Make use of money that are exempt from taxation in order to pay for medical bills
Expenses that are connected to your healthcare can be paid for with money from a healthcare savings account, often known as an HSA. Despite the fact that they are typically not a good choice for people who are older or who have health conditions that require frequent visits to the doctor or hospital, they can be an excellent way to pay for unanticipated medical care and are highly recommended for those who find themselves in need of it. It would be best if you were enrolled in a high-deductible health insurance plan to be eligible for one.
You can also utilize an HSA to build up cash for investing, which is something you can do if it turns out that you won't need to pay for your healthcare out of your own money.
HSAs can be established by a person or an employer, with the latter option allowing the employer to contribute to the employee's account. An account can receive tax-free contributions of money to invest or pay for medically-related expenses. Even though the typical person spends 96% of their annual contributions on healthcare costs, no "use-it-or-lose-it" policies are associated with HSAs. Instead, the money in an HSA grows tax-free until it is withdrawn.
The best health savings accounts are those that are simple to open and administer, allow you to invest up to one hundred percent of your account balance, pay interest on contributions made by the account holder, and have minimal or no recurring maintenance fees. We researched and evaluated over a dozen of the most prominent HSA accounts before selecting the top six, which are shown in the following paragraphs.
The Finest Health Savings Accounts Available in 2022 for You
- HIGHLY RECOMMENDED OVERALL: the Lively
- HIGHLY RECOMMENDED FOR OFFERING THE BEST INVESTMENT OPTIONS FOR HSA: Fidelity
- HIGHLY RECOMMENDED FOR EMPLOYERS: HealthEquity
- HIGHLY RECOMMENDED FOR HSA MANAGEMENT: Optum Bank
- HIGHLY RECOMMENDED FOR HSA EDUCATION: HSA Authority
- HIGHLY RECOMMENDED FOR TRADITIONAL BANKS: Bank of America.
HIGHLY RECOMMENDED OVERALL: the Lively
Lively is the most excellent HSA account overall due to the fact that it does not charge any fees to individual users, has excellent ratings for its customer care, and offers a wide variety of investment opportunities. The procedure of setting up Lively is simple and quick. By linking your bank account, you may get started immediately without having to fill out any paperwork. Lively will assist you with setting up either periodic contributions or an initial one-time payment, whichever you like.
Lively is another fantastic alternative for companies, and there is a monthly fee of $2.95 for each employee who registers for an HSA account through the employer. When compared to the costs that low-deductible healthcare plans might impose on employees of small businesses, this can be a significant advantage. Lively gives you the ability to synchronize with your company's payroll and gives you alternatives for centralized management of donations and enrollments.
The investment possibilities provided by Lively are excellent, regardless of whether you sign up for the service as an individual or as an employee who gains access to the account through their workplace. You can either invest your money through a self-directed brokerage account at TD Ameritrade, which can be accessed for no cost, or take advantage of a guided portfolio offered by Devenir, which charges a fee equal to 0.50 percent of the total amount it manages each year. Both of these options are available to you. There is not a needed minimum amount of cash balance for either of the options.
Because you are able to manage your investments using either your web dashboard or a mobile app, it is simple to manage your account regardless of where you happen to be.
HIGHLY RECOMMENDED FOR OFFERING THE BEST INVESTMENT OPTIONS FOR HSA: Fidelity
Because Fidelity is a typical financial organization that provides a reasonable HSA account along with fantastic investment alternatives and does not charge any fees for account maintenance or account closure, we decided to make our top pick for HSA investment options come from Fidelity. Fidelity gives you all of the benefits of the smaller HSA account providers, such as a simple process for setting up your account and no fees, in addition to providing their very own extensive in-house investing alternatives.
No investment minimums are required, and no transaction fees are associated with any of the available investment alternatives for Fidelity's Health Savings Accounts (HSA). You have the ability to invest in stocks, bonds, mutual funds, exchange-traded funds, certificates of deposit, and options when you open an HSA account with Fidelity. You can also take advantage of the investment assistance that Fidelity provides in order to select the assets that are suitable for you.
Online reviewers give a high evaluation of the customer assistance provided by Fidelity, particularly with regard to the investing choices. If you want a number of the extra features that come with a reliable investment account but do not want to pay any additional fees, this is the option for you to go with.
HIGHLY RECOMMENDED FOR EMPLOYERS: HealthEquity
We recommend HealthEquity as the best HSA account for businesses because it does not impose any account minimums or fees, is straightforward to set up, and provides an all-in-one solution for employers that includes health plans, FSAs, and HRAs. Small business owners will be able to take care of all their benefit offerings with the assistance of HealthEquity, which makes it simple for employees to sign up for and manage their benefits in a centralized location.
Benefits can be challenging to understand for business owners, and they can cost you and your staff if you are unable to provide the same level of compensation as your rivals. In addition, consolidating all of your firm's benefits into a single location will help remove the administrative problems and reduce the internal costs connected with operating the benefits program at your company.
HealthEquity is a non-bank HSA custodian. This means it does not offer direct investment alternatives to its customers. Instead, the company is focused on giving you the very best experience possible when it comes to managing your HSA. In addition to providing aid with health savings accounts (HSAs), flexible spending accounts (FSAs), and HRAs, the organization also provides commuter benefits, wellness programs, and assistance with COBRA compliance.
You have the ability to directly manage your HSA through the mobile app provided by the organization, but if you do not keep at least $2,500 in your account at all times, there is a monthly administration fee.
HIGHLY RECOMMENDED FOR HSA MANAGEMENT: Optum Bank
Because of the wide variety of tools and features that it provides through Betterment, an online Robo-advisor, and cash management company, Optum Bank is the best HSA account for investment management. These tools and features include automatic deposits, investment sweeping, automatic portfolio rebalancing, dividend reinvestment, and receipt storage. This helps keep your investments flowing without requiring a lot of manual labor, and it also helps you ensure that you comply with all of the HSA laws when you begin to invest and use the money in your account.
The fact that Optum charges more money for its services than the other organizations on our list is the most significant drawback of using Optum. Depending on what you're purchasing with your investments, you will most likely be required to pay an annual maintenance cost, an annual custody fee, and multiple investments feeds. Optum also interacts with personal finance apps such as Personal Capital, which can assist you in keeping track of all fees and the success of your investments and ensuring that you have adequate funds in your budget to cover anticipated future medical bills.
Optum also has a customer review rating that is below average; nevertheless, this should not come as a surprise given that the company is one of the market leaders in the financial category and that it supports more than 3 million accounts. A number of consumers voiced their dissatisfaction with Optum's customer support, while others stated that they did not believe that the company's web tools were simple enough to use. Users are incredibly satisfied with how simple it is to manage their accounts online and with the wealth of information pertaining to HSAs that can be found on the website.
HIGHLY RECOMMENDED FOR HSA EDUCATION: HSA Authority
Old National Bank oversees and serves as a national leader in HSA accounts and is known as HSA Authority. No annual fees or minimum balances are charged, and you will not be charged any additional costs to move HSA funds into or out of an HSA Authority account. In addition, there are no fees paid to transfer funds out of an HSA Authority account. HAS Authority has a dedicated customer service team that helps you through every step of the process. Additionally, there is a robust library of online resources that help you better understand your HSA options, which can change annually based on your needs and circumstances. Due to these reasons, we chose HSA Authority as the best HSA account for ongoing education. We made this decision because HSA Authority has a dedicated customer service team that helps you through every step of the process.
Although current and former customers give HSA Authority's customer service a high rating, the online services available through their website are not as robust as those offered by other companies on this list. For instance, in order to access your online account with Old National Bank, you had to utilize their app, which was not designed with HSA customers in mind when it was developed. Users can only access the most fundamental functionality within the app, such as seeing their deposits and account balances.
In addition, you won't be charged any fees to use the automated teller machines provided by Old National Bank; however, if you use an ATM that is not part of your network, you will be subject to fees. The bank receives a high ranking for offering individualized attention to new users set up an account as well as existing customers striving to grow their money, which, despite the convenience features having the lowest rankings on our list, rates highly.
HIGHLY RECOMMENDED FOR TRADITIONAL BANKS: Bank of America
If you use Bank of America for banking, loans, or any other type of financial product, you may take advantage of the well-rounded Health Savings Account (HSA) that the bank provides. This HSA account is compatible with all of your other accounts.
Because of its extensive selection of financial services, low costs, and fantastic account possibilities, the HSA product that Bank of America supplies is, in our opinion, the greatest one that a traditional bank provides. People who wish to maintain all of their financial dealings with a single institution or those who would instead utilize a well-known, established brand for their HSA account are the most outstanding candidates for this type of arrangement.
Companies can use individual accounts and accounts to provide health savings accounts (HSAs) for their staff members are available through Bank of America. The HSA account offered by Bank of America comes with 24/7 customer care, which has received a variety of evaluations, as well as a powerful mobile app that allows you to handle all of your HSA account's requirements. There will be a fee of $2.50 charged each month to maintain your account, and you have the potential to earn interest at a rate of up to 0.07 percent per year, which you will pay out on a monthly basis.
In addition, if you would like to make investments with the money that is in your HSA, Bank of America has a number of different funds from which you can choose. They provide clients with access to some of the most well-known and widely used investment funds from reputable companies like Vanguard and Blackrock. Although they may not have the most extensive investment options available among the companies on this list, they do have a diverse range of investment opportunities.
Frequently Asked Questions (FAQs)
What exactly is a Healthcare Savings Account?
