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 fixed3.81%3.85%
15 yr fixed3.05%3.07%
5/1 ARM3.21%3.16%
30 yr refi3.79%3.83%
15 yr refi3.06%3.06%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 21,080.28 -2.67 -0.01%
Nasdaq 6,210.19 4.94 0.08%
S&P 500 2,415.82 0.75 0.03%
Treasuries 2.25 -0.01 -0.22%
Data as of 12:53am ET
Company Price Change % Change
Bank of America Corp... 23.24 -0.01 -0.04%
Advanced Micro Devic... 11.00 0.02 0.18%
General Electric Co 27.45 -0.04 -0.15%
Chesapeake Energy Co... 5.29 0.11 2.12%
Ford Motor Co 10.93 0.07 0.64%
Data as of May 26

Sections

While President Trump sees himself as the savior of coal, his most senior economic aide doesn't look like he's jumping on the coal train. More

Betsy DeVos oversees a $1.3 trillion student debt program that touches 42 million Americans. Many borrowers complain about the servicing they receive. More