The Health Savings Account (HSA) Rules You Need to Know

Most households will encounter expensive medical bills in the future, even when you can negotiate discounts and deduct qualifying expenses on an itemized tax return.

A health savings account (HSA) is one of the best ways to pay for out-of-pocket medical expenses as there are several tax benefits.

If you have an HSA-eligible health plan, it’s important to know the health savings account rules to maximize your savings.

Table of Contents
  1. How HSAs Work
    1. Do HSA Funds Expire?
    2. Can You Invest HSA Funds?
    3. Can You Use HSA Funds on Dependents?
    4. How Does an HSA Work When I Go to the Doctor?
    5. How Does HSA Reimbursement Work?
    6. Do HSA Accounts Have Fees?
  2. HSA Tax Benefits
    1. Are Employer HSA Contributions Tax-Deductible?
    2. What is the HSA Tax Penalty?
    3. Do I Have to Report my HSA on my Taxes?
  3. Who Qualifies for an HSA?
    1. Can You Get an HSA Without an Employer?
  4. HSA Contribution Limits
    1. 2022 HSA Contribution Limits
    2. 2023 HSA Contribution Limits
    3. Excess HSA Contributions
    4. Rollover an IRA to an HSA
    5. Should You Max out an HSA?
  5. HSA Withdrawal Rules
    1. Family Expenses Qualify
    2. Eligible HSA Expenses
    3. Is There an HSA Reimbursement Deadline?
    4. Should I Use My HSA or Pay Out of Pocket?
    5. Can You Cash Out an HSA?
  6. Can You Use an HSA in Retirement?
    1. Maximum HSA Contribution Age
    2. Eligible HSA Expenses in Retirement
    3. Do HSAs Have Required Minimum Distributions?
    4. What Happens to an HSA When You Die?
  7. HSA Pros and Cons
    1. Pros
    2. Cons
  8. Are HSAs Worth It?
  9. What is the Downside of an HSA?
  10. HSAs vs FSAs
    1. FSA Tax Benefits
    2. FSA Contribution Limits
    3. Redemption Deadlines
  11. How to Join an HSA
  12. Best HSA Plans
    1. Lively HSA
    2. Fidelity HSA
    3. Bank of America HSA
  13. Summary

How HSAs Work

A health savings account is a tax-advantaged way to save for future medical expenses. To qualify you must have a high deductible health plan (HDHP).

An HSA is similar to a Roth IRA but you can use it to pay medical bills during your working years and during retirement.

Here is a quick look at how health savings accounts work:

  • Open a health savings account with an eligible insurance plan
  • Make tax-deductible contributions from your paycheck or a linked bank account
  • Save or invest the contribution amount to earn tax-free interest
  • Make a tax-free distribution for eligible medical expenses
  • Roll over the unused funds into each new year

You can make tax-deductible contributions similar to a traditional IRA up to the annual contribution limit. Employers have the option to contribute to your account too but their contributions count against your annual contribution limit. Contribution limits for 2023 are $7,750 for a family and $3,850 for individuals with a $1,000 catch-up contribution for those 55 years or older.

Like a Roth IRA, your withdrawals are tax-free for most medical-related expenses. In retirement, it’s possible to redeem funds for non-medical reasons.

Many plans let you invest your contributions to potentially earn compound interest to passively build your account balance like an IRA and 401k. The investment options vary by plan provider.

When you need to pay a medical bill, most plans offer a debit card to pay expenses directly from your HSA balance. You might also pay with a rewards credit card to earn the purchase rewards and upload your receipts for reimbursement.

Most people who qualify for an HSA open their account through the employer-provided health plan. In this case, you can fund your account by withholding money from each paycheck.

But it’s also possible to get a standalone HSA plan from companies like Lively HSA if your workplace doesn’t partner with an HSA provider or you have health insurance from the Marketplace or a state exchange.

You can read IRS Publication 969 to find the nuts and bolts of medical savings plans.

Do HSA Funds Expire?

Unlike other medical savings accounts, your HSA contributions don’t expire at the end of the year or when you switch employers. You have the flexibility of withdrawing your funds as soon as you make a contribution or at an unknown date in the future.

Your remaining balance won’t expire if you switch to a non-eligible health insurance plan or change employers. Your contributions are yours for the rest of your life.

While you can withdraw your contributions, you won’t be able to add new funds until you have a qualifying health plan again.

Can You Invest HSA Funds?

There is no limit to the amount of money you can save up in your HSA. Funds are held in a savings account that typically earns little to no interest and may have a fee.

However, most HSA accounts will let you invest funds once you reach a certain balance, say $2,000, in your account. This is a huge benefit and you should consider taking advantage of it if your balance gets to this point.

The investment options vary by plan administrator but can include:

  • Stocks
  • Bonds
  • ETFs
  • Mutual funds
  • Target date retirement funds

You can expect index funds as a low-fee and easily diversified way to invest funds you plan on using for expenses several years down the road.

If you decide to invest your HSA money, those funds go into an investment account and won’t be used to pay medical bills. You can only pay bills from your FDIC-insured interest-bearing cash account.

Your plan may require you to maintain a minimum cash account balance before you can start investing. The Bank of America HSA requires a $1,000 cash balance and you can invest funds above that threshold.

However, there isn’t a minimum cash threshold for accounts from Fidelity or Lively.

Can You Use HSA Funds on Dependents?

Another awesome perk of using an HSA is being able to use your funds for your spouse’s and dependent’s medical expenses. This is true even if you only qualify for a self-only HSA because your spouse has an ineligible health plan.

How Does an HSA Work When I Go to the Doctor?

Having an HSA won’t change your experience at the doctor’s office. The medical staff will bill your health insurance plan as usual and you will receive an explanation of benefits (EOB).

If you need to pay a portion of the costs upfront, you can use your HSA debit card at the doctor’s office or the billing department. Make sure you keep the receipt for your tax records.

How Does HSA Reimbursement Work?

There isn’t a reimbursement deadline to redeem your HSA funds for qualifying expenses. One requirement is that you can only use your HSA money for medical expenses occurring after you open your account.

Most plans let you pay upfront or request reimbursement later – this can be done even years later and no income taxes will be paid on these disbursements.

Your payment method depends on when the funds leave your HSA:

  • Pay with your HSA debit card: Funds withdraw immediately and no reimbursement is necessary. You can only use this option if the current HSA balance can cover the bill amount.
  • Upload a receipt: Pay for expenses out of pocket and then upload a receipt. You will receive reimbursement by direct deposit to your linked bank account or by paper check – typically within a few business days.

You don’t have to immediately pay doctor’s bills with HSA funds to receive reimbursement. For example, you might wait if you want to verify the charges qualify for a tax-free withdrawal.

You might seek reimbursement later if your HSA balance doesn’t have a sufficient balance and you need to add funds.

If you pay with your HSA debit card, the payment amount withdraws from your current cash balance. When there are insufficient cash reserves, you will need to sell some of your invested funds to raise capital.

Some people pay cash and keep their receipts for reimbursement once they reach retirement. This allows the balance in their account to grow to large sums and will provide some tax-free income (as they request reimbursement for past medical bills) in retirement.

Do HSA Accounts Have Fees?

It’s possible you (or your employer) will pay fees to use an HSA account. Some plans charge more fees than others and it’s important to price shop if you can pick your administrator.

Some of the fees you might pay include:

  • Monthly service fee
  • Investment account fees
  • Debit card transaction fees
  • Withdrawal fees

The fees you’re likely to pay can depend on if you have an individual plan or an employer-provided plan.

Individual plans can be less likely to charge recurring fees, including the best HSA plans. The only fees you might pay are the ETF or mutual fund expense fees – the fund manager collects this expense from all shareholders.

Some non-employer plans charge a flat monthly service fee of $5 or less that covers the expenses for cash and investment transactions.

Workplace plans can be a different story. The employer might pay a monthly service fee or pass it onto the employee.

Similar to a 401k plan, you must decide if the tax benefits are worth contributing to a fee-heavy plan. You can always explore opening an individual plan if this is the case.