A health savings account, often known as an HSA, is a type of tax-advantaged savings account that allows you to make contributions tax-free directly from your salary. You can use the money in this account to either invest it or pay for healthcare-related costs. Only people who have a high-deductible health plan are eligible to open a health savings account (HSA). This type of plan mandates that you pay for some or all of your medical expenses out of pocket (up to a predetermined limit) before your insurance company begins covering any of your expenses.
A flexible spending account is not the same as a health savings account (FSA). The medical costs that the money can cover in your FSA are often more limited than those covered by other health savings accounts. In contrast to an FSA, the money in an HSA can be carried over from one year to the next, but an FSA's rollover limit is only $550. 2 An FSA can also often only be opened through your employer. In contrast, an HSA account can be opened independently by any individual who meets the requirements.
What is the function of an HSA account?
The process shouldn't be too complicated if you do not qualify for an HSA. If you are eligible, it shouldn't be too difficult to open an HSA account; you have to work with a provider who can assist you, such as a bank, credit union, insurance company, broker, or even a financial advisor. They will take care of the paperwork on your behalf and advise you on matters such as your contribution limit, which will be $3,600 for 2021, and how you may pay for your healthcare expenditures or help you locate the appropriate investment options. They will also handle and deal with the paperwork for you.
Your health savings account (HSA) provides you with a debit card that you can use at healthcare facilities such as pharmacies, doctor's offices, and hospitals. Using an HSA to pay for your medical bills is comparable to paying for them on your own, with the critical difference being that you can do so using money exempt from taxation. If you do not have the funds in your account when the charge is incurred and you wind up paying for it out of pocket, you should preserve the receipt so that you can refund yourself later when you have the funds in your account.
HSA accounts come with a number of advantages, one of which is the provision of significant tax savings. In point of fact, "A Health Savings Account is the unsung hero of all benefits." It is the only type of investment vehicle that provides these three distinct tax advantages. According to Pam Krueger, the creator of MoneyTrack and a co-host on the show, "The money you donate goes into the HSA account before taxes are taken out, the funds grow tax-free, and are tax-free when they are utilized to pay for healthcare bills."
Who Is Eligible to Use an HSA?
The Internal Revenue Service requires that you already be enrolled in a high-deductible health insurance plan on the first of the month before you can open an HSA account. For the year 2021, this indicates that you are required to have a health insurance plan with a deductible of at least $1,400 for people or $2,800 for families. This requirement is in place so that you can qualify for an HSA.
Because of this, it is challenging for people who already have health concerns to make the investment in a healthcare savings account worthwhile because they would be responsible for paying a significant portion of their medical expenses out of pocket.
In addition, you need to ensure that you satisfy the following requirements:
- Lack any other form of health insurance coverage
- You are unable to enroll in the Medicare program.
- You are not eligible to be claimed as a dependent on the income tax return of another person.
- You are not permitted to have a health reimbursement or a flexible spending account at this time.
- You cannot have received benefits from the Veterans Affairs (VA) in the preceding three months, with the exception of preventative care benefits.
It is critical that you pay close attention to your health plan and how it evolves from one year to the next because there is a possibility that these changes could also affect your eligibility.
How Much Does It Cost to Open an HSA Account?
The monthly service cost for most decent HSA accounts ranges from zero to five dollars. If you have a minimum balance in your account, typically between $1,000 and $5,000, many service providers will waive the monthly costs associated with your account. If you are no longer qualified for an HSA, many HSA providers will charge you a fee of up to $25 to cancel your HSA account; however, in most cases, you will still have access to the assets in your account.
In addition, if you take money out of your retirement account before you turn 65 for any reason that is not connected to medical costs, you will be required to pay taxes on that money in addition to a 20 percent penalty. After the age of 65, you will no longer be required to pay the penalty; however, any money you spend on non-medical expenses will still be subject to taxation.
Are Investments Allowed Within an HSA Account?
You have the ability to put the money you have in your HSA account into a number of different investments, including stocks, bonds, and mutual funds. Any interest that you earn in your account as a result of the investments will not be subject to taxation, precisely like the contributions you make to the account. This is because your investment options will typically differ depending on your choice of HSA provider. If investing is something that is important to you, you will want to explore each HSA provider's investment possibilities before making your pick.
When you invest your money, you will be subject to additional costs, just like you would be if you utilized a third party to invest your money. To handle your investment, each service provider will charge you a different fee, which will typically range from 0.05 percent to 0.75 percent on an annual basis, depending on your investment.
How We Determined Which Healthcare Savings Accounts Are the Best Suited For You
Over a dozen of the most reputable HSA accounts from throughout the country were considered in our search for the ideal HSA account. We whittled the list down to the top six based on the costs, investment opportunities, convenience of setup, and general ratings from previous customers. Your decision on whether or not to invest your funds, the amount you want to contribute, and the number of times you anticipate utilizing your funds to pay for medical expenditures will determine which provider is the best fit for you.
