By Dr. James M. Dahle, WCI Founder
[Update December 2018: Fidelity came out with a new HSA this year, with no fees. Lively is also charging no fees starting January 2019. That puts those two HSAs at the top of my list.
Update: January 2019: I just opened a new HSA at Fidelity for my 2019 contribution and initiated a rollover from HSA Bank/TD Ameritrade. More details in an upcoming post.]
I get asked a lot for recommendations on things like individual 401(k)s, IRAs, financial advisors, crowdfunding firms, and Health Savings Account (HSA) providers. Every time I get one, I think to myself, “You really need to get around to doing the research so you can write that sort of a post.” But it's hard work to do research, especially when I'm perfectly happy with the providers I'm currently using and when I have zero affiliate relationships with any of the firms doing it. See the problem? If I can just pull it out of my brain and type it, great! If I actually have to do work, I want to be paid for it. Greedy capitalist!
[Update just prior to publication: Want to know how greedy? I actually checked to see if any of these companies had an affiliate program after finishing the article. None do, which isn't surprising given how cheap an HSA is. There just isn't much money there to pay an affiliate for a lead when your annual fees are under $100.]
However, I've overcome my greedy ways today and I'm going to write a review about which HSA you should be using. As I write this paragraph, I haven't done a lick of research. I have no idea who is going to come out on top in this little comparison. And it really doesn't matter much to me personally, since I won't make a dime from any of these companies and I probably won't switch from the one I have.
I'm NOT going to explain what an HSA is or why you should be using one. I've done that many times before and if you still don't know, click on that link and learn about the first investing account I fund each year.
In this post, we're going to discuss which HSA is best for those who use it as an investing account, a Stealth IRA if you will. [Yup, still using that term, despite being threatened with a painful death if I continue to use it.] Maybe a follow-up post will discuss which HSA is best if you're actually using it all year long to pay for health care expenses. Be aware that if your employer puts money into an HSA for you, or pulls it out of your paycheck and puts it in, then let them keep doing that. There is some free money there or at least a little savings on payroll taxes. But if your employer's chosen HSA stinks, you can do a rollover into a better one once a year.
Best HSAs for Investing
If you, like me, mostly just use your HSA as another IRA (although one mostly intended to pay for health care in retirement), you will have a laser focus on the investing features of the account. That means the lowest possible fees and the best possible investments. Good customer service and lack of hassle are important too, but honestly, I only touch my HSA once a year. I can deal with some minor hassles once a year so I don't put too much stock on that stuff. I just want someone to charge me nothing and let me buy Vanguard index funds. Is that too much to ask?
Okay, here we go. I looked through a few similar articles on the internet and then went to each company's site. I wrote up a little paragraph about each one, and then AFTER I had collected all the information, I put them in this rank order. Bear in mind this is all subject to change at the whims of these companies. As they change fees and offer new investments, this rank order could change.
# 1 Lively
The savings account only pays 0.05%-0.55%, but they have no investing threshold, so you can invest your first dollar. Lively allows you to invest at TD Ameritrade, with a $2.50 monthly ($30/year) investing fee. Adding in the once a year $6.95 trading fee I would pay for what I'm doing, that's only $36.95, which makes Lively the second cheapest on this list. The only downside? They're pretty new. But frankly, none of these companies are all that old. Even the concept of an HSA isn't very old. The Bogleheads had a big discussion about them if you want more details, but the first mention of this company there was only 6 months ago.