HSA Tax Benefits

Many people are familiar with the tax benefits of retirement accounts but it’s easy to overlook the similar perks of an HSA. The money you set aside for medical expenses in an HSA can get better tax treatment than keeping your cash in a savings account.

There are three HSA tax benefits:

  1. Tax-deductible contributions
  2. Account balance can grow tax-free
  3. Tax-free withdrawals for qualifying expenses

A health savings account lets you enjoy the best tax perks of both a traditional IRA and a Roth IRA.

However, you will encounter a tax penalty if you contribute to a plan without a qualifying medical plan or make a non-qualifying withdrawal.

Tax-Free Contributions

Contributions that you (the primary account holder) make are tax-deductible and reduce your taxable income on your federal income taxes. Most states let you deduct the plan contributions too.

Contributions that employers make do count against your total contribution limit but is not considered income.

Tax-Free Investment Income

By default, HSA contributions deposit into an FDIC-insured account that earns interest. You can also invest your cash to potentially earn a higher yield.

Your savings interest and investment income grow tax-free and qualifying withdrawals are tax-free.

Tax-Free Withdrawals

While an HSA is a top-notch Roth IRA alternative, you can only withdraw your cash for qualifying medical reasons.

Before age 65, that’s for qualifying medical, dental, and vision expenses. Thankfully, most medical services and treatments qualify.

The list of qualifying reasons expands after you turn 65 making it easier to avoid potential taxes. However, you must still use your contributions for medical expenses to avoid paying taxes.

Remember, there is no time limit on reimbursements. So you can pay cash for medical expenses now and receive reimbursement years later for some tax-free income. If you choose to do this, make sure you keep excellent records.

Are Employer HSA Contributions Tax-Deductible?

Employers and other parties can contribute to your HSA account. You cannot deduct these contributions as you didn’t earn the income. However, these contributions qualify for tax-free withdrawals.

What is the HSA Tax Penalty?

HSAs are an awesome way to set aside money for the inevitable medical bills. But non-qualifying withdrawals are subject to income taxes and an additional IRS penalty.

The potential penalties depend on your age when you make a distribution.

Under Age 65

If you’re younger than 65 years, you will pay income taxes on the non-qualifying distribution amount and an additional 20% tax penalty.

The income tax penalty depends on which tax bracket you’re in for your federal income taxes.

This penalty structure is similar to making early distributions from an IRA.

You may also have to pay a 6% excise tax on your excess annual contributions. It’s possible to refund your excess contributions before filing your federal tax return to avoid this penalty.

Age 65 or Older

Once you turn 65, the 20% early withdrawal penalty disappears. You only pay ordinary income taxes on the distribution amount for non-qualifying expenses.

Do I Have to Report my HSA on my Taxes?

You must report your health savings account contribution and withdrawal amounts on IRS Form 8889.

Your HSA administrator will furnish a year-end Form 1099-SA reporting your plan withdrawals and account debit card purchases. You will need to indicate which withdrawals qualify for the tax-free benefits.

While you won’t have to submit receipts with your tax return, keep this information handy in the event of a tax audit.

Online tax software will walk you through the reporting steps to accurately report your activity.

Who Qualifies for an HSA?

There is one basic requirement for individuals and families to qualify for a health savings account. You must have a high deductible health plan (HDHP) and not have other medical insurance coverage.

An HDHP plan has a higher deductible and yearly out-of-pocket maximums but a lower monthly premium.

Here are the minimum qualifications for an HDHP in 2023:

Coverage StatusMinimum DeductibleMaximum Out-of-Pocket Expenses (In-Network)

Your employer may offer a qualifying plan and you can also buy HSA-eligible coverage from the Marketplace if your only option is federal health coverage.

You won’t qualify for an HSA if you also have one of these coverage situations:

  • Enrolled in Medicare
  • Receive Veterans Affairs (VA) health benefits
  • An HDHP with a flexible spending account (FSA) or a health reimbursement arrangement (HRA)
  • Health sharing plan
  • Are eligible for coverage on a spouse’s non-HDHP plan
  • Are a dependent on another person’s tax return

You can still qualify for an HSA if you also have Archer MSA.

