(Money Magazine ) -- Q: I have a large balance in my health savings account. What's the safest way to invest the money and maximize yield? -- Mark Paine, Cincinnati
A: Before you start chasing yields, make sure your bases are covered.
Since health savings accounts (HSAs) are linked to high-deductible insurance plans, you should keep enough in a savings or money-market account to meet your deductible (in fact, many HSAs require this).
To be safe, you should also make sure you have enough resources -- in or out of your HSA -- to pay your annual out-of-pocket maximum, which can run as high as $11,900 in an HSA-eligible family plan, says Devon M. Herrick, a senior fellow for the National Center for Policy Analysis.
With a larger HSA balance, you can take on more risk in the hope of earning a better return. That's especially true if you roll over funds every year.
A recent Fidelity survey found that 95% of the firm's HSA investors spent less than their annual contributions, essentially treating their HSAs as another tax-advantaged investment account.
Last year 12% of employers offered HSAs; 25% of large firms did so. You can put up to $3,050 a year in an HSA as an individual, $6,150 for a family; those 55 and older can save an extra $1,000.
Some HSAs let you buy equities, but consider that riskier path only if you're sure you won't need the money for several years.
A relatively safe way to beat a savings account is to buy a short-term bond fund (recent yields averaged 1.75%). Your principal will dip slightly if rates rise, but a better yield will cushion those losses.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.73%||3.76%|
|15 yr fixed||2.93%||2.96%|
|30 yr refi||3.80%||3.83%|
|15 yr refi||3.01%||3.04%|
Today's featured rates:
A special Mother's Day gift card comes with a laser-etched design and a matching gift box. It costs $200 and comes preloaded with $50 to spend at Starbucks. More
A growing number of hospitals are relocating to higher-income areas in hopes of attracting better paying patients. More
CODE documentary director tells us about the women that were written out of history. More
Fliers report higher satisfaction levels when it comes to flying, but Spirit Airlines ranks lowest on the American Customer Satisfaction Index Travel Report 2015. More