Several years ago, my wife and I decided to drop my employer-sponsored healthcare plan and buy our own individual healthcare plan.
The cost was very similar, but we had a better choice of doctors, which was important to us. When we changed plans, we opted for a high-deductible health insurance plan.
One of the benefits of using a high deductible health care plan is the opportunity to open a health savings account (HSA), which is tax-advantaged savings account for health care expenses.
There are a lot of benefits to using them, but I made a huge error when I opened our high deductible health care plan – I forgot to open an HSA!
I decided to rectify that error and open an HSA, which I did right before the tax deadline this year.
I highly recommend opening an HSA as soon as possible if you have a high deductible health insurance plan. You will save a lot of money on taxes, and you have the opportunity to use the plan as another way to invest.
How an HSA Works
First of all, not just anyone can contribute to a health savings account – you must first have a qualifying high deductible health insurance plan.
“High deductible” is defined as having a deductible of $1,200 for an individual, or $2,400 for a family.
Once you have that in place, you are eligible to contribute to an HSA.
Once your HSA is open, you can contribute up to the individual or family limit each year (see chart below for contribution limits).
In some ways, an HSA is like an IRA. Your contributions are tax-deductible (like a Traditional IRA), regardless of your income limits, and your withdrawals are tax-free (like a Roth IRA), provided they are made for qualifying health care expenses.
Non-qualified distributions before age 65 are subject to a penalty.
Non-qualified withdrawals after age 65 can be made penalty-free, but you must pay taxes on the withdrawals (like a Traditional IRA).
These tax rules allow some people to use HSAs as an investment vehicle, similar to having another Traditional IRA.
Your contributions can be maintained in a health savings account in a variety of funds, including an interest-bearing account similar to a savings account (though sometimes with better interest rates), or you can invest your funds in stocks, bonds, or other investments.
Some HSA’s can even be linked to a brokerage account where you can invest your funds more easily.
Related topic: Compare Flexible Spending Accounts and Health Savings Accounts.
HSA Contribution Limits
Here are the HSA contribution limits for the last few years:
Tax Year Individual Family Catch-Up Contributions
(age 55 and over)
2023 $3,850 $7,750 $1,000
2022 $3,650 $7,300 $1,000
2021 $3,600 $7,200 $1,000
2020 $3,550 $7,100 $1,000
2019 $3,500 $7,000 $1,000
2018 $3,450 $6,900 $1,000
2017 $3,400 $6,750 $1,000
2016 $3,350 $6,750 $1,000
2015 $3,350 $6,650 $1,000
2014 $3,300 $6,550 $1,000
2013 $3,250 $6,450 $1,000
2012 $3,100 $6,250 $1,000
2011 $3,050 $6,150 $1,000
2010 $3,050 $6,150 $1,000
There are changes to HSAs every year, so stay up to date on what they offer.
What to Look for in an HSA
Here is where the fun starts – HSAs are available from numerous banks and credit unions, but they aren’t always advertised.
To further complicate things, some banks and credit unions actually outsource their HSAs to third party companies. Still, they brand it under their name to keep as much business under one roof as possible (in turn, they usually receive a small kickback from the company that actually runs the plan).
Watch Out For High Fees
Many HSAs carry high monthly fees, and shopping around can save you a lot of money.
Determine Your Needs
If you are planning on using your HSA for the immediate tax break and plan on using it to pay for your health care in the present, then you want to look for quick and easy access to your funds.
If you plan on using your HSA as another retirement fund, then your needs may be different, and you would want to look for an HSA that offeres access to investments that meet your needs.
Where to Research HSAs
The single best resource I’ve found for researching HSAs is this awesome thread at FatWallet.
The thread goes back almost 7 years, so keep this in mind if you visit the forum.
I started at the second post in the thread, which lists a bunch of HSA providers and information about their plans.
This is kept more or less up to date, and includes information such as rates, fees, account minimums, and other relevant information.
If you want to get more recent info, visit the links, or skip to the end of the thread.
