7. What are my investment choices?
It varies. Some HSAs function as savings accounts only, while others allow you to invest your contributions in a selection of mutual funds or other investment choices, giving your account the potential to grow. If you’re thinking about making that sort of investment, consider your goals. Do you plan to use the account to pay for everyday health expenses in the short term rather than saving it for future anticipated medical costs? If so, then you may want to keep those funds in cash or investments that offer easy access to cash.
Anticipating that you won’t be using the account anytime soon? Then consider mutual funds or other investment choices that may be more appropriate for the long term. Be aware that your account balance might have to reach a certain amount before your provider allows you to invest it, and you may need to maintain a certain cash balance in your account. Please note that investing in securities involves risks, and there is always the potential of losing money when you invest in securities.
8. Can I use my HSA in retirement?
Yes. Starting an account now, while you’re in good health, could help you in retirement—when your medical bills are likely to increase. For individuals who are Medicare-eligible (age 65 or older), your HSA can be used to pay for premiums for Medicare Parts A, B or D with tax-free withdrawals, as with other qualified medical expenses. You can even pay for non-qualified expenses, but you will need to pay regular income taxes on those withdrawals. In addition, notes Roger W. Gray, director of Health Benefit Solutions at Bank of America, “You can also use an HSA to pay with pre-tax dollars for your qualified long-term care insurance premiums.”
9. Are there instances in which an HSA is not necessarily the best choice?
An HSA may not be right for everybody. You might prefer to select a health insurance plan with a lower deductible, in which case you wouldn’t be eligible to contribute to an HSA. Or you might, for instance, have other savings priorities—like building a general emergency fund—that leave little room in your budget for funding yet another savings account. Or if you’re young and in good health, you might decide you’d rather devote any spare cash to investing in an IRA or other account dedicated solely to retirement.
But for many others, an HSA can be a useful solution for addressing some of the high costs of health care. “In today’s health-care market, we all need to take a long-term view of health coverage,” Gray says. “If you consider the cost of insurance in combination with the potential savings provided by an HSA, you may be better positioned to meet your medical needs—and possibly have money left over to help you meet your other goals.”