Setting Up Your Fidelity Hsa Investment Options

A Health Savings Account (HSA) is a tax-advantaged account that can be used in conjunction with an HSA-eligible health plan to pay or save for qualified medical expenses. There is no minimum required to open an account, and you can invest any amount. The money you contribute is not subject to federal income tax, earnings accumulate tax-free, and withdrawals are not subject to federal income tax when used for qualified medical expenses. You can choose to manage your investments yourself with a self-directed Fidelity HSA or let Fidelity manage and invest for you with a Fidelity Go HSA.

Investment options with no minimum balance

Fidelity offers a range of investment options for Health Savings Accounts (HSAs) with no minimum balance requirements. Here are some key points to consider:

• No Minimum to Open an Account: Fidelity does not require a minimum balance to open an HSA. You can start investing with any amount, allowing you to begin building your savings and taking advantage of the tax benefits of an HSA.
• Flexibility: You can choose to manage your investments yourself with a self-directed Fidelity HSA or opt for the Fidelity Go® HSA, where professionals manage your investments for you.
• Wide Range of Investment Options: With a Fidelity HSA, you can invest in a broad range of individual stocks, mutual funds, and other securities. This flexibility gives you the opportunity to diversify your portfolio and potentially maximize your returns.
• Tax Advantages: HSAs offer a triple tax advantage. Contributions are tax-deductible, earnings accumulate tax-free, and withdrawals are not subject to federal income taxes when used for qualified medical expenses. This makes HSAs an attractive option for long-term savings and investing.
• No "Use-It-or-Lose-It": Unlike Flexible Spending Accounts (FSAs), HSAs do not have a "use-it-or-lose-it" policy. Your savings roll over each year, and you retain control of the account even if you change jobs or move to another state.
• Potential for Growth: The longer you invest, the greater the potential for growth. Investing your HSA funds can help your savings grow over time, especially with the compound interest earned on tax-free earnings.
• Access to Funds: With a Fidelity HSA, you can access your funds anytime. This flexibility allows you to withdraw money for qualified medical expenses or reimburse yourself for previous expenses.
• No Account Fees: Fidelity does not charge any account fees for HSAs that you invest yourself or for Fidelity Go® HSAs. However, certain investments may have fees and minimum investment requirements, so be sure to review the details of each investment option.

By choosing a Fidelity HSA with no minimum balance requirements, you can start investing for your health care needs and take advantage of the tax benefits and flexibility that HSAs offer. Be sure to consider your financial goals, time horizon, and risk tolerance when deciding how to invest your HSA funds.

Tax-free gains

A Health Savings Account (HSA) is a tax-advantaged account that can be used to pay for or save for qualified medical expenses. It is one of the most tax-efficient savings options available and can be a powerful tool for retirement savings.

The money you contribute to an HSA isn't subject to federal income tax, and any investment growth is also tax-free. Withdrawals are also free from federal income taxes when spending on qualified medical expenses.

Tax-Advantaged Contributions

Contributions to an HSA are tax-deductible. You can contribute to your HSA in several ways, including one-time or recurring contributions from a bank account or eligible Fidelity account, depositing a check, or setting up direct deposits from your payroll. There is no minimum amount required to open a Fidelity HSA, and you can invest any amount.

Tax-Free Investment Growth

Any gains or growth from investing your HSA funds are not taxed. This means that you can invest a portion of your HSA funds in stocks, bonds, ETFs, mutual funds, and more, and any gains will be deposited back into your HSA tax-free.

Tax-Free Withdrawals for Qualified Medical Expenses

Withdrawals from your HSA are not subject to federal income taxes when used for qualified medical expenses. This includes doctor's visits, hospital services, surgery, medications, and more.

Carry Forward Unused Funds

Unlike other types of savings accounts, HSAs have no "use-it-or-lose-it" rule. Any unused funds in your HSA will carry over to the next year, and you can continue to grow your savings over time.

No Minimum Balance Required for Investing

There is no minimum balance required to start investing your HSA funds. You can choose to invest in a variety of options, including stocks, bonds, ETFs, and mutual funds, depending on your financial goals and risk tolerance.

Long-Term Growth Potential

The longer you invest your HSA funds, the greater the potential for growth. By investing consistently and taking advantage of the tax benefits, you can accumulate significant savings over time to cover medical expenses in retirement.

Remember, the tax advantages of an HSA apply to federal taxation only. Contributions, investment earnings, and distributions may or may not be subject to state taxation, depending on the state you live in. Be sure to consult with a tax advisor to understand the specific rules and regulations for your situation.

No-fee withdrawals for qualified health care expenses

A Health Savings Account (HSA) is a tax-efficient way to save and pay for qualified medical expenses. Withdrawals are free from federal income taxes when spending on qualified medical expenses (QMEs).

The Internal Revenue Service (IRS) defines a QME as the cost to diagnose, treat, or prevent disease and includes equipment and supplies needed for those purposes. Over-the-counter medications, hand sanitizer, and sanitizing wipes are also considered QMEs. For a full list, see IRS Publication 502.

If you pay for a QME out of pocket, you can reimburse yourself from your HSA at any time. To do this, you can transfer money online from your HSA to your personal bank account using an electronic funds transfer (EFT), mail yourself a check, or write yourself a check from your HSA checkbook.

If you have a Fidelity Go® HSA, you can also pay for QMEs with a debit card. This is a simple way to pay for your QMEs on the spot.

Comparison with traditional savings accounts

A Health Savings Account (HSA) is a tax-advantaged account that can be used in conjunction with an HSA-eligible health plan to pay or save for qualified medical expenses. HSAs are tax-advantaged in three ways:

• Contributions using after-tax money may be tax-deductible. If your HSA is through your employer, you can make pre-tax payroll contributions.
• Withdrawals are free from federal income taxes when spending on qualified medical expenses.
• Any investment growth is also tax-free.

There are no minimum requirements to open a Fidelity HSA account, and you can invest any amount. The longer you invest, the greater your potential growth.

Compared to a traditional savings account, an HSA offers a higher potential for growth. For example, a $350 monthly contribution in an investment account could grow to $426,990 in 30 years, compared to $134,874 in a traditional savings account. This is because the average interest rate for an investment account is higher than that of a savings account. As of October 21, 2024, the assumed annual nominal investment growth rate is 7% compared to a 0.45% national savings account deposit rate.

However, it is important to note that investing in the stock market comes with a risk of loss, and the performance of an investment account is not guaranteed. In contrast, a traditional savings account is FDIC-insured, protecting you from loss. Each type of account has its own unique set of potential benefits and limitations that you should consider before deciding which is right for you.

HSA investing vs. self-directed investing

A Health Savings Account (HSA) is a tax-advantaged plan that allows individuals and families to save for qualified medical expenses on a tax-free basis. Contributions are generally made with pre-tax dollars, and can be deducted from your gross income on income taxes each year. HSA funds can be used for qualified medical expenses, and for costs that may not be covered by other health plans, such as dental, vision, and psychiatric care.

There are several benefits to investing in an HSA. Firstly, the money you contribute is not subject to federal income tax, and withdrawals are not subject to federal income tax when used for qualified medical expenses. Secondly, HSA funds offer flexibility, as they can be used at any age to pay for qualified medical expenses, and there is no minimum required to open an account. Finally, HSA funds can accumulate year over year, and any unused funds in the account roll over, allowing your savings to grow over time.

When it comes to investing your HSA funds, you have the option of using a self-directed HSA, or a managed HSA. With a self-directed HSA, you can choose and manage your own investments, which can include stocks, bonds, ETFs, mutual funds, and more. A self-directed HSA offers the benