Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Money left over in your health savings account?

By Kim Clark, Money Magazine


(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.

Remember: If you don't like your employer's HSA options, you can move your account; most major banks and credit unions, as well as a few investment firms, offer HSAs.  To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.78%3.78%
15 yr fixed2.99%2.98%
5/1 ARM3.18%3.16%
30 yr refi3.76%3.79%
15 yr refi3.00%2.98%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 22,296.09 -53.50 -0.24%
Nasdaq 6,370.59 -56.33 -0.88%
S&P 500 2,496.66 -5.56 -0.22%
Treasuries 2.22 -0.04 -1.86%
Data as of 6:46pm ET
Company Price Change % Change
Advanced Micro Devic... 12.61 -0.69 -5.19%
Bank of America Corp... 24.76 -0.26 -1.04%
Apple Inc 150.55 -1.34 -0.88%
General Electric Co 25.11 0.24 0.97%
Facebook Inc 162.87 -7.67 -4.50%
Data as of 4:15pm ET

Sections

JPMorgan Chase is hoping to ease Washington D.C.'s income inequality problem by investing $10 million in two of its poorer neighborhoods. More

When you're making big career decisions, you turn to your mentors and your trusted peers. But how do you find these mentors and trusted peers in the first place? More