ChooseFI Logo

Investing Inside Your HSA: Healthcare’s Best Kept Secret

Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. American Express is a ChooseFI advertiser. Disclosures.

Most people have some experience investing through an IRA or 401k. They may even trade stocks in their spare time. It’s easy to assume that for the most part, managing one investment is much the same as any other.

But a Health Savings Account (HSA) is a different animal. While it has a host of unique benefits that make it a top-tier investment vehicle, it also has its own restrictions and quirks that you need to understand before investing. But once you get the hang of it, investing with an HSA will be one of the best financial decisions you’ve ever made.

Unfortunately, 96% of people never take advantage of investing in their HSA. If you’re interested in using an HSA to work towards financial independence, read ahead for everything you need to

How Investing with an HSA Works

Investing with an HSA is similar to setting up your own IRA or using your company’s 401k. First, you need to decide how much you want to contribute every month. Next, decide how you want to invest the money. Do you want to be aggressive or conservative? Do you want a variety of mutual funds or just a couple? Do you want more control over your investments or a more hands-off approach?

If trading your funds manually every month seems like a chore, you can create automatic investments through your HSA. Many HSAs require that trades be at least $100 or more, so keep that in mind.

If you don’t already have an HSA set up, you’ll first have to pick a bank. If you already have an HSA through your employer, you can change it if you become unsatisfied with their investment options. Rolling over funds from one HSA to another is a pretty seamless process. You can only roll your HSA over once in a 12-month period, so do your research before switching banks.

Lively: A Modern HSA

One banking choice for investing your HSA comes from Lively. Lively helps you open an HSA (or transfer your current one) and make regular, automatic contributions from your employer or your bank account. Or you can make occasional, individual contributions as you wish.

Many HSAs come with monthly fees, but there are no monthly fees with Lively. There’s no minimum balance requirement either. Your Lively HSA funds sit in an FDIC insured account that earns interest.

And if you decide you want to invest your HSA funds, Lively partners with TD Ameritrade to help you do that.

If you’re unsure how to invest your HSA or how to manage it with your other retirement accounts, talk to a financial planner. They can make sure your HSA choices align with the other funds you hold. A financial planner can also tell you when to open an HSA if you aren’t maxing out your IRA and 401k yet.

Like an IRA or 401k, HSAs have an annual maximum contribution of $3,550 for individuals and $7,100 for families (for the 2020 tax year). If you make automatic contributions to your HSA, make sure they don’t exceed that limit or you’ll have to withdraw the excess or pay a fine.

Withdrawals from an HSA are tax-free and can be done at any time, as long as you’re reimbursing yourself for qualified medical expenses. You can withdraw earnings from your HSA without paying taxes on them as well. That’s part of what makes the HSA a perfect investment vehicle–everything about it minimizes your tax obligation.

Get started with Lively here.

Related: The Triple Tax Benefits Of The HSA

What You Need to Know

Investing with an HSA is similar to creating an IRA, but there are a few different terms you’ll need to know.

Minimum Cash Balance

Most HSAs require that investors keep a certain minimum, uninvested cash balance. The minimum is usually between $1,000 and $2,000. If you have an HSA with $3,000 in it and your
bank requires that you have $1,000 in cash, you can only invest $2,000. The remaining $1,000 might earn some interest, but for the most part, it’s just an unavoidable cost of doing business. Some HSA providers, including those listed below, have no minimum cash balance–that makes them a perfect choice for investors.

Available Funds

While you can’t choose which funds your 401k provides, you do have options when it comes to your HSA. Every bank has its own list of available investments, and choosing a bank with the
best available funds isn’t always easy.

You can also go with a self-directed HSA. These allow you to invest the money almost anywhere you like, such as real estate, commodities or other alternative investments. For someone who likes more control over their investments, this is a great choice.

As with any investment account, an HSA investment charges its own set of fees. Any good FIRE devotee knows that paying unnecessary fees reduces the return on investment. The fewer fees you pay, the more money you collect yourself. Many charge an annual or monthly fee, usually between $2-3 a month.

Best Banks to Invest Your HSA With

Want to invest with your HSA, but not sure where to get started? Here are our picks for the best HSA investment accounts. If you currently have an HSA that you’re investing with, check to see
how much you’re paying in fees and what kind of selection you have.


Financial planner Ryan Inman of the Financial Residency Podcast recommends Lively. There’s no minimum cash balance required and users can pick from TD Ameritrade funds. The site is easy to use and free from monthly fees.

HealthSavings Administrator

This HSA bank has no minimum cash balance, and according to financial planner Brian Canning, CFP® of Abacus Wealth Partners, a great range of low-cost funds to choose from.

HSA Bank

HSA Bank has a self-directed investment option through TD Ameritrade and no minimum cash balance. The self-directed portion provides more freedom for investors who are comfortable
picking their own funds.

Overall HSA’s are a great tool for pursuing FI. You can save pre-tax, then grow and spend the money tax-free.

Fidelity HSA®

Fidelity now offers an HSA that is a brokerage account, not affiliated with your employer. With Fidelity, there are no account opening or transaction fees and you’ll have a broad range of investing options. 

Fidelity provides professional, experienced investing help so you can be sure to choose and manage your investments with confidence.

Related Articles

Investing Inside Your HSA: Healthcare's Best Kept Secret
Subscribe To The FI Weekly

Action, accountability, inspiration, and community. Join the movement. Get started on your Path to FI

Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. American Express is a ChooseFI advertiser. Disclosures.
More To Explore
Money Plan
Fundamentals of FI: What Is An Emergency Fund & Do You Really Need One?

In this episode, we delve into the concept of an emergency fund and whether or not it is truly necessary. Brad challenges the traditional notion of a stagnant emergency fund sitting in a savings account, and instead explores the importance of building assets and maximizing net worth. Join us as we discuss the nuances of financial independence and the role of an emergency fund in achieving long-term financial goals.

Read More »
You Might Be Interested in...
Share This Post