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HSA: Why Health Savings Accounts Are an Ideal Wealth Building Tool

Matt Spillar

This post may contain affiliate links. Please read my disclosure for more information.

A valuable wealth building tool that many people might not already know about is called a Health Savings Account (HSA). Today’s post will walk through the importance of HSA’s, who is eligible to open one, and give a deep dive on Lively, the HSA provider that I recommend.

An HSA is a tax-advantaged savings account available for people who are enrolled in a high-deductible health insurance (HDHP) plan. The power of the HSA is it’s one of the only accounts that provides the opportunity for tax savings in three ways – money contributed into the account with pre-tax dollars, money growing within the account tax-free, and money that can be withdrawn from the account fully tax-free when being used to pay for qualified medical expenses. This makes HSA’s a powerful wealth building tool, because you’re keeping more of your money in your own pocket!

Note: The contribution limit for a family in 2020 is $7,100.

The best part is that you can decide when to be reimbursed for medical expenses whenever you want, anytime after the HSA was opened. For example, say you have a $100 medical procedure. You could turn in the receipt and get reimbursed from your HSA right away, OR you could keep the receipt (keeping a digital copy on your computer to keep long-term), let the $100 continue to grow through being invested, and then reimburse yourself further down the line (even in retirement)! If you end up having more money in your HSA than needed for medical expenses, you can withdraw the money once you reach age 65 (you’ll have to pay income tax on it when withdrawing, if not used for medical expenses).

The Mad Fientist walks through all these steps in an easy to understand way, in this blog post.

Who is eligible to open an HSA?

To qualify for an HSA, you must meet the following:

What is a HDHP?

Simply put, a HDHP is a health insurance plan defined by lower premiums and a higher deductible. You can read more about the details here. It won’t be the right fit for everyone, including those with preexisting medical conditions. However, if you’re in good health, rarely need prescription medicine, and don’t expect to have significant medical expenses in the coming year, it might be worth considering an HDHP. In trade for lower premiums, HDHPs require you meet your deductible before you get any coverage for treatment other than preventive care. In turn, you’ll be eligible to contribute to an HSA and reap the tax savings.

Should I open an HSA?

By now you may be thinking that opening an HSA sounds like a pretty sweet deal. HSAs are owned by individuals, not their employers and similar to a 401k or IRA, can be transferred from job to job or institution to institution. If you lose HSA eligibility later on after opening the account, the funds still remain yours and can still be used as before. Then you can resume making contributions whenever you regain eligibility.

Many times your employer will offer a standard HSA when you enroll in your HDHP, and sometimes will even offer matching funds for your contributions. If this is the case, it may be best to go with the standard provider offered. However, it’s important to pay close attention to the fees you’re paying. If your employer doesn’t offer an HSA, doesn’t match contributions, or your fees are high – I would highly recommend going with Lively for your HSA.

What is Lively and why are they a good choice for my HSA?

Lively has been named a top-rated HSA provider by Morningstar and has been featured in Forbes. They have good investment options and no monthly or hidden fees, which compares favorably to competitors who charge an average of $26/year simply for having an account. The company prides itself on their intuitive design, accessible support, and ongoing education for its customers.

Investment Options

You can invest 100% of your Lively HSA funds with no cash minimum requirements, meaning all of your money is actively working for you and none of your cash is sitting on the sidelines. Lively allows you to set up either one-time contributions or recurring contributions – all with zero transfer fees! You won’t need to complete any paperwork, and you can fund your account either by linking your bank account or through your regular employer payroll contributions.

Lively offers two investment options, a guided portfolio in partnership with Devenir (where you pay a small fee to receive personalized suggestions from an advisor) and a self-directed brokerage account (by TD Ameritrade), which provides investors with a wide range of stock, bond, and fund options they need to design and manage their ideal portfolio how they want.

The self-directed brokerage account has $0 access fee, no minimum balance, $0 commissions for online trading of US exchange listed stocks, and a wide variety of investment options, including individual stocks, bonds, CDs, over 550 commission-free ETFs, and more than 13,000 mutual funds. There are plenty of good, low-cost investment options that you can use for long-term investing.

You can check out the rest of their features here.

Accessing Your HSA Funds

Lively makes it convenient to access your HSA account when paying for medical expenses, as you will be provided with an HSA Visa debit card, which can be used anywhere Visa is accepted. The card can be used at a doctor’s office, pharmacy, or any qualified medical expense provider.

If you used a non-HSA form of payment, as previously mentioned you can keep track of your receipts and continue to let your HSA funds grow tax-free. Later on, whenever you decide, you can schedule a reimbursement from your HSA. The online interface has a feature that allows you to track your unreimbursed expenses. It lets you record your qualified medical expenses and upload the receipt. Lively then stores this information away for you in an organized way – letting you choose whether to be reimbursed now or later.

Mobile App

You can monitor and run your Lively HSA account from your iOS or Android devices. You can use the mobile app to set up contributions, track HSA spending, check your account balance, and monitor your investments. It has an extremely intuitive interface and is easy to use.

How do I get started with Lively?

Once you’ve determined you’re eligible to open an HSA, getting started with Lively is easy:

  1. Open an account and fill in your basic information
  2. You’ll be asked if you have a current HSA you want to rollover
  3. Your account is finalized within 1-2 business days, you can login and start contributing

If you need any assistance you can view the “Help” tab on the bottom of the website, are connect with a representative via chat, email, or phone. Rolling over an existing HSA from a different provider is also a seamless process.

I have no doubt that utilizing an HSA along your financial independence will help fast track your progress, and Lively is the best choice I’ve found for this. Good luck, and feel free to reach out to me with any questions!

This post is brought to you in partnership with Lively. Thanks for reading! Be sure to get updates on all of my latest posts by subscribing via RSS, following me on Twitter, and liking my page on Facebook!