Families can open an HSA if they do not qualify for one of the ineligible plans above. If your spouse’s health insurance doesn’t qualify for an HSA (i.e., a PPO) and they can’t add you to their policy, you can open a self-only savings account.

If you have a non-qualifying plan, you cannot contribute to an HSA until you switch to an eligible plan.

Can You Get an HSA Without an Employer?

Yes, there are several providers that offer self-only and family HSAs independent from an employer. You qualify as long as you have eligible HDHP coverage.

You might consider this option if you’re self-employed, your employer doesn’t offer an HSA, or your workplace health savings account has substantial fees.

Your employer is unlikely to contribute to a standalone plan as you must fund it from a linked bank account. But you will still enjoy the same tax benefits as a workplace HSA.

HSA Contribution Limits

There are annual contribution limits to be aware of to avoid a potential 6% excise tax on excessive contributions. It’s also important to note that employer contributions and Archer MSA contributions count toward the annual HSA limit.

The yearly limits can change yearly and accountholders age 55 or older can make additional catch-up contributions.

2022 HSA Contribution Limits

  • Individuals: $3,650 ($4,650 if age 55 or older)
  • Families: $7,300 ($8,300 if age 55 or older)

2023 HSA Contribution Limits

  • Individuals: $3,850 ($4,850 if age 55 or older)
  • Families: $7,750 ($8,750 if age 55 or older)

The contribution deadline is April 15, 2023 – the federal income tax deadline. Keep this deadline in mind if you need a last-minute tax deduction and have the extra cash.

Excess HSA Contributions

It can be easy to make excess HSA contributions if your employer chips in, two spouses contribute to the same plan, or you also fund an Archer MSA.

Changing to a non-HDHP health plan, losing health coverage, or enrolling in Medicare can reduce your maximum contribution limit too.

The “Last Month Rule” in IRS Publication 969 is important to review if your coverage situation changes mid-year. Your contribution limit is calculated using a testing period and you will need to have coverage through December 1 of the next tax year to be able to make the full contribution amount for this tax year penalty-free.

An HSA contribution calculator can estimate your maximum contribution amount using your coverage details.

If you make an excess contribution, it’s possible to complete a return of excess contribution form with the HSA provider before you file your federal taxes.

But you will pay a 6% excise tax on the excess amount if you don’t catch the event in time.

Rollover an IRA to an HSA

Current tax rules allow individuals to make a one-time contribution from an IRA to an HSA. This transfer doesn’t incur the 10% early redemption penalty or income taxes like typical early IRA distributions.

The most you can roll over is the annual contribution limit. As you can only do this money move once per lifetime, consider rolling over as much as possible.

There is one event when you can do two rollovers. It’s when you initially qualify for an individual HSA and then qualify for a family HSA later in the same tax year. In this case, you can contribute up to the annual contribution limit for families.

Unfortunately, you can’t roll an HSA into an IRA.

Should You Max out an HSA?

Contributing the full annual health savings account limit is a good idea if you have the money. Here are some of the leading reasons to consider maxing out your HSA:

  • Contributions are tax-deductible
  • Most medical expenses qualify for tax-free distributions
  • Can withdraw funds during your working years or retirement
  • Can use the funds for yourself, spouse, or dependents

However, you should only contribute money you’re comfortable setting aside for medical expenses to avoid potential penalties in the future.

While nobody can predict their future medical needs, the likelihood of needing expensive treatment increases as we age or our families grow.

You should also compare your potential investment options to retirement accounts and taxable accounts. Partially funding your HSA might be a better option if you can get better investment returns from alternative assets even if you need to pay taxes.

HSA Withdrawal Rules

How you spend your balance can be the most important health savings account rules to follow. Using your funds for a non-eligible expense incurs a hefty tax penalty.

Before you panic, most medical and dental expenses qualify.

Family Expenses Qualify

Even if you can only open a self-only HSA with a smaller annual contribution limit, your contributions can reimburse the expenses for your spouse and dependents.

