Lively’s Free HSA Account: Voted Top HSA Provider by Morningstar
12 min read •
30 sec brief
With hundreds of HSA providers out there, deciding which one is right for you can be a challenge. Here we break down all of the things that you should consider when choosing an HSA provider.
You probably know, at least in general terms, some of the many benefits of a health savings account. With an HSA you’re able to:
- Make deposits into the account tax-free.
- Take money out of the account to pay qualified medical expenses for yourself and your dependents, tax-free.
- Save money in the account from year to year, tax-deferred.
- Use the account as an additional way to save for retirement.
- Own your HSA forever – you don’t lose the money in it at the end of the year or when you change jobs.
There are numerous banks, insurance companies, credit unions and financial institutions where you can open an HSA account.
When looking to open an HSA, you want to look for a free, federally-insured HSA account, which will give you optimum flexibility to invest and grow your balance.
The best HSAs fit all of these qualifications, and luckily, a Lively HSA fits this bill - and you can open one online in just five minutes!
Read on to learn more.
The Basics of an HSA
For those who only have a passing familiarity with health savings accounts, here’s a brief summary of how they work and the benefits they provide. If you’re already knowledgeable about HSAs, please feel free to skip ahead to the next section.
Almost every individual who has a private health insurance plan (like insurance through their employer or as an individual, rather than through a government plan like Medicare) can open an HSA if their insurance meets certain guidelines.
The most important guideline to understand focuses on the annual deductible and out-of-pocket maximum set by your insurance company; you must have what’s called a “high-deductible health plan,” abbreviated as HDHP. In a nutshell, these plans typically have lower monthly premiums – but they require you to pay a pretty substantial amount out-of-pocket for medical costs, before your insurance kicks in.
The government changes the numbers every year to adjust for inflation, but to be classified as an HDHP in 2019 your health plan deductible must be at least $1,350 (or $2,700 if you’re covering a family). An HDHP also cannot have a higher out-of-pocket annual maximum than $6,750 for an individual or $13,500 for a family (again, those are 2019 numbers).
These numbers will change in 2020. In 2020, your health plan deductible must be at least $1,400 (or $2,800 if you’re covering a family). The HDHP cannot have a higher out-of-pocket annual maximum than $6,900 for an individual, or $13,800 for a family.
You won’t have to do a lot of number-crunching to find an HDHP health plan which will allow you to open an HSA; most insurance companies clearly identify them. When you’ve enrolled in an HDHP, you’ll have access to all of the HSA providers on the market.
Once you’re qualified for a health savings account and open one - what do you do next?
Many employers will make your contributions for you as part of their benefits package, and what’s important is that those HSA contributions come out of your paycheck before taxes. If the company offers a Lively HSA option through a cafeteria plan, no Federal Insurance Contributions Act (FICA) taxes will be deducted, either. If you make the contributions yourself through post-tax income, those funds are tax-deductible on your tax return. In other words, you don’t pay any federal income tax on the money you put into your HSA.
Once you’re building up money in the account, you can take it out at any time for what are considered “qualified medical expenses” by the IRS. The government puts out a long list of what’s considered “qualified,” but it primarily includes money paid to doctors, hospitals, dentists and other medical professionals, as well as money spent on prescriptions and necessary medical equipment. If you pay those costs out-of-pocket with cash, check or a credit card, you can reimburse yourself for them, too. You just can’t use your health savings account funds for things like certain over-the-counter medications or health care premiums.
There are maximum contribution limits for HSAs every year.
For 2019 it’s $3,500 for individuals and $7,000 for families, with those over age 55 allowed to deposit an extra $1,000 “catch-up” contribution per year. All of that money can be spent, tax-free, on qualifying medical bills.
For 2020, the contribution limits are $3,550 for individuals and $7,100 for families. The catch-up contribution will remain at $1,000 during this time.
All of that money can be spent, tax-free, on qualifying medical bills.
If you don’t spend your HSA funds on qualified medical expenses and instead use it to save, you’ll be able to see the major tax advantages of a health savings account.
An HSA can be used in almost the same way that you would use a traditional IRA or Roth IRA – to save money and invest it for retirement. Wherever and however you invest your money, it grows tax-free inside the account, meaning you could end up with a sizeable nest egg when you retire if you invest wisely.
But here’s where the HSA is an even better deal. With an IRA your money goes in tax-free, but you pay income tax on whatever you take out. With a Roth IRA you can take money out tax-free when you hit age 59½, but you pay taxes on the money you put in. With an HSA you pay no taxes on contributions, and no taxes on withdrawals as long as they’re used on qualified health care expenses.
That’s why it’s said that health savings accounts provide triple tax benefits: tax-free (or tax-deductible) going in, tax-free while accumulating value, tax-free when taken out for health care costs. They’re an ideal way to build retirement savings, while still having the funds available for tax-free withdrawal in the event of a medical emergency.
In all likelihood, your tax advisor will tell you that if you have high-deductible health insurance, opening an HSA is a no-brainer.
That leaves one big choice: where to open your HSA. Once you know the details, you’ll understand why Lively is the only real choice for health savings accounts.
The Benefits of a Lively HSA
We’ve discussed the many benefits of an HSA in general, so let’s take a closer look at the benefits of a Lively HSA.
