Skip to main content
Menu File a Claim Login
American-Fidelity-logo
Menu
Menu File a Claim Login
American-Fidelity-logo
American Fidelity Logo American Fidelity Logo
  1. Strategy
      •  
      • Employee Benefits
      • Communication and Education
      • Enrollment and Admin
      • HR Assistance
      • Tax Savings
      • Compliance Updates
      •  
  2. Products
      •  
      • Benefits
      • Dependent Verification
      • HR Technology
      • Reimbursement Accounts
      • Retirement Savings
      • Section 125
      •  
  3. Why Us
      •  
      • For Education
      • For the Public Sector
      • For Automotive
      • Account Managers
      • Customer Testimonials
      •  
  4. Blog
      •  
      • Benefits Strategy
      • Reimbursement Accounts
      • Supplemental Benefits
      • Customer Stories
      • Compliance Updates
      •  
  5. Support
      •  
      • COVID-19
      • Employer Assistance
      • Videos
      • Contact Us
      •  
  6. Claims
      •  
      •  
Login
 
 
American Fidelity Logo

Should You Invest Your HSA?

 

February 27, 2020

5 minute read

Category: Reimbursement Accounts

Man standing in an office

So, you have a Health Savings Account (HSA), now what? While these accounts are similar to Flexible Spending Accounts (FSAs), one of the main differences between an HSA and an FSA is that you may be able to invest your HSA contributions.

Learn more about the pros and cons of investing your HSA, and why this may be a beneficial strategy to consider for your overall financial wellness.

The Basics of Investing Your HSA

Maintain a Minimum Balance

Before investing your HSA, your administrator may require you to maintain a minimum balance in your account. You will need to maintain this minimum amount to continue to invest. So, if you withdraw money and dip below the minimum balance, you will need to contribute more funds before you can continue to invest.

Consider Your Planned Health Expenses

If you are considering investing your HSA, it's important to note you will have to maintain both the required minimum investment balance and the amount of money you anticipate using on your health expenses for the year.

Consider the following hypothetical example:

HSA administrator minimum required balance: $2,500

Your anticipated health costs for 2023 you would like to pay for with your HSA: $1,300

Recommended total amount to keep in your HSA for the year: $3,800

The above example illustrates how you should maintain a balance that meets both the minimum required balance for investing, as well as a safe amount of money to cover any anticipated health expenses. Now let's say you want to invest a portion of your contributions in your HSA. This example uses the 2023 maximum contribution limit for family coverage, $7,750:

Starting balance: $0

2023 contribution amount: $7,750

HSA administrator minimum required balance: $2,500

Your anticipated health costs for 2023 to cover with your HSA: $1,500

Recommended amount to keep in your HSA for the year: $4,000

Remaining amount you could choose to invest if you follow the above recommendations: $3,750

Pros and Cons of Investing Your HSA

As with any investment strategy, there are both pros and cons if you choose to invest your HSA.

Pros of Investing Your HSA

Tax-free Growth: HSAs are one of the only accounts that provide tax-free distribution of account growth on your investments, if certain conditions are met. Even while you're investing in your HSA, if you need to access your funds to help pay for eligible medical expenses, you still have the option to access your funds. 

Retirement Savings: Many people only use their HSAs as a short-term account to cover their immediate eligible medical expenses. However, HSAs are an excellent tool to take advantage of in your retirement planning. You can contribute to an HSA in addition to your other retirement accounts, and once you reach the age of 65, you can use your HSA funds to pay for eligible medical expenses including some health insurance premiums. Learn more about preparing for retirement 

Asset Growth: You can choose to invest a portion of your HSA in optional market-based investments, which may experience growth in the value of your assets over time.  This growth can be achieved through the accrual of additional interest or through the increase in value of investments purchased, both of which can outperform normal interest rates.  This can help you grow the value of your HSA over the long term.

Cons of Investing Your HSA

Risk: All investments involve risk, and you may lose money on your investments. It is important to consider the risks associated with any investment you choose to make, including your HSA. When considering whether or not to invest, you should consider your time horizon, when you will need access to your funds. You should also consider the impact and frequency of market fluctuations, as it could affect the availability of your HSA funds. 

Lastly, you should carefully consider both how much of your HSA assets you invest and where you invest those assets. It is important that you invest in a way that limits your risk to an acceptable level. Those HSA assets you can avoid using for longer periods of time are excellent candidates for investing.

Choose What's Best for You

After reviewing the pros and cons of investing your HSA balance, it's important to review your financial plans and make the best decision for you and your family.

Consider these questions as you plan:

  • Do I need to use my HSA funds in the near future?
  • How much time do I have to grow my HSA if I choose to invest it?
  • Can I weather any storms the market may face if I choose to invest my contributions?
  • What growth could I expect to see if I choose to invest?

The answers to these questions may help you make the best decision for your family.

This blog is up to date as of November 2022 and has not been updated for changes in the law, administration or current event.

  • Tags:
  • Retirement
  • HSA

Share:

 

Shop for Eligible Items on the HSA Store

You may purchase HSA-eligible items online at the HSA Store. Browse medical supplies, over-the-counter medication, prescriptions, and more.

Visit HSAStore.com

 

Related HSA Articles

 

End of year tips for reimbursement accounts

December 20, 2022

4 minute read

The end of a calendar year can be a busy season. As you prepare for the new year, check out these tips for managing your reimbursement account.

  • Tags:
  • HCFSA
  • FSA
  • HRA
  • HSA

HSA Mistakes to Avoid: Dependent Rules

November 08, 2022

5 minute read

There are some eligibility rules to consider if your employees plan to use their HSA funds for their tax dependents' medical expenses.

  • Tags:
  • HSA

2023 reimbursement limits and Social Security wage caps announced

November 07, 2022

3 minute read

The IRS has just announced 2023 reimbursement account limits and Social Security wage caps.

  • Tags:
  • FSA
  • LPFSA
  • DCA
  • HSA
  • HCFSA
  • Compliance

 

AF-1498-1122

American Fidelity Assurance Company
americanfidelity.com

https://americanfidelity.com/blog/reimburse/invest-hsa/

Site Map

About Us

News Center

Careers

Contact Us

© 2022 American Fidelity Assurance Company

  • Privacy Notices |
  • Report Fraud |
  • Terms of Service |
  • Licensing |
  • Special Notices |
  • Cameron Enterprises

AF-1498-1122

  • File a Claim
    Login
  • Home
  • Benefits Strategy
    • Employee Benefits
    • Communication and Education
    • Enrollment and Admin
    • HR Assistance
    • Tax Savings
    • Compliance Updates
  • Products
    • Benefits
    • Dependent Verification
    • HR Technology
    • Reimbursement Accounts
    • Retirement Savings
    • Section 125
  • Why Us
    • For Education
    • For the Public Sector
    • For Automotive
    • Account Managers
    • Customer Testimonials
  • Blog
    • Benefits Strategy
    • Reimbursement Accounts
    • Supplemental Benefits
    • Customer Stories
    • Compliance Updates
  • Support
    • COVID-19
    • Employer Assistance
    • Videos
    • Contact Us
  • Claims
  • Careers
    • Corporate Careers
    • Sales Careers
  • About Us
  • Site Map

Popular Topics:
  • Register for an Account
  • Forms
  • Unused FSA Funds
  • HCFSA Eligible Expenses
  • Carryovers, grace periods and runoff periods
  • HSA Eligible Expenses
  • HSA Tax Forms
  • Disability Tax Forms