Eligible HSA Expenses

Here is a closer look at some of the ways you can use your HSA funds tax-free.

The following expenses can apply to you, your spouse or dependents you declare on your tax return. These costs must occur after opening your HSA to receive reimbursement.

Medical Expenses

Some of the common medical expenses you can use HSA dollars for include:

  • Acupuncture
  • Ambulance service
  • Bandages
  • Body scan and x-rays
  • Chiropractor
  • Crutches
  • Doctor’s office visits
  • Hearing aids
  • Insulin
  • Laboratory fees
  • Medication (prescription and over-the-counter)
  • Personal protective equipment
  • Physical therapy
  • Surgery (excluding cosmetic surgery)
  • Wheelchair and walking aids

Some items and services may require a prescription or a doctor’s formal recommendation to qualify.

Health Insurance Premiums

You cannot use your funds to pay your HDHP medical insurance premiums in most instances. But some medical premiums can qualify for HSA dollars:

  • Long-term care insurance
  • Health care continuation coverage (i.e., COBRA)
  • Coverage while unemployed under federal or state law
  • Medicare and other health care coverage after age 65

If you’re at least 65 years old, the withdrawal rules expand so you can use your money to pay most Medicare premiums. One exception is a Medicare supplemental policy like Medigap.

Dental Expenses

Your funds can also cover most dental expenses:

  • Cleanings
  • Fillings, sealants, etc.
  • Orthodontics
  • X-rays

Vision Expenses

These vision-related expenses can qualify as well:

  • Contact lenses
  • Eyeglasses
  • Surgery
  • Vision exams

The contact lenses and glasses may be necessary for medical reasons to qualify and not for fashion reasons.

Please refer to IRS Publication 502 for an exhaustive list of qualifying expenses.

Ineligible Expenses

Not every medical expense qualifies for tax-free reimbursement. Common over-the-counter products are the best example in addition to non-essential medical services.

You will need to pay out-of-pocket for some of these costs:

  • Baby diapers
  • Co-pays
  • Cosmetic surgery
  • Cotton balls
  • Hair regrowth
  • Lotion
  • Prepaying medical expenses
  • Prescription drug programs
  • Weight loss supplements

Many more items are ineligible for reimbursement. Checking with your HSA provider can be one of the best ways to see what’s covered and what’s not.

Also, expenses occurring before your HSA opening date are ineligible. You also can’t get reimbursed for eligible expenses that you plan to deduct as an unreimbursed medical expense on your itemized tax return.

Is There an HSA Reimbursement Deadline?

There isn’t a deadline to request reimbursement for eligible expenses. Your unused funds roll over into next year until you decide to use them.

However, requesting reimbursement by December 31 of the same year as the expense date can make recordkeeping easier.

Remember that you have until the federal tax deadline (usually April 15) to make contributions if you need extra cash to request reimbursement.

Should I Use My HSA or Pay Out of Pocket?

Health savings accounts give you the flexibility of using your cash balance now or later.

You might decide to pay for current medical bills with HSA funds as this money is already set aside for healthcare. Not using your HSA means you may have to dip into savings or sign up for a payment plan that increases your short-term monthly expenses.

There are three potential advantages of paying out-of-pocket now:

  • Your HSA investments have more time to earn passive income
  • You can deduct unreimbursed medical expenses on an itemized tax return
  • Want to save your tax-advantaged dollars for retirement

Another reason to consider paying out-of-pocket today is for small bills that you can easily pay without feeling any financial pain.

As your HSA funds don’t expire, there isn’t the pressure to use them in the same year you make the contribution. As a result, there are more incentives to contribute more and accumulate your balance for future years or when you have large bills.

Can You Cash Out an HSA?

It’s possible to cash out an HSA at any time. However, liquidating your entire account for non-medical expenses isn’t a good move in most instances as the withdrawal amount is subject to taxes and the 20% penalty.

Applying the entire amount to eligible medical, dental and vision expenses waives the penalty and can be worth it to avoid medical debt.

