Any financial product described as “no-fee” is usually worth a second (or third) look. That’s more true than ever these days, when banks seem to be doing somersaults in their efforts to slap fees on every transaction that they process.

Even savings accounts praised for their overall value can carry hidden fees. A great example is a health savings account, or HSA. These vehicles allow people to contribute tax-free dollars, receive tax-free earnings on their balances, and spend the money on qualified medical expenses without paying tax on withdrawals.

The problem is that many HSA providers charge a monthly fee of up to $5.00, just for the privilege of owning an account. Some of those institutions will waive the fee once the account reaches a minimum balance, but others charge the maintenance fee regardless. Over decades, those fees can total well over $1,000. When you’ve decided to open an HSA, it’s worth taking your time to find a provider who won’t bury you in fees while you’re trying to save money.

Why open an HSA?

Let’s start with the magic word: tax-free. In fact, let’s use it three times – to explain why many experts say that an HSA account provides “triple tax benefits.”

First of all, HSA contributions are tax deductible if you make them yourself; if they’re deducted from your paycheck, they’re taken out of your salary on a pre-tax basis. Either way, you don’t pay income tax on the money deposited into your health savings account, making the contributions tax-free.

Next, tax-free withdrawals from the account can be made at any time, as long as they are to pay for qualified medical expenses (as defined by the Internal Revenue Service).

Finally, the money held inside the account can be carried over from year to year, growing tax-free over years or even decades. There are a number of investment options for owners of HSAs, who can also simply choose to receive the interest generated by their savings.

It’s important to understand that you can’t just add $100,000 into your HSA and receive all of these tax advantages. There are annual contribution limits, which are set by the government and adjusted each year. The limits depend on whether you have an individual or famly plan, with an additional “catch-up” contribution allowed for those over the age of 55.

Even so, a health savings account is a powerful financial tool when saving for retirement, since medical care expenses are likely to increase as you grow older. Those who can afford to pay their current medical bills out-of-pocket will find that the best use of an HSA is to accumulate a nest egg to pay for medical expenses incurred after they’ve retired. It’s also a terrific “health insurance policy,” should an unexpected medical emergency occur before retirement.

And when you’re not paying an account maintenance fee every month, every dollar of your HSA balance will be available for those purposes.

Why doesn’t everyone open an HSA?

While HSAs are often a misunderstood benefit, even if you’re well aware of the benefits of HSAs, you may not be eligible to open one. These tax-advantaged accounts are only available to people covered by a high-deductible health plan, commonly referred to as an HDHP. Thse plans have minimum deductibles for individual and family plans which are set by the IRS and are subject to change every year.

There are other regulations which determine if a health plan is an HDHP. The deductible must be applicable to prescription costs as well as medical bills. All deductibles, copayments and co-insurance charges must be counted toward the policy’s out-of-pocket maximums. And the policy must set an annual limit on total out-of-pocket, in-network spending for the year – with the insurer paying all bills in full once the maximum is reached. Those numbers are also subject to change each year.

A large percentage of health insurance plans don’t fit into those very strict parameters. That’s why, if you’re interested in opening an HSA, you have to make sure that the policy you’ve chosen is actually an HSA-eligible HDHP.

Maximizing the benefits of your HSA

The true power of a health savings account is realized when you maximize your contributions to your HSA every year up to the contribution limit. Those limits are on the total amount that can be placed into your HSA. If your employer makes contributions on your behalf up to the limit, you can’t add additional contirbution on your own. It’s up to you to ensure that your total contributions don’t exceed the annual limit. Thankfully, that’s an easy task. Most HSA providers, including Lively, have an easy-to-understand online account interface that will show you your account status and balance 24/7.If you’re maximizing your annual contributions, you’re halfway to your goal. The second half of the puzzle involves making smart investment decisions.

We’ve already briefly mentioned the investment options available to owners of health savings accounts, and the best HSA providers make an enormous number of choices available.

When you open a Lively health savings account, you also have the opportunity to open an investment account that is linked to your HSA. You can choose from industry-leading solutions, including self-directed and guided portfolio options, in order to put your money to work and build toward your long-term financial goals with confidence.These investment options offer a wealth of diversification choices for any desired level of investment risk. Experienced investors may wish to make their investment selections on their own, while the less-experienced might be wise to consult with their financial advisor before deciding on an investment strategy.

The more money you build up in your health savings account, the better off you’ll be in retirement when health care bills start to add up or if you’re hit with an unexpected medical bill, which can easily be paid with the debit card tied to your HSA account. It’s all a matter of balancing safety and risk, just as it is with an IRA, 401K or any other investment account.

The easiest – and safest – way to be sure that your HSA balance is continually working for you is to set up automatic investment transfers. With a few clicks on your phone or computer, you can establish scheduled deposits into the fund of your choice.

Get started with Lively

There’s no better alternative than Lively when you’re ready to open an HSA. Here are just a few reasons.

• No fees: There’s no monthly maintenance fee for a Lively HSA.

• No minimum balance required: You can begin investing your HSA balance immediately, no matter how much you have in your account.

• Convenience: All transactions are handled online through an easy-to-use Lively interface, which also shows your current balances and the performance of your investments.

• Flexibility: The wealth of investment choices offered by Lively's investment options, plus the ability to schedule regular investments, allows you to craft the optimal strategy for maintaining and growing your HSA balance over time.

For more information on how a Lively no-fee health savings account can work for you, reach out to us today.