If you don’t have a good HSA account provider, there’s never been a better time to move your HSA funds to a new one. HSA funds are portable, meaning that you can move them any time to a new account. This article will review my updated research and picks for the best HSA accounts in 2022 available to individuals and families (outside of employer-sponsored offerings).
The entrance of Lively and Fidelity into the Health Savings Account (HSA) space, each with very competitive offerings, has resulted in a number of other administrators lowering their fees and improving their investment options, so this article is a complete annual re-write of my picks for the top HSA accounts, to help you make a switch for 2022.
The Benefits of HSAs: The Best Account for Health Care Costs
Why curate and maintain a list of the best HSA accounts? I have previously noted that the HSA is my pick for the best retirement account (employer matching funds aside), in addition to being the best account for health care costs. Why are HSAs the best? Here are just a few of the reasons:
- HSAs offer a unique combination of tax-free pre-tax contributions and tax-free withdrawals for qualified medical expenses (QMEs), employer contributions, and growth through investments. In other words, for qualified medical expenses, you’re not taxed when the funds are contributed or withdrawn from an HSA!
- HSA maximum contributions are significant – $3,650 per individual and $7,300 per family in 2022 and $3,850 per individual and $7,750 in 2023. That is a very significant amount of tax savings!
- HSA account contributions fully roll over from year-to-year (unlike with FSAs). In other words, HSA funds are not “use it or lose it”.
- You can do a one-time IRA to HSA rollover to boost your funds.
- If you have an employer sponsored HDHP with HSA, you may be eligible for HSA bonus incentives.
- You are the owner of your HSA account and your employer can’t take the funds away from you.
- HSAs are “portable”. This means that you can take an HSA with you from one employer to another, or even to self-employment.
- You can withdraw funds from HSA accounts in retirement similar to an IRA, without penalty, for any reason, starting at age 65.
- HSAs don’t have required minimum distributions at retirement age, like IRAs do.
- HSAs can now be used to pay for OTC medications, feminine hygiene and menstrual care products, and telehealth – in addition to all of the previous qualified medical expenses like doctor visits, prescription drugs, and more.
Remember, you must have an HDHP to get access to and then continue contributing to an HSA. You can withdraw from an HSA at any time, for a qualified medical expense, without penalty. For more basics on HSAs, check out the above links and the full IRS HSA guidelines.
The Challenge with HSAs
The challenge with HSAs, however, is that a lot of the big name financial players (e.g. major banks and investment brokers) aren’t in the HSA space. Many HSA administrators have a maze of fees to navigate as well, sadly. If you get stuck with the wrong HSA account provider, it can really cut into your account balance. As with most things, it definitely pays to shop around. In this article, I will do some of the heavy lifting, to get you started.
The HSA marketplace is still young, but quickly growing. HSAs are fairly new to the health insurance and investing worlds. They weren’t established until 2003. In 2008, only about 6 million Americans had one. But that number has more than quadrupled since, and there are now 32 million HSA accounts in the United States, with total HSA assets surpassing $100 billion.
HSA accounts can be started with banks, brokers, credit unions, and even insurance companies. Any company that offers an HSA is referred to as an “administrator” or “custodian”. HSAs were originally designed for modest deposits through payroll, followed by frequent small withdrawals. This is why most started and are still administered by banks and credit unions, which makes investing tricky, because most banks and credit unions don’t have their own investing platform. But, the good news is that you are not locked in.
What Criteria to Look for in the Best HSA Account
There are far more HSA account administrators out there than there are IRA account administrators. This makes finding the best HSA account very difficult. Most HSA accounts are through banks and very few of them allow you to invest your savings in anything outside of their own money market accounts, CDs, and other in-house financial products. And with bank rates as low as they have been in recent years, those yields are very small. Unfortunately, most online brokers do not offer an HSA account option.
When it comes down to it, here are the things you should look for when selecting an HSA account:
- Debit Card: does the HSA come with a debit card for simple HSA-eligible qualified medical expense tracking? The best HSA accounts do.
- Setup Fees: are there setup or opening fees? If so, look elsewhere. No HSA accounts with setup or opening fees ranked on this list of top accounts.
- Maintenance Fees: are the HSA account fees close to zero or very minimal? For a number of years, most HSAs had very high fees, including annual or monthly maintenance fees. Those with high fees will not rank on this list.
- Savings, Investment, or Both: Does the HSA have only a save-and-spend savings account, or also an investment account? The top HSA accounts have both. If you can’t invest a portion of your funds in higher yield investments, as you would in a 401K or IRA, your HSA contributions will erode compared to high health care inflation every year. I also want to note that since all HSA accounts have a saving account option, and savings rates at nearly every one of them is close to zero with interest rates being so low at the moment, the proficiency of savings rates did not factor in to my best HSA account ranking at all this year.
- Self-Directed Brokerage or Managed Funds: if the HSA offers an investment account, do you only have a small list of managed funds to choose from? A self-directed brokerage account option is preferable here, so you can choose low cost options versus being stuck with high-fee funds.