# 2 HSA Bank
I have had an HSA with HSA Bank for about 6 years, so I know it well. I think my HSA is pushing $60K, as I've maxed it out each year and never taken anything out of it. The entire thing is invested in the Vanguard Total Stock Market Index ETF. With HSA Bank, you basically split your money between two accounts- the savings account at HSA Bank (pays 0.05%-0.45% depending on balance) and a linked investing account at TD Ameritrade. You have two options with fees. You can either leave at least $5K in the savings account and pay no fees to HSA Bank, or you can pay $5.50 a month ($66/year) and invest the whole thing at TD Ameritrade. Once you get over to TD Ameritrade, they have a list of ETFs that you can trade commission-free. Unfortunately, they recently removed the Vanguard ETFs, including the one I was using, from the list. So that means every time I buy and sell, I've got to pay $6.95. There are similar ETFs (such as SPTM) that trade commission-free, but I'd rather pay $7 a year to get the real thing and a much more liquid ETF with thinner bid:ask spreads. Maybe that's right, maybe that's wrong, but I'm not going to argue about it for $7. So total annual fees for what I want to do? $72.95 and I get exactly the investment I want. HSA Bank offers one other investment option. Instead of going to the brokerage window at TD Ameritrade, you can also buy mutual funds from “Devenir,” whoever they are. The mutual funds include the usual assortment of high-priced, actively managed funds found in bad 401(k)s- Goldman Sachs, JP Morgan, American Funds etc. Don't do that.
# 3 HSA Authority
Update after publication: I had an appallingly bad customer service experience on the phone with these guys just trying to get information about the HSA, and ended up with some wrong information (i.e. I thought $1,000 had to be left in the savings account paying literally 0.01%, but it turn sout you just have to have $1,000 to start investing and can invest every dollar. So I've moved them up from # 8 to # 3 in this list.]
Devenir runs their investments, like the second option at HSA Bank. Unlike with HSA Bank, HSA Authority has apparently gotten Devenir to offer Vanguard Admiral Share Index fund, without commissions. You do have to have $1,000 in the account before you are allowed to invest anything, but that shouldn't be a significant hurdle for readers of this blog.
# 4 Elements Financial
The savings account pays 0.25-1%, but once you have $2,500 in it, you can invest at TD Ameritrade like with HSA Bank where you could buy Vanguard ETFs inexpensively. Fees are $4/month ($48/year) if you have less than $2,500 in the savings account. Not a bad deal, right? However, they charge $24 to wire money from the HSA to TD Ameritrade. What's that about? Why would they need to wire it when everyone else does an ACH transfer? So if I want to invest it all like at HSA Bank and buy the Vanguard ETF once a year, my annual fees would be $48 + 24 + $6.95, for a total of $78.95, just slightly more than HSA Bank. That gets them third on my list.
# 5 Saturna
Saturna could be the cheapest option on the list for what I want to do. Saturna doesn't charge an annual fee, but I did notice they have a $75 fee to close the account, which is higher than the usual $20-25 I see. The problem I have with Saturna is their investments. They offer their own selection of funds, none of which I recognized including some random Idaho tax-exempt bond fund, as well as their own brokerage window, with $14.95 commissions. Actually, that's not entirely true. I have heard of some of their funds, the Amana ones. These are funds that invest in accordance with the principles of Islam. I've had a reader or two ask about them in the past, so if you want an HSA where you can invest in Islamic-compliant mutual funds, maybe Saturna is for you. The brokerage also charges you $25 a year if you haven't made any trades in 365 days. I wonder if I could get hit with that given my once a year trading frequency, but I think I could work around it with one trade per calendar year. I couldn't find anywhere that they pay any sort of interest on uninvested money other than some Dreyfus money market funds in the brokerage area. Potentially, I could buy that Vanguard ETF through Saturna brokerage once a year for $14.95, making this perhaps the cheapest possible option out there for me. Still hard to feel comfortable recommending this one to readers though. I guess I just don't like that there isn't a household name involved here anywhere. Idaho tax-exempt fund. Proprietary mutual funds. A little-known brokerage. Why won't Vanguard just start offering HSAs? It would make things so much easier.
# 6 Bank of Cashton
The Bank of Cashton offers relatively high interest rates on cash, ranging from 0.4%-1.65%. Their fees are also low at $25/year. There is no threshhold to invest, but investments seem to only be done through a “Cetera” brokerage account, which charges $14.95 commission. Adding the $25 annual fee to the $14.95 commission, gets me to $39.95, one of the cheapest options on the page. That said, I prefer a big household name brokerage (i.e. TD Ameritrade) to one I've never heard of before this review and if for some reason you needed to do more than one transaction a year, the commisions could add up quickly at $14.95. Similar issues to Saturna, but with an extra $25/year fee, puts them at # 6 on the list. That said, Saturna and Bank of Cashton became more attractive when TD Ameritrade took Vanguard ETFs off their commission-free list.
# 7 Select Account
The Select Account HSA charges anywhere from $0-4/month in fees, but the more you earn and the more you have in the account, the higher the interest rate. The interest rate ranges from 0-2%. It's like a choose your own adventure book or something. There are literally 45 combinations of fees/interest rates. You can't make this stuff up. If you want to invest the money, the fee for that is $18 a year but you have to leave $1000 in the regular account (earning 0-1.05% depending on how you solve the fee matrix.) Their mutual fund investments are also managed by Devenir. There are some Vanguard funds, but not even Total Stock Market Index fund. Could you make do with the 500 index fund admiral shares? Probably. Once you get $10K in there, you can go to a brokerage window at Charles Schwab where you could buy Vanguard ETFs or anything else you want with the usual $5 commissions. Bottom line, I think I could do my once a year ETF buy for $18 + $4.95 commission for a total annual cost of $22.95, minus whatever the cash drag on $1,000 would be. On a mutual fund earning 8%, that's another $80, so perhaps $102.95 total.
# 8 BenefitWallet
These guys have a $1,000 threshhold to invest, and offer a handful of good Institutional (even lower expense ratio than Admiral) Vanguard index funds. The checking account only pays 0.05%, and there is a $2.90/month ($35.80/year) fee to invest. There is also a $3.50/month fee for balances under $1,000, but that is relatively easily avoided for readers of this blog. So all in, perhaps $80 of cash drag + $35.80 = $115.80/year in fees. Not bad, but that cash drag is the biggest “fee” for many of these HSAs.
# 9 Optum Bank
# 10 HSA Administrators
I love how HSA Administrators is always open about fees and investments. It was a hard decision between HSA Bank and HSA Administrators years ago when I had to decide. Back then, the fees at HSA Administrators were slightly higher, and that's why I'm at HSA Bank. Currently, their fees are $45 plus a 0.25% AUM fee. That's it. But in my case, with a $60K balance, that AUM fee is $150 and growing. So a grand total of $205 per year, almost three times the price of HSA Bank. Hard to get excited about that. The investments, however, are easy to get excited about. Vanguard admiral share index mutual funds plus some DFA funds for those who are into that sort of thing. But overall, it's cheaper for me to just buy the Vanguard ETFs at HSA Bank than pay the HSA Administrators AUM fee. However, if you were doing a lot of transactions every year, and had a much smaller HSA balance than I do, I could see where someone would choose HSA Administrators.
# 11 HealthEquity
HealthEquity made my research job pretty tough, but I think I found the information I was looking for eventually. They pay from 0.05-1.40%. There is some sort of an investment option, but you seem to have to open an account before they'll tell you what you can invest in. I did see something in a brochure that there was at least one Vanguard fund, but most were not. It bothers me that they spend most of the brochure trying to sell you some advisory services and a book. The account maintenance fee is $3.95 a month, or $47. 40/year. There is also a 0.4% AUM fee for invested money, and that's before the advisory fees if you choose to use an advisor. Between the fees, the lack of transparency, and the apparently limited investments, it's tough to place this one very high on the list.
[Update after publication: A number of readers wrote in or commented that HealthEquity offers a bunch of Vanguard funds. They also all claimed all kinds of varying amounts of fees that HealthEquity charges from nothing 3 basis points. In fact, even in HealthEquity's own brochures I found different levels of fees. No wonder everyone is so confused. As of the day of publication of this post, this is what was found on HealthEquity's site:
I really don't like AUM fees on these. When you combine that with an administrative fee and the fact that you can't invest your first $2,000, I'm not sure why this particular HSA has any fans at all. Nice to see the Vanguard funds though.]
# 12 Bank of America
BOA HSAs pay 0.1-0.3%. There is a $1,000 investment threshold. There are two reasonable iShares investment options (500 index and a developed markets fund.) The fees are $4.50 a month ($54.) Add another $80 worth of cash drag from that threshold, and you're at $134/year. Between the fees, the low interest rate, the thresh hold, and the poor investment options, this one is low on the list. Bank of America might be the only household name on this list (outside of TD Ameritrade), but their reputation isn't so hot. It's not Wells Fargo, but I wouldn't open a bank account there, so it is hard to recommend their HSA.