Where I Opened My HSA
I’ll be the first to admit, there is no perfect solution when it comes to HSAs.
If my primary bank, USAA, offered Health Savings Accounts, I probably would have gone with them.
They don’t offer them, so I contacted my local bank (where I have a business savings account) about opening an HSA through them, and my account manager told me the HSAs they offer are actually through a third party. I
can go with the convenience of the local branch, or I can choose to link my HSA to an account where I can better invest my funds and have more growth opportunities.
Right now, my family is healthy, and we don’t have many health-related expenses.
So my goal was to fund my HSA to the limit, then invest the funds until needed.
Hopefully, I will be able to leave the money in the HSA for years and let compound interest work its magic.
If we need the funds for a major medical expense, then we can tap into them at that point.
I Chose HSA Bank for My Health Savings Account
I did a lot of research, and after comparing HSA providers, I decided to open an account with HSA Bank.
Pros and Cons of HSA Bank
There are quite a few fees at HSA Bank (see list of interest rates and fees), but they aren’t outside of the norm when compared to many other HSA providers.
The key is to look at your needs and evaluate the HSA on a case by case basis.
Thankfully, most of the fees at HSA Bank are avoidable with a little planning and if you maintain a minimum balance.
They also offer online access, unlimited check transactions, and a debit card for making payments on qualified expenses, which is convenient.
Interest Rates and Investments
HSA Bank also offers fairly good interest rates on funds held within the savings account which are currently comparable to many online savings accounts.
They also allow you to connect your HSA to a TD Ameritrade account, giving you easy access to investments.
When I looked at my needs and compared HSA Bank to some of the other top options, I decided that I could avoid all monthly fees at HSA by maintaining a minimum amount in my account.
And I would be able to invest some of the funds in a self-directed HSA Investment Account with TD Ameritrade, where our contributions will hopefully grow until we need them.
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Merk3 says
Great job on this article Ryan! Another place to search most of the HSA plans available on the market is HSAsearch.com.
As a former US Army Officer, I too would likely use USAA if they offered an HSA plan. Since they don’t, I’ve been using The Bancorp HSA for the last six years. I’ve studied these plans in great detail over the years and I find this plan to have one of the largest investment selections in the industry and their costs are fairly low as well (as long as you don’t mind electronic statements over paper). The downside is… their customer service is poor, which I hear is common in the HSA industry.
If you’re good on a computer and don’t mind doing a lot of the leg work yourself, then I feel that The Bancorp HSA is one of the best plans on the HSA market.
Sandy says
More about HSA Bank. I’ve had an HSA there since 2005. I thought their customer service was awful, but because I have an associated brokerage account switching would be difficult. Also it wasn’t clear that any of the other administrators were really better.
Their switch to a cumbersome new web site convinced me that it really was time to switch and I found that Elements Financial (ELFCU) was a great alternative. Slightly less in monthly charges, but most importantly their customer service is light years ahead of HSA Bank. Although its pretty easy to be better than 30+ minutes hold times, no response ever to email or voice mail, service reps who seem to be mentally challenged just to do account verification, and no follow through on anything. Just getting to their web site one last time to set up a transfer ended up taking 3 hours to get a new password straightened out. By far the worst financial provider I have ever done any business with.
RON says
I just wasted one and a half hours on the phone with HSA Benefit Wallet, when we got disconnected they never called me back even though they asked for my phone number in case that happened. I could not be more unhappy with their service. Pathetic.
Mike says
Here’s another follow-up on HSA Bank. They just revamped their website, and it is much more difficult to navigate than the previous version. Finding the proper link to transfer funds to TD Ameritrade is tedious. I also was disappointed in their response time to an email I sent in early December. I didn’t receive a response until nearly a month later; at least they apologized for the delay. I suspect they are in the weeds dealing with account holders who are having issues with the new website. Fortunately, I only deal with them twice a year; once, to make my contribution in early January, and then to transfer those funds to my brokerage account. If you are in a situation where you needed to interact with customer service on a more frequent basis, be prepared for a lot of frustration!
Riley says
It has been two years since this article was posted. I wonder if HSA bank is still the leader after that time? HSA definitely is designed to get as much money out of fees as possible. They’re only a little worse than most banks in that regard ($25 to close your account?!). However, they also seem to want to prevent you from spending your money as well. They give you a credit/debit card that you can use to make transactions. If the vendor puts through a $0.00 charge to test the account or hold it while the charges are figured HSA bank rejects the order and tells you the customer needs to contact HSA bank. This $0.00 transaction is a pretty standard technique in banking so many online vendors use this approach. I’m puzzled that HSA bank hasn’t figured out how to process these transactions. Contacting customer service requires more ID verification questions than usual: name, address, SSN, DOB, account #, email address on file, date and value of last deposit, year and month account was opened… though sometimes they skip those and just ask for name, DOB and SSN. If your employer opened the account for you, some of the questions can be a guessing game. I’ve had customer service reps that varied from pleasant and trying to help you to hostile that you were trying to touch the money stored in your account. The solution they all give for the $0.00 bug is to use a different credit card. If the rep is feeling nice they’ll tell you that you can get money out of the HSA bank card via a cash advance. Just make sure to keep your receipt because they (not sure if it’s the federal government or HSA bank) might audit you later.
The investment opportunities might be nice but they need to get their payment processing techniques up to the same modern standards that their fee structure is up to and they could work on training their customer service reps to a consistent standard of non-hostility.
Brian says
I realize this thread is a couple of years old, but I had to weigh in on US Bank.
My company uses US Bank for our HSA, and it’s fine if everything is working and you don’t need customer service, but it is a DISASTER if there’s a problem.
Due to the poor investing choices offered through the US Bank HSA, I had opened an account with HSA Bank. I did a trustee-to-trustee transfer to move my $s out of US Bank to HSA Bank. The money disappeared from US Bank but never showed up at HSA Bank! In addition, US Bank then closed my account even though I specifically asked them not to, and my company was unable to continue making contributions on my behalf.
I made literally a dozen calls to US Bank and never got anywhere. Their customer service is in another country and is completely powerless. All they can do is refer things to the “back office” and tell me they’ll get back to me in some amount of time. They NEVER call me back when they say they will, and when I call them back after the elapsed period of time, the back office has never done anything. You’d think that missing money would be a big deal to them, but it’s not. The only way I was able to get both issues resolved was through my company’s HR, who had access to somebody high up in their organization that I did not.
I would call US Bank HSA’s customer service the worst customer service I have ever experienced.
My experience with HSA Bank has been pleasant. When I call them, I get an American who actually has the tools available to help me. I’m not trying to be xenophobic, but I think most of us have tended to get better customer service from 1st world countries than from 3rd world countries. The real problem with US Bank though is that these customer service reps are powerless and cannot actually talk to the back office themselves. All they can do is put in a request for action that is never acted upon.
Dan says
Did you ever look at US Bank as well? While I currently have HSA Bank, US Bank has a lower monthly ($2.50) and no fee threshold ($2,500) the last time I looked a couple of months ago. They also have local branches, so I am considering moving over.
Just curious if US Bank was in consideration in your decision process.
Ryan Guina says
I looked at US Bank and I think they offer a very solid HSA. They also offer investment opportunities, which is something I was looking for. In the end, the option of linking a TD Ameritrade account was the reason I chose HSA Bank, as it gave me a wider array of investment options (the options at US Bank are limited to a selection of about 22 funds; TD Ameritrade is a standard broker, and they offer more options including more index funds, which is typically how I invest).
There are several advantages of using US Bank though, with the lower threshold for having the monthly fees waived, and the local branches. I don’t think you can go wrong either way, and I can see how US Bank would be preferable for many people.
For anyone else reading these comments, I highly recommend reading the thread at FatWallet for more options. Finding the best HSA for your needs is highly dependent upon personal needs.