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Can I Invest my HSA Funds?

4 min read

30 sec brief

Invest your HSA today and you can hit retirement with a big pot of tax-free money to pay for medical expenses.

Invest your HSA today and you can hit retirement with a big pot of tax-free money to pay for medical expenses.

When you open an HSA your contributions are typically parked in an FDIC-insured bank savings account. That’s the perfect safe-and-sound place to keep HSA money you intend to tap for current medical expenses. But you can invest your HSA funds in stocks and bonds, too.

Investing your HSA funds in stocks and bonds gives you the opportunity to earn higher returns than the interest earned in a bank savings account.

Invest Your HSA Today

…your future (older) self will be glad you did

Investing your HSA is a smart strategy for the HSA money that is part of your long-term retirement plan. Medicare typically covers about 70% of retiree health care expenses. Investing in your HSA today sets you up for having tax-free money you can use in retirement to pay your out-of-pocket health care expenses.

Investing Your HSA

Keep in mind, you can divide your HSA savings into separate buckets: maybe you keep some of it in the bank savings account —  just in case you want to use it sooner — and then the other bucket can be invested for the long-term.

Lively has partnered with TD Ameritrade to offer a broad lineup of investments for HSA investors, for free.

In addition to FDIC-insured Certificates of Deposit (CDs) TD Ameritrade enables you to invest your HSA in:

  • Exchange-traded funds can be a smart and inexpensive way to instantly create a low-cost diversified HSA investment portfolio. Like a mutual fund, an ETF typically owns hundreds of individual stocks or bonds. An ETF doesn’t have a required minimum investment, while most mutual funds require you to start with at least $1,000 to $1,500. TD Ameritrade offers a lineup of ETFs you can purchase without paying any sales commission. Got a favorite ETF that’s not included in the no-fee lineup? Pay a $ and you’re good to go.
  • Mutual funds are another low cost way to invest your HSA funds. TD Ameritrade has a lineup of funds you can buy and sell without transaction fees. For other mutual funds you will pay $25 any time you buy or sell shares.

Tip: All mutual funds and ETFs charge an annual fee called an expense ratio. It’s not something that shows up on your statements. But you can easily find it listed at TD Ameritrade or entering the fund or ETF ticker symbol in your search box. The lower your expense ratio, the less money that will be deducted from your account each year.

  • Individual Stocks and Bonds The commission for stocks is $6.95. Buying or trading Treasury securities costs $25, the cost of corporate bonds varies, and is embedded in the price of the bond.

Learn more about investing your HSA.

If you need more help with health account decisions, check out our blog. We will make you a healthcare benefits expert in no time, without any extra work or effort on your end.

Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.

Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.

About the author

Carla Fried

Carla translates business and personal finance concepts into engaging content that helps individuals make more confident choices in how they manage their money. Her work appears in The New York Times, Money Magazine, Barron's and Consumer Reports.

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