Can You Use an HSA in Retirement?

Your objective might be saving some (or all) of your HSA dollars to cover medical expenses in retirement when you’re no longer earning an active income.

The good news is that health savings accounts cover expenses in retirement whether you’re enrolled in Medicare or not. The tax-free withdrawals can be valuable as you plan retirement.

However, you will no longer be able to contribute once you enroll in Medicare as you forfeit your HDHP medical insurance.

Maximum HSA Contribution Age

One misconception is that you can no longer contribute to an HSA once you turn 65 or retire, whichever comes first. There isn’t a maximum contribution age for a health savings account.

The one main requirement is that you have an HDHP health plan.

You might continue having this plan once you become Medicare-eligible at age 65 but defer enrollment.

Once you enroll in Medicare, you can no longer contribute to your health savings plan.

Eligible HSA Expenses in Retirement

You can use your account balance for several more expenses once you turn 65. However, the costs must be medical-related.

Eligible expenses can include:

  • Most Medicare premiums
  • Employee-portion of employer-provided health coverage
  • Long-term care coverage

There is also more incentive to use your contributions for non-medical expenses. You will pay ordinary income taxes on the withdrawal amount like traditional IRA distributions. The 20% penalty for ineligible expenses no longer applies after reaching age 65.

Do HSAs Have Required Minimum Distributions?

HSAs don’t have required minimum distributions (RMDs) like a traditional IRA as your withdrawals will most likely be tax-free.

What Happens to an HSA When You Die?

Your unspent HSA dollars don’t go with you to the grave when you designate a beneficiary.

Your estate plan should include your plans for any remaining HSA funds. It’s possible to bequeath any remaining HSA balance to a surviving spouse tax-free. However, a non-spouse beneficiary will have to taxes on the balance amount.

List Your Spouse as the Primary Beneficiary

The spouse of the deceased HSA plan holder is the only person who doesn’t have to pay taxes on the inherited amount. You will need to list your spouse as the primary beneficiary to waive the tax charges.

If the spouse isn’t listed as the primary beneficiary, they will need to pay taxes on the amount they receive.

Non-Spousal Dependents Pay Taxes

Any recipient that isn’t the deceased’s spouse will pay taxes on the inherited amount. The taxable amount is the fair market value of the HSA.

HSA Pros and Cons

Here is a quick synopsis of the advantages and disadvantages of the HSA rules.


  • Several tax advantages
  • Funds don’t expire
  • Can invest contributions to earn more interest
  • Most medical-related expenses qualify for tax-free withdrawals


  • Can only redeem for medical expenses to avoid taxes and penalties
  • Must have a high deductible health plan (HDHP) to contribute
  • Monthly service fees may apply
  • Non-spouse beneficiaries will pay taxes on the inherited amount

Are HSAs Worth It?

HSAs are worth considering if you have an eligible health plan and want a dedicated fund for medical expenses with tax-advantaged dollars.

Even if you don’t reach your annual HSA contribution limit, it’s difficult to ignore the tax benefits. After all, you’ll likely have medical expenses in the future an HSA could cover.

Emergencies can happen at any time and it’s hard to predict the cost of future medical treatment. This fund can prevent having to use your regular savings, retirement, or emergency fund.

If you currently budget money for medical bills, saving with an HSA gets more value from your contributions because of the tax perks. The additional paperwork can be worth the tax savings.

What is the Downside of an HSA?

One of the largest downsides of an HSA is that you must have an HDHP plan to open and continue making contributions. While an HDHP plan is a common health insurance option, many people have an ineligible plan type.

You must also be comfortable only being able to access the funds for medical expenses. If you have limited income, consider diversifying your savings into a variety of accounts to address your short-term and long-term expenses.

Focusing on maxing out your retirement accounts can be the better option if you want more flexibility to make penalty-free withdrawals. Of course, you must wait until retirement to tap these investments without penalty.

HSAs vs FSAs

Another popular tax-advantaged savings account is a flexible spending account (also known as a flexible spending arrangement/FSA). An FSA is a popular alternative to HSAs that your employer might offer instead.

