If your HSA strategy is to put money in your HSA today and leave it untouched for a decade or more – hint: you’re going to use it to pay for retirement health care costs — you should consider investing your HSA money, rather than sticking with a bank account that pays low interest. Over time stocks and bonds have delivered stronger returns than cash. You just have to be prepared to ride through periods when stocks lose value. And keep in mind you can always divide your HSA money and keep some in a bank account for current health care expenses, and invest the rest.
4 Steps to Invest Your HSA Money
You can invest your Lively HSA in exchange traded funds (ETFs), mutual funds, and individual stocks and bonds offered through TD Ameritrade. There are no fees from Lively! There are additional fees charged within your investment account at TD Ameritrade. (More on this in a sec).
Step 1: Invest Automatically
The best way to stick to an investment plan is to make it automatic, rather than rely on your best intentions to remember to make an investment at the end of the month, or year.
Step 2: Diversify
You are in charge of deciding what types of investments you want to own in your HSA.
A portfolio of dozens of stocks (or bonds) reduces the pain of any single investment tanking. Exchange traded funds (ETFs) and mutual funds give you instant diversification, as they typically own hundreds of stocks or bonds.
Another layer of diversification is to consider owning a mix of funds or ETFs that invest in different types of assets. Adding an international fund or ETF to your HSA will give your investments global reach.
Step 3: Use ETFs if you have a small starting balance.
Most mutual funds require an initial minimum investment of $1,000 to $1,500. If you want to create a diversified portfolio of say four different funds, you could need $6,000 to get started.
ETFs have no investment minimums. You can build a diversified portfolio using ETFs right from the get-go.
Step 4: Pay attention to investing fees.
Lively provides you access to innovative and affordable HSA investment solutions that are personalized to meet your needs. And there are no cash minimum requirements to get started
Fees can make a big difference. The lower your fees the more money that stays in your HSA to grow. If you intend to be a frequent investor, a no-fee fund or ETF that has a low expense ratio will reduce your investment costs.
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.