Do you enjoy going to the bank? Most people don’t.
This is why Lively has designed their health savings accounts to be fully administered online, either through a browser or on your phone with the convenient Lively mobile Android or iOS app. No going to the bank, no filling out paperwork, and no collecting piles of receipts in the corner.
In fact, you can even open your Lively HSA online, in just five minutes.
Do you like paying fees to maintain a bank account or checking account? Of course not, especially when you’re trying to save money for retirement or for health expenses.
That’s why Lively doesn’t charge fees for individual or family health savings accounts, unlike many HSA providers who require you to maintain a certain account balance to avoid fees that may be challenging for some to achieve.
It costs zero dollars to open a Lively HSA account, zero dollars in monthly maintenance fees, zero dollars for deposits or withdrawals, zero dollars to receive a Lively Visa debit card for your account (the most convenient way to pay doctors and pharmacies), and zero dollars to close your account if that ever becomes necessary.
With a Lively HSA, you pay initiation fees, no monthly fees, no transaction fees. Zero account fees with no minimum balance – it doesn’t get better than that.
Lively HSA Investment Options
The real power of a health savings account is the ability to grow your HSA funds tax-free. It’s hard to do that when you’re simply earning the low-interest rates that you’d receive by using your HSA as “only” a savings account. (Although that option is also available, of course.)
The secret to building up a sizeable retirement fund (or emergency medical fund) in a health savings account is to use it as a full-fledged investment account. Almost any HSA provider will give you some investment options – you want to find a provider that offers a number of diverse investment opportunities like you would with a Lively HSA.
The reason why Lively can offer such a robust program is that your investments aren’t done directly through Lively. When you sign up for one of their health savings account you also receive a free self-directed brokerage account from TD Ameritrade. They’re one of the world’s largest and most reputable online brokers, with nearly 12 million client accounts and client assets well over a trillion dollars.
Want to know what else is free with a Lively HSA/TD Ameritrade brokerage account? You pay no extra fees to add investments to your HSA. You pay no extra fees to set up automatic, recurring transfers from your HSA to your investment account. You don’t have to have a minimum balance, so there are no monthly maintenance fees. All you pay are the normal fees associated with actually trading equity – and there are a large number of commission-free mutual funds and ETFs available to you in your TD Ameritrade account.
Exactly how robust is the smorgasbord of investment possibilities with a Lively HSA and TD Ameritrade? You can trade:
- Individual stocks
- Individual bonds
- Treasury bonds
- More than 13,000 mutual funds
- More than 550 commission-free ETFs (exchange-traded funds which trade much like stocks)
- Certificate of Deposit (CDs)
You have complete access to your TD Ameritrade brokerage account, as well as the Lively HSA online interface with easy-to-use tools that let you manage your account, 24 hours a day. It’s the easiest way possible to handle the personal finance portfolio associated with your health savings account.
If you already have an account with another provider, switching to take advantage of the industry-leading benefits of a Lively HSA is easy. You can do a rollover of funds from your previous provider right in the Lively dashboard, or they’ll take care of a trustee-to-trustee transfer on your behalf.
If you don’t already have a health savings account – why waste any more time? As long as you have a high-deductible health plan, you could be enjoying the benefits of a Lively HSA in just five minutes. Your current health insurance isn’t an HDHP? The sooner you start looking into changing plans, the sooner you’ll be able to start saving in an HSA.
What About Flexible Spending Accounts?
There’s a lot of confusion between HSAs and Flexible Spending Accounts (FSAs), as they have a similar purpose, however they have very different nuances when it comes to taxes and usage.
Here’s the most important difference: a flexible spending account belongs to the employer, not the individual. If you leave the company, your former employer will get the money that’s in the flexible spending account back. At the end of the year, you can only carry over (at most) a small amount of your FSA balance to the following year, and the employer keeps the rest. The employer can also set up rules saying that none of the balance can be carried over, so they’ll keep anything you haven’t spent.
There are other important differences as well. The amount you can contribute each year to an FSA is smaller than the amount you can put into an HSA, and you have to “declare” the amount of your FSA contribution at the start of the year (as opposed to an HSA, where you can make deposits whenever you’d like). You also don’t earn interest in a flexible savings account, unlike the many investment opportunities you’d have with an HSA.
As you can probably tell, an FSA isn’t an investment vehicle by any means. It exists solely to pay current medical expenses with tax-advantaged money. Some people prefer an FSA because they don’t have (or aren’t eligible for) a high-deductible health plan. Others who could theoretically open an HSA choose a flexible saving account instead because they’re fortunate to have employers who pay a portion of their contribution each year.
Even if an employer contributed half of an employee’s annual contribution, that’s only about $1,300 – most or all of which would go right back to the employer at the end of the year if it hasn’t been spent.
Contrast that with the amount that could be earned in just one year’s HSA contribution of $3,500, compounded over several years. It wouldn’t be long before the profit was well above $1,300, and that money would belong to the employee forever.
Opening that HSA with Lively is an even easier choice. In five minutes, you could be building a tax-advantaged retirement fund that you might never have considered possible.
It’s the smart way to protect yourself against unexpected health costs now – and to build a huge nest egg for the future.
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