity
Fees: $36 per year administration fee + $0.33 per $1,000 invested monthly fee
HealthEquity administers 2.7 million health savings accounts with over $5 billion in deposits. They have a minimum threshold that needs to be met before you will be able to invest. This threshold varies from $0 to $2,500 if you are part of an employer group. For individuals and families enrolling on their own, the investment threshold is $2,000.
HealthEquity offers three options for investing: Auto-pilot, GPS, and self-driven. Auto-pilot is their full-service investment option with automated portfolio rebalancing, mutual fund rotation, and asset category rotation depending on your investment goals. The monthly service fees for Auto-pilot is 0.08% of invested assets. The GPS option provides recommended portfolio guidance, recommended quarterly rebalancing, and recommended fund and category rotation for a monthly fee of 0.05% of assets. There are no monthly service fees for the self-driven option.
For all three of the investment options, HealthEquity offers their Investor Choice lineup of low cost mutual funds consisting of Vanguard mutual funds. There is a monthly administration fee of $0.33 per $1,000 invested, but no other trading costs, commissions, or fund minimums.
Comparing to the competition, HealthEquity’s minimum threshold to invest, and monthly investment administration fee that is a percentage of total money invested makes this administrator more expensive than the others as your account balance grows over the years if you plan to use your HSA as a supplementary medical retirement fund.
Health Savings Administrators
Fees: $45 per year + $0.625 per $1,000 invested every quarter
Health Savings Administrators Fee Schedule
Promoting themselves as the “Investor’s HSA”, Health Savings Administrators has been around since 2004 when the HSA was created. Their first dollar investing allows you to invest right away with no minimum threshold to hit before being able to invest your contributions. They have nearly 400 funds to choose from, including funds from American Funds, Vanguard, Dimensional, MFS, T. Rowe Price and TIAA.
While there are no transaction fees and a large selection of funds to choose from, including Vanguard’s Total Stock Market ETF with its low expense ratios, Health Savings Administrators does charge a custodial fee of $0.625 per $1,000 every quarter. This means your costs will increase as your savings grows.
The HSA Authority
Fees: $36 per year
The HSA Authority is powered by Old National Bank and has been providing HSA accounts since 2004. They provide customized HSA solutions to employers and individuals in all 50 states.
The HSA Authority requires you to contribute $1,000 before you can establish an investment account. After that, you are allowed to transfer all your money if you wish to the investment account. The HSA Authority investment account is a self-directed account in partnership with Devenir. You’ll have access to a selection of 32 load-waived mutual funds, including 17 from Vanguard.
HSA Bank
Fees: $2.50 per month maintenance fee if daily balance in HSA is less than $5,000. If investing, an additional monthly investment fee of $3.00 if HSA’s daily balance is less than $5,000
There is no minimum balance to start investing at HSA Bank. You have the option to set up a TD Ameritrade self-directed brokerage account that will let you invest in stocks, bonds, and mutual funds. Trading fees of $6.95 per equity trade applies. TD Ameritrade commissions can be avoided if you enroll in their commission-free ETF program. Due to recent changes, Vanguard ETFs are no longer part of their commission-free ETF program after January 19, 2018. Or you can invest your funds in a pre-selected group of no-load mutual funds from Devenir for an annual fee of $24.
Depending on how you feel about fees, you can either keep $5,000 in your HSA and avoid $66 per year in fees or transfer 100% of your balance from your health savings account to your investment account and hopefully earn more from your investing or stock-picking prowess.
Lively
Fees: Basic account is free for individuals. Adding investing is $2.50 per month
Lively is a San Francisco based startup backed by top-tiered VC’s and investors. Lively was created to make HSAs less complicated, help users manage their spending and maximize their savings. Funds that are deposited in a Lively HSA are held at a custodial bank that is FDIC-insured.
There is no minimum balance required to start investing. Your HSA funds are invested with a TD Ameritrade Self-Directed Brokerage Account that gives you access to a variety of investment options that includes stocks, bonds, CDs, more than 250 commission-free ETFs, and over 13,000 mutual funds. Note that you will have to enroll separately to access their commission-free ETFs, and Vanguard ETFs are no longer part of the commission-free program as of January 19, 2018. If you wish to purchase Vanguard ETFs, stocks, or options, the standard commission is $6.95 for each trade.