- Investment Fees: if the HSA offers an investment option, what are the fees to invest, as well as the ongoing expense ratios of the funds you have to choose from? The lower the fees the better.
- Reputation: is the bank, credit union, broker, or other HSA administrator reputable and do they have good customer reviews?
The Best HSA Accounts
Based on the criteria listed above, I’ve ranked my picks for the best HSA accounts in the chart below and provided my best overall, best investing, and best savings HSA choices.
Best HSA Account Overall: Lively
Lively is my choice for the #1 best HSA account overall. With its low ($0 maintenance fees) and multiple investment options (no-added fee self-directed brokerage account through TD Ameritrade or Devenir managed fund option), they are a great choice for anyone. Lively is 100% focused on HSAs as a company and their website and support is very transparent, detailed, and responsive – a rarity in the HSA space.
Best HSA Account for Investing: Lively & Fidelity (Tie)
Lively (via TD Ameritrade) and Fidelity both offer self-directed brokerage account options for their HSAs, with no additional management fees. This is how I prefer to invest, as it gives the most personal choice and the potential for the lowest overall fees (any HSA provider has standard fund expense fees). Both brokerages offer an extensive selection of stocks, bonds, ETFs, and mutual funds to choose from, with $0 in trading fees on their respective platforms.
Best HSA Account for Saving (Non-Investing): Lake Michigan Credit Union
The Lake Michigan Credit Union HSA is my choice for the Best HSA account with a savings account option. While interest rates are historically low everywhere at the moment, Lake Michigan Credit Union, as a credit union with a strong balance sheet that passes savings on to customers, offers some of the most competitive interest rates of any credit union or bank. Their investment account options don’t make them the best choice for investors, but if you intend to let your funds only sit in savings, they are the best choice.
Best HSA Accounts: Top 9 Provider Breakdown
|Best HSA Account Ranking:||HSA Administrator:||Monthly Fees:||Setup Fees:||Other Fees:||Investment Options:|
|1||Lively HSA||$0||No||Lively HSA fees||TD Ameritrade self-directed brokerage option. $0 commissions for online US stock, ETF, & option trades. Managed option w/ Devenir has 0.5% annual fee.|
|2||Fidelity HSA||$0||No||Fidelity HSA fees||Fidelity brokerage account option. Check out my in-depth Fidelity HSA review for more details. $0 commissions for online US stock, ETF, & option trades.|
|3||HSA Bank||$0||No||HSA Bank fees||Self-directed through TD Ameritrade. $0 commissions for online US stock, ETF, & option trades. Or, Devinir pre-selected funds (% annual fee invoiced quarterly). For accounts w/ balances > $1,000.|
|4||Elements Financial HSA||$0 if ave. savings balance is $2,500+. $4 if below.||No||Elements Financial HSA fees||Interest dividend based on account balance, or self-directed brokerage option through TD Ameritrade if balance > $2,500. $0 commissions for online US stock, ETF, & option trades.|
|5||Lake Michigan Credit Union HSA||$0||No||Lake Michigan Credit Union fees||For balances > $1,000, LMCU offers a choice of 20 investment options with no added fees to invest.|
|6||Bank of America HSA||$2.50/mo.||No||Bank of America HSA fees||Self-directed choice of mutual funds, with no added fees to invest.|
|7||Further HSA by Health Equity (formerly "Select Account")||$1, $3, or $4/mo. options.||No||Further Fees||Additional $18 fee per year: Further investment options when balance exceeds $1,000. If balance > $10,000, you can open a self-directed account w/ Schwab.|
|8||Optum Bank HSA||$3.75. $0 if ave. savings balance is $5,000+.||No||Optum Bank fees||Choice of 31 funds or managed portfolio with Betterment.|
|9||Health Equity HSA||Up to $3.95 ($0 if combined cash & investment balance > $2,500).||No||Health Equity fees||Choice of 24 Vanguard mutual funds. For self-directed investing, 0.03% per mo. on the ave. daily invested balance (0.36% per year) with $10/mo. fee cap. Advisory services available at extra cost.|
Can you Switch HSA Accounts? Or have Multiple HSA Accounts?
When I first signed up for an HSA, I wondered how married I would be to a particular HSA account. Could I switch if I didn’t like mine, just like I could with an IRA? Could I have more than one account? I’ve since done a lot of research on this topic.
If you or your employer have picked a poor HSA account admin, the good news is that you are not stuck with them. Just as with IRAs, you can switch if you are not happy with your administrator’s policies and fees. A person contributing to an HSA is under no obligation to contribute to his or her employer-sponsored HSA. And you can contribute to an HSA outside of employer payroll deductions. Employers, however, may require that direct payroll contributions be made only to their sponsored HSA plan.
You can have more than one HSA account. And you can make transfers between accounts if you do not like one. Full HSA transfers or partial HSA fund transfers can be initiated at any time by starting a new account with the HSA provider of your choice.
Best HSA Account Provider Discussion:
- Who is your current HSA account administrator and what are their fees, policies, and investment options?
- Have you invested within your HSA account?
- What is your pick for the best HSA account?