Conclusions
Well, you can see my biases when you look at how I made the rank list. I don't like annual fees, I really don't like AUM fees, I dislike having an investment threshhold, and I prefer a big name brokerage with lower commissions or being able to directly purchase Vanguard Funds. If you prefer the absolutely lowest annual fee, you may wish to go with Saturna instead of Lively. If you actually plan to make a bunch of trades each year, it may be worthwhile getting an HSA without commissions, such as Select Account, BenefitWallet, or HSA Authority. If you have a tiny account where the AUM fees won't add up to much, you might consider HSA Administrators. If you plan to leave a significant chunk of money in cash, Select Account or Bank of Cashton may be attractive to you.
The bottom line is that the HSA market is now very competitive. Fees are low across the board and you should be able to easily limit fees and commissions to less than $150/year. On the investing side, the differences between the top companies are not great, so if you are actually spending from the account, it may be best to make your final decision based on the non-investing features of the account. Since our account is currently with the firm I ranked second on this list, we considered changing from HSA Bank (# 2) to Lively (#1). I figure this could save us about $36 per year. However, then I got to thinking about the costs of closing the HSA Bank Account ($25.00), the cost of selling our shares ($6.95), the potential market losses of having the money out of the market during the transfer (just a 1% market change could be $600), and the cost of buying the shares back ($6.95) and it didn't seem so wise. But I figured, hey, both accounts would be at TD Ameritrade, why would I have to liquidate the investment at all? I called TD Ameritrade and they confirmed that I would not have to liquidate the investment or pay them any fees or commissions to switch. So it would only cost $25 to start saving $36 per year. It's not quite enough money for me to justify the hassle unless Lively's HSA is easier to use for spending and keeping receipts, especially since fees can change so quickly. I called HSA Bank to give them a chance to keep my business by lowering their fees, but they refused, so we may have a new HSA provider by the time you read this. [Update just prior to publication: Inertia is a powerful thing, still at HSA Bank. We're too busy getting ready for the WCI conference in Park City this week to take care of our own finances!]
What do you think? Which HSA provider do you use? Are you considering changing? Why or why not? Comment below!
We’ve had Select Account plus Charles Schwab for several years. The Select Account fees are nominal – something like a couple of dollars each month – with everything except a bit of cash invested in a Schwab index fund. It’s not used for reimbursing medical expenses since those come from the company MERP, so it’s effectively another 401K plan that gets funded annually.
Newbie here
Is it better to buy VTSAX with fidelity HSA and pay the fee or pick a no fund fee from fidelity like Fidelity® Total Market Index Fund (FSKAX)?
Thank you
Doesn’t matter much. I chose the Fidelity Zero ER TSM fund for my new Fidelity HSA.
Thank you
is that the FZROX?
Yes. But differences between all of those are very slight.
Do you recommend any good self-directed HSA account or vendor?
There aren’t a lot out there and I don’t think I’d bother, at least until your HSA hits $50K or so. But no, I don’t have a recommendation there. Let me know if you find a good one.
Does “self-directed” mean “invest in anything of your choosing” like a Solo 401K?
I’m surprised any of those exist at all. It seems like a bad idea except in the most narrow of circumstances. Unlike a long-term investment, the HSA funds might be needed immediately at any time without advance notice. This isn’t money that should be invested into novelty ventures. We have about 80% invested in a index fund to avoid liquidating assets in an emergency. The rest is cash. My company also reimburses 100% of medical expenses which means we’re never likely to touch the HSA funds at all, but I still leave a bit in cash regardless.
Whatever the HSA funds are invested in should be balanced by the possibility of having to liquidate them suddenly.
If your out of pocket max for the year is $10K and you have a $100K HSA, you certainly don’t need immediate liquidity on the entire HSA balance. Besides, you can save receipts, wait a few years, and then cash out too.
The main reason I think most probably won’t go for a self-directed HSA is their balances are too small to do much with. It’s pretty rare to meet someone with a $20K HSA, much less a $200K one.
We have an HSA through my wife’s employer, currently HSA bank / TD ameritrade. It seems that the information regarding how to navigate these HSAs is not easy to come by, so thank you for your post. I am wondering if it makes sense in the long-term to open a fidelity HSA and roll the money in now- I think we still have to have the HSA Bank account to accept contributions through the employer. Trying to get this set up right now because I dont want to have a bunch of accounts open in the future and I dont want to incur capital gains through any kind of transfer/rollover in the future. We have
~ 6-7K just sitting there. Looking forward to the update with the Fidelity review!
I’d just stick with the HSA Bank fi your employer is using it. The saved fees aren’t worth a lot of hassle as they’re pretty minor.
That update ran here: https://www.whitecoatinvestor.com/fidelity-vs-lively-hsa-review/
I received an updated from HSA bank that DEVENIR will be offering new funds with low ratios. I check it out and they are offering Vanguard funds with fees of .05. I’m still digging around to see if there are any other fees and/or if they require you to keep any cash in the savings account. Anyone with additional info on this change?
Can an individual contribute to an HSA if it is not tied to an employer? My current employer provides a high deductible insurance, but does not offer a sponsored HSA. I know I may not be able to get the FICA tax benefits from a payroll deduction, but can I still get the other tax benefits?
Yes. Mine is at Fidelity. Lively also good. Yes, you get everything but the FICA benefit.
I have only been doing a back door Roth for myself since my wife still needs to liquidate her Traditional IRA and pay the taxes. I noticed online that there is a one time contribution from an IRA to an HSA without a penalty. Will she still owe taxes on this money that she has taken out of her IRA? We also took money out of her IRA this year to buy a house since we wanted to avoid PMI.
At the beginning you stated
“Fidelity came out with a new HSA this year, with no fees. Lively is also charging no fees starting January 2019. That puts those two HSAs at the top of my list.”
You didn’t talk about Fidelity at all?
Not sure you read the dates. The post was written in February. Fidelity came out with their HSA later that year. I wrote a separate post all about it here that I presume you missed:
https://www.whitecoatinvestor.com/fidelity-vs-lively-hsa-review/
and as a favor to folks like you who are reading old posts, I put an update at the top of it with a link to Fidelity where you can read all about it. It’s a lot of work to keep 1800 pages of the internet up to date and I can’t rewrite every post on the site every month. Sorry.
Thanks for providing the URL. Didn’t know you wrote another post, when I clicked on Fidelity from the original post it brought me to their website. Don’t expect you to rewrite every blog post. Thanks.
I’ll add a link to that post.
My employer offers 3 health care plan options (one of which is HMO). We prefer to have PPO. One of the PPO plans would qualify for HSA but the monthly premiums would be higher for my family (by about $100/month) and the deductibles (individual and family) are substantially higher. Currently the non-qualified plan family deductible is $750. In the high deductible PPO plan which would qualify me for an HSA, it is $8100. I do like the stealth IRA nature of the HSA. Do you think it is worth the switch? Even if I put the max in (~7k) into the HSA, given such a high deductible it is possible it could all be used up and then I would lose the investment benefits. Thoughts?
Thanks for your blog and help!
You shouldn’t select health coverage simply because it has an HSA. The objective of your selection is to get the best health coverage for the money. It sounds like selecting the HSA eligible plan would provide worse coverage. I wouldn’t do that.
Agreed. Pick the right plan for your family first. If that happens to be an HDHP, then use the HSA. https://www.whitecoatinvestor.com/should-i-get-an-hdhp-just-to-use-an-hsa/
I found out my job offers an HSA!! Given all the benefits, why do so many blogs advocate funding an IRA over an HSA? Is it simply the age withdrawal limit? Thanks.
Beats me. I’m a huge fan of a triple tax free investing account.
Hey again WCI!
As a new intern taking advantage of the my employer’s roth 403b match and being offered an HSA through HealthEquity, is it best to place emphasis on this HSA over a traditional roth IRA throughout residency after contributing to my 403b? Current priority plan is: Roth 403b (4.5% employer match), private undergrad student loans (6 figures in debt for private onyl), HSA vs. Roth IRA.
I read the financial waterfalls post repeatedly, but I am wondering how the ranking of HealthEquity impacts that rank list.
HealthEquity is fine if you’re able to invest the money in reasonable investments, which I think you can there.
If you’re not going for PSLF and not getting a significant REPAYE subsidy, then Roth is probably better than traditional.
But if you have six figures in private loans and are prioritizing that over HSA and IRA contribution (which is fine) I don’t see how this question is relevant. You’re not going to have those loans paid off in residency are you?
Thanks for the info!
I am not going for PSLF. I am going for REPAYE with ~300k federal loans (in addition to my private loans because I clearly made bad financial choices in the past). I think(?) I would have a significant REPAYE subsidy. Therefore, I should prioritize a Roth IRA over my employer matched (4.5%) 403b Roth option?
With the help of a parent, I’m hoping to have almost all of my private loans paid off by the end of residency. I was told to refinance (which I did) and pay them off as quick as possible.
If you run the numbers, you will likely find that you will come out ahead (or at least similarly) using tax-deferred instead of Roth accounts in residency because it will increase your REPAYE subsidy. It’s a much bigger difference if going for PSLF. You get the match either way. The private loans of course are irrelevant to the decision. More info here:
https://www.whitecoatinvestor.com/roth-vs-traditional-pslf/
Thank you for the details! I am not going for PSLF as a derm resident. Therefore, I should stick to Roth option over traditional. Correct?
Probably, but depends on how much REPAYE subsidy you’re getting.
Through my previous employer I had an HSA Bank account, and my fired financial advisor recommended I invest 100% of the account with TD Ameritrade when I left my employer in 2018. A couple of years ago, the cash portion went into the negative because of the $2.50 monthly fee. Now that I have begun doing the research, it seems that I cannot contribute anything to the account, although I put in $25 in 2019 and 2020, which my fired financial advisor recommended. What should one do to cover those fees? Will it automatically be pulled from the investment portion, if I don’t put in a cash contribution? For those amounts that I have contributed, does that mean I have done something illegal per the IRS?
Yes, it will be automatically pulled. I’d probably sell a little to cover the fees for the next year though.
I’m not sure that I’m seeing anything illegal. If you were allowed to contribute you can contribute. But if you weren’t allow to put in $25 and did, well, that would be an overcontribution.
Just wanted to update that The HSA Authority charges a $36 yearly investing fee that comes out of the investment.
I am a complete newbie at this. I finally enrolled in a HDHP plan and started contributing to an HSA. My employer did not let me choose a company and these funds went into an optum financial account. I have not done any investing with my contributions. I have the option to open an mutual fund only investment account with optum financial or to do a combined optun financial/td ameritrade brokerage account. Any recommendations for the easiest/best way to approach this? I have seen recommendations for transferring once a year to another place such as fidelity as well, which I am definitely willing to consider. Thanks all.
I’d probably just do the once a year rollover to Fidelity or Lively, but if you want to keep things simple either of the other two options is reasonable. I used to have one that did the same thing with TDA brokerage and that worked fine for me.
Thanks you. If I wanted to keep it simple and enroll in the mutual funds via optum, can I later decide to transfer it into a different account such as at fidelity? I will likely keep a small sum in the savings account for some minimal health costs now and then transfer the rest to an investment account either at optum, optum plus TD ameritrade or another place. I suppose where, depends on risk tolerance? I am in my mid 30s and a few years into practice in emergency medicine.
Yes.
What you invest the money in depends on risk tolerance, but where you do it is based more on fees, hassle, and convenience.
I’m purchasing an individual health insurance plan and am considering a HDHP so that I can open an HSA. But as I was comparison shopping, I noticed a lot of Non-ACA-compliant Short Term health insurance plans with United Healthcare that were $80-$200/month cheaper than comparable HDHPs. Would you recommend Non-ACA-compliant Short Term health insurance plans (without the option of an HSA) instead of ACA-compliant HDHPs (with an HSA)?