How to Start Investing Your HSA

Opening a health savings account (HSA) is a great step in the right direction for your financial future. Consider an HSA as your home for medical savings. With an HSA, you can put money aside every year to pay for qualified medical expenses in the future. With the long list of eligible medical costs you can use your HSA for, it's a powerful financial tool.

But you can do so much more than simply saving. If you're not considering HSA investment, you're missing out on piles of potential cash.

About HSA Investment

The beauty of an HSA is that it has three tax advantages. The first is that your contributions up to the annual limit are tax-deductible. The second is that qualified withdrawals are tax-free. Finally, the interest you earn through investments is tax-deferred.

Investing is the best way to make your medical expense nest egg grow. You don't need much to get started. Say, for example, that you only put a couple of hundred dollars a month into your HSA, starting at age 30. With investments, that figure can grow to well over a million dollars by the time you're 70 if you earn the stock market's standard annual return of 10 percent.

That figure makes a big difference considering how health expenses get higher as you age. You don't have to withdraw from your HSA at any specific point, so investing can help you maximize savings for long-term financial growth.

There are many ways to invest through HSA. Like a brokerage account or IRA, you need to have money in your account first. Once it's funded, you can choose what types of investments you want to make. Many providers offer simple tools and automatic rebalancing, making investment approachable even with little financial experience.

Typically, the best way to invest is with stocks, bonds, mutual funds, ETFs, etc. It's a hands-off process that can earn you substantial interest over time. Because you don't pay taxes on those gains, you can sit back and watch your HSA grow over decades.

Read a similar blog about invest HSA here at this page.

Do I Need to Use a Third Party Administrator for My HSA?

Running a business of any size can be difficult, especially with how fast the digital economy moves these days. You already have a lot on your mind, and managing benefits is often just one more thing to worry about. This becomes particularly challenging when you have a large workforce that is spread out across the country or even the world. Different states and countries have different laws and regulations, and keeping up with everything can be a chore.

For some business owners, the solution to these problems is to hire an HR team to handle tasks like health savings account (HSA) management. For others, it may make more sense to go with a third party administrator (TPA) to handle HSA benefits. Which one you choose is up to you, but there are pros and cons to each approach.

Why Choose a TPA?

An HSA TPA can take a lot of the burden off of your shoulders when it comes to managing plans, accounts and benefits. Your HSA TPA acts as an advocate for your company and its employees so that you can focus on other important tasks.

A TPA can also take care of other benefit programs that you provide to employees, including mental health benefit programs and return-to-work programs. Essentially, your TPA functions as an all-in-one administration team for medical benefits.

The Benefits of Handling Your Own HSA Administration

If you choose to keep your benefits administration in-house, you’re going to have much more control over how things are managed. Of course, this means more work for you and your team, but some business owners find this trade-off worth the extra hassle.

Employees may also prefer to deal one-on-one with your company through HR to handle questions and concerns about HSA and other benefits. Working through a third party often means more phone calls, emails and other communications bouncing back and forth. In-house benefits administration cuts out a lot of the bureaucracy and provides a more efficient route for your employees to gain access to the information they need most.

Read a similar article about “difference between HRA and HSA” here at this page.