You can only have one or the other but not both. If you have an FSA, your spouse can still have an individual HSA if they have a qualifying health plan from their employer.

Here are the key highlights of FSAs

FSA Tax Benefits

An FSA offers tax-deductible contributions and the funds can only reimburse eligible medical expenses, similar to an HSA.

Your contribution amounts to both an HSA or FSA reduce your taxable income dollar-for-dollar.

FSA Contribution Limits

The annual contribution limit in 2023 is $3,050. There isn’t a higher limit for married couples unless the other spouse also has an FSA. The minimum remained $100.

If both spouses have an FSA, they can each contribute $3,050 to their respective accounts for a combined contribution of $6,100.

HSAs have higher contribution limits.

Redemption Deadlines

Employees must redeem their FSA balance before the end of the calendar year. As a result, FSAs are not a good long-term savings option like an HSA.

Employers can offer one of two “carryover” options each year for 2023:

  1. Carryover up to $610 of unused contributions into the next calendar year
  2. Extend the unused balance redemption window by 2.5 months

Only one option is available. Your first medical expenses for the next year will use these funds if they are available.

If the funds expire before you use them, you lose the remaining balance, unlike an HSA.

Assuming you can choose between either savings account, the HSA is the better option for most people as it’s not tied to your job and you can roll over your unused balance for a lifetime.

How to Join an HSA

Opening a health savings account can be easy when you follow these steps:

  1. Enroll in an HSA-eligible high deductible health plan
  2. Open an HSA through your employer or with an independent administrator
  3. Fund your account with a one-time or recurring deposit
  4. Invest the long-term balance in an investment account
  5. Use funds for eligible medical expenses

If you’re comfortable with more risk, your investment account is like a second IRA. But if you only want the tax benefits and the stability of an FDIC-insured “safe” investment, the cash account can be effective too.

Best HSA Plans

If you have an HSA eligible plan but your employer doesn’t offer an HSA you can choose from of these HSA providers to avoid fees and have many investment options.

Lively HSA

Monthly service fee: $0

Lively doesn’t charge any fees for its individual or family HSAs ($2.95 per month for employers). There isn’t a minimum balance requirement to start investing.

Your investment options include an interest-bearing cash account, a self-directed portfolio of stocks and ETFs, and a guided portfolio.

Read our Lively HSA review to learn more.

Learn more about Lively

Fidelity HSA

Monthly service fee: $0

The Fidelity HSA is part of the Fidelity Investments family. You may prefer this fund if you already use Fidelity for your IRA and other financial accounts.

You can open an account for $0 and there are no service fees. There isn’t a minimum threshold to start investing but only your cash account can reimburse medical bills.

Investment options include self-directed stocks, funds, and guided portfolios catering to HSA portfolios.

Bank of America HSA

Monthly service fee: $2.50

The Bank of America HSA charges a fixed $2.50 monthly service fee which is a downside. You will also need to maintain a minimum $1,000 cash balance before you can invest any funds.


Following the health savings account rules is one of the easiest ways to accumulate tax-advantaged dollars for future expenses when you have the right health plan. If you qualify for an HSA, this account can be an important part of your long-term financial plan.

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About Josh Patoka

After graduating in $50k with student loans in May 2008 from Virginia Military Institute with a B.A. International Studies and Political Science with a minor in Spanish (he studied abroad in Sevilla, Spain for 3 months), Josh decided to sell his soul for seven years by working in the transportation industry to get out of debt ASAP and focus on doing something else with a better work-life balance.

He is a father of three and has been writing about (almost) everything personal finance since 2015. You can also find him at his own blog Money Buffalo where he shares his personal experience of becoming debt-free (twice) and taking a 50%+ pay cut when he changed careers.

Today, Josh relishes the flexibility of being self-employed and debt-free and encourages others to pursue their dreams. Josh enjoys spending his free time reading books and spending time with his wife and three children.

Opinions expressed here are the author's alone, not those of any bank or financial institution. This content has not been reviewed, approved or otherwise endorsed by any of these entities.

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