Optum Bank
Fees: $3 per month unless your balance is over $3,000
Optum Bank started in 2003 in Salt Lake City, UT and is part of the UnitedHealth Group of companies. Optum Bank currently has over 3 million HSAs with over $8 billion in assets under management.
Optum Bank has a minimum investment threshold of $2,000 that you need to maintain in your HSA at all times, and the minimum that you can transfer to your investment account is $100. This means that you can start investing once you have contributed $2,100 into your HSA account. Optum Bank has a variety of no load and load waived mutual funds you can choose from, including ones from Vanguard along with target date funds from Schwab.
Saturna Capital
Fees: If self-directed Saturna Brokerage HSA, potential annual $25 inactive account fee
Saturna Capital was founded in 1989 and provides retirement planning, administration services, and manages equity, fixed income, and mutual funds for its clients. In 2005, they added HSAs to their offerings. Unlike other HSAs, the Saturna HSA was designed with investing for retirement in mind. To this end, Saturna does not provide a checkbook or debit card for account holders. There is no minimum threshold to begin investing.
Saturna Capital offers two options for investments: Saturna No-Load Mutual Funds or Saturna Self-Directed Brokerage HSA.
If investing in Saturna’s actively managed mutual funds, which are listed on page 12 of the fee schedule, there are no account opening, closing, maintenance, or custodial fees. However, their funds tend to have higher expense ratios which will erode your earnings.
If you choose to use their self-directed brokerage account, there is a $25 annual inactivity fee ($12.50 if holding mutual funds only) if you do not make at least one trade per calendar year. Their commission schedule also show a $1 fee for each dividend reinvestment event. The self-directed account allows you to invest in a variety of investments that includes money market funds, stocks, bonds, ETFs, mutual funds, or options. Commission-free no transaction fee mutual funds are available through Pershing’s FundVest Focus program, however you will need to meet minimum investment requirements for Saturna to waive their commissions. Other no-load mutual funds and stock trades are $14.95 each.
Of all the HSA investment options reviewed here, Saturna Capital has possibly the lowest costs if you make one transaction each year so you are not charged the annual inactivity fee. This one transaction could be could be the purchase of additional shares with your yearly HSA contribution. If you are an active trader, Saturna Capital’s $14.95 trading fee can start adding up fast.
Closing $ense
I’ve had a HSA with HSA Bank for over 10 years now. When I signed up back then, there were a lot less providers available than there are now.
If I were to sign up for an account as a new customer today, and I was someone who intended to use a health savings account to pay for current medical expenses, I would choose one with minimal account fees. There are two options in this situation: Saturna Capital or Lively. Both companies have no annual fees. Lively offers a debit card for the saving account, but Saturna Capital doesn’t. Lively also offers a small amount of interest on balances in the HSA. Lively is a startup, which may be a bit more risky since you do not know what changes they may make in the future. One consolation is their custodian bank is FDIC-insured, so your money is safe if the company fails.
If I was looking to invest my HSA contributions for the long term, my current provider is no longer the most affordable choice since HSA Bank does charge $66 in fees a year if you do not keep $5,000 in their savings account. You’ll want to find a provider that has minimal account balance requirements since any funds you need to keep in the savings account are funds that you could be earning you more money. You’ll also want to find one that doesn’t charge you a percentage of fees based on your investment account’s total size. This means HealthEquity and Health Savings Administrators are out.
You should decide whether you are a investor who wants to invest in mutual funds only or if you plan to buy stocks or ETFs regularly.
If you are a regular active trader, you’ll want a HSA provider that gives access to a brokerage account. These are: HSA Bank, Lively, Saturna Capital, and Further. Saturna Capital’s equity commissions are more than double than the others, so it’s really only three choices. Out of those three, Lively stands out since their annual fee is only $30, which is the same as Further’s, only you do not need to keep $1,000 in the HSA and you do not need to save $10,000 before getting access to a brokerage account. However, if you only make one trade a year, Saturna Capital has probably the lowest fees among those in the list as long as you don’t invest in their actively managed mutual funds.
Do you currently have a HSA account? Which provider do you recommend and why?