Best Health Savings Accounts (HSA) in April 2024

6 Best HSAs of 2024

Best For Low Fees

Lively

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Why We Chose It

Lively doesn’t charge fees and offers a simple dashboard to track contributions, investments and spending. Clients can choose self-directed investment options through a Schwab brokerage account or a pre-defined portfolio from Devenir.

Pros

• Open a free account online with no paperwork requirements
• No fees for transferring HSA from another provider
• Simple dashboard tracks account activity, health plan deductibles and out-of-pocket costs

Cons

• Schwab charges a $24 annual fee if balance is under $3,000
• The Devenir HSA Guided portfolio charges 0.5% annually
• Savings account interest rates are much lower than other accounts

Best for No Minimum Balance Requirement

HSA Bank

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Why We Chose It

When you’re first starting out, you may not have enough money in your HSA to open some accounts. HSA Bank is an excellent choice for small-balance HSAs because it has no minimum balance requirements and does not charge monthly fees. You’ll earn a small amount of interest on your savings account, then you can invest in self-directed investments once your account reaches $1,000.

Pros

• No minimum balance requirements or monthly fees
• Invest in a brokerage account or professionally managed portfolios
• No trading fees for U.S. stocks and select mutual funds

Cons

• Tiered interest rates on savings balances are 0.50% or less
• May incur trading fees in some investments

Best for Investment Options

Fidelity Investments

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Why We Chose It

Fidelity Investments has an established reputation as one of the best investment companies in the industry. HSA clients can choose from a self-directed portfolio where they can choose their own investments or have Fidelity choose and manage investments on their behalf. Self-directed accounts benefit from commission-free trades on U.S. stocks and ETFs, while managed portfolios under $25,000 have no management fees.

Pros

• Offers self-directed investing or managed portfolios
• No minimum to open an account
• Reduced fees for eligible accounts

Cons

• Withdrawals may take up to three to 10 days to sell investments
• Underlying investments may require minimum investment amounts
• Higher commissions are charged when trades are handled by a Fidelity representative

Best for Savings Rates

Liberty Federal Credit Union

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Why We Chose It

HSA customers who want to earn the highest interest rates on their money should consider Liberty Federal Credit Union. While it does not offer investment choices, customers earn 2.01% APY on their Health Savings Checking account and can lock in CD rates on excess funds for up to five years.

Pros

• Offers high interest rates on HSA checking and CDs without monthly or annual fees
• Check writing and debit cards are available
• No minimum balance to open an account

Cons

• Must have a minimum balance of $500 to earn dividends
• Requires $1,000 minimum balance to open CDs ranging from one to five years
• Does not offer stock, mutual fund or ETF investment options

Best Traditional Bank HSA

Bank of America

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Why We Chose It

Many investors have never heard of the companies that run health savings accounts. Instead, they prefer to stick with a traditional bank where they can have all of their accounts at one institution. Bank of America is one of the largest financial institutions in the U.S., and it offers HSAs as well as deposit accounts, loans, credit cards and other bank products.

Pros

• No minimum balance is required to open a health savings account
• Customers can choose between automatic or manual investing
• Can have all of their banking, borrowing and investment accounts at one company

Cons

• Limited mutual fund investment choices
• Self-directed brokerage option is not available
• Low interest rates on HSA savings accounts

Best for Employers

HealthEquity

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Why We Chose It

Employers often look for cost-effective ways to provide benefits to employees. HealthEquity offers low-cost health savings accounts with easy-to-use integration tools. It is the largest HSA provider with more than 5.5 million HSA members across more than 50,000 organizations.

Pros

• Fast onboarding and custom integrations make implementation easier
• 24/7 member support
• Employees can invest in low-cost mutual funds from Vanguard with only $500

Cons

• Charges a monthly admin fee of $6 per account
• Low HSA cash balance tiered interest rates

What is a Health Savings Account?

A health savings account (HSA) is a tax-advantaged savings account available to consumers participating in a high-deductible medical insurance plan. To qualify, you must be covered by a high-deductible health plan, which has insurance deductibles between $1,500 and $7,500 for individuals and $3,000 to $15,000 for families. HSAs are the only tax-advantaged account that offers triple tax advantages for contributions, growth and withdrawals.

Contributions are deducted from paychecks on a pre-tax basis, lowering taxable income. The money grows tax-deferred, which means that participants don’t pay taxes on the interest and gains each year. Withdrawals are exempt from income taxes as long as they are used for eligible expenses.

Eligible medical expenses include:

• Medical expenses used to meet deductible
• Dental care
• Vision care
• Prescription drugs
• Over-the-counter drugs prescribed by your doctor
• Select types of medical equipment, supplies and diagnostic services

You are unable to use your HSA funds to pay for insurance premiums except in select cases. Instances where you can use HSA funds include long-term care insurance, health care continuation coverage (eg.: COBRA), health care coverage while receiving unemployment compensation and qualified Medicare expenses or other health care coverage after turning 65 years old.

Maximum contributions vary based on individual versus family accounts. In 2024, annual maximum HSA contributions grow to $4,150 for individuals and $8,300 for families. 

The money can stay in a savings account to earn interest, or it can be invested in a variety of investment options. Some HSA companies or workplace plans require participants to maintain a minimum balance in the savings account while investing the rest.

Who Should Get a Health Savings Account?

Health savings accounts are an ideal type of savings account for people in good health. In order to participate in an HSA, you must be signed up for a high-deductible medical insurance plan. These plans offer lower premiums, but they do not start paying out benefits until you’ve met the deductible. By avoiding costly medical expenses, you can invest your contributions to grow over the long term.

“HSAs are an excellent way to save for future medical expenses through triple-tax advantage savings. I’ve been investing through an HSA for many years to reduce my taxes and grow tax-free money when I have medical expenses.”

— Lee Huffman

For people with recurring or high medical expenses, HSAs are not a good idea because they won’t be able to benefit from investing their contributions. In many cases, the out-of-pocket expenses for medical care, prescriptions, co-pays and deductibles are more than their HSA contributions. They may be better off with an HMO or low-deductible PPO medical insurance plan.

People who can afford it can choose to pay their medical costs out of pocket. This allows their contributions to stay invested and grow tax-deferred. At a later date, they’ll submit receipts for eligible expenses to withdraw money tax-free.

What Are Health Savings Account Rules?

Like most tax-advantaged accounts, there are rules that govern who can participate, how much you can contribute and how the money can be withdrawn. These rules also govern how and when contributions and withdrawals are taxed.

• Who can participate: In order to contribute to an HSA, you must be enrolled in a high-deductible medical insurance plan.
• Annual contribution limits: HSAs have contribution limits for individuals, families and participants age 55 and older. 
• How is money taxed: Contributions are tax-deductible from your Federal income each year. Payroll contributions are also exempt from FICA tax and state income taxes (in most states). Interest, dividends, capital gains and other income grows tax-deferred. Qualifying withdrawals are tax-free.
• Where you can invest: You can invest in any of the HSA’s chosen investment options to potentially earn higher returns in the long run. Investment options include stocks, bonds, and exchange-traded funds (ETFs). 
• Withdrawal rules: Participants can withdraw money tax-free when used for eligible medical expenses. These withdrawals can be done with a linked debit card or by submitting receipts. Some wait to submit receipts until a later date to allow the investments to grow over time. When you reach the age of 65, you can withdraw the money for any reason without paying a penalty. But you will owe income taxes on the gains if the withdrawal isn’t for an eligible expense.

How to Open A Health Savings Account

If an HSA fits into your financial plans, follow these steps to choose a company and open an account.

• Step 1. Research HSA companies to find one that matches your goals.
• Step 2. Sign up for an eligible high-deductible medical insurance plan.
• Step 3. Determine how much you can save in your HSA and set up payroll contributions.
• Step 4. Complete the application to open your health savings account with your preferred company.
• Step 5. Tell your employer where to direct your contributions.
• Step 6. Select the investments where your excess contributions are invested.

Pros and Cons of Health Savings Accounts

To make it easier to decide whether they are right for your finances, take a look at the pros and cons of health savings account providers.

Pros

• Triple tax advantages: contributions, growth and withdrawals
• Contributions are portable and unused money rolls over to the following year
• Unused contributions can be invested for long-term growth

 

Cons

• Must participate in a high-deductible medical insurance plan
• Taxes and penalties if money is used for ineligible expenses
• Participants may not be able to max out contributions

Health Savings Account (HSA) vs. Flexible Savings Account (FSA)

During your annual enrollment, you may be offered the choice between a health savings account (HSA) and a flexible spending account (FSA). Both accounts allow consumers to pay for medical expenses on a pre-tax basis. While HSAs require participants to have a high-deductible medical plan, anyone can have an FSA. In fact, there are different types of FSAs, including those for medical and childcare expenses.

Each type of account has different contribution limits as well. In 2024, participants can contribute a maximum of $3,200 per year to Healthcare Flexible Spending Accounts (HCFSAs). HSAs allow much larger contributions with 2024 annual maximums of $4,150 for individuals and $8,300 for families.

FSA contributions must be spent each year. If you don’t use the money on eligible expenses, you forfeit the unused balance. But some plans allow you to carry over a certain amount: up to $640 in 2024. With this in mind, people often contribute less to an FSA than they expect to spend each year to avoid forfeiting unused money. By comparison, money in HSAs can be carried forward indefinitely so participants are encouraged to contribute the maximum.

Contributions to FSAs do not earn interest and can’t be invested. Since HSAs offer a longer-term approach, they offer either interest or investment returns, depending on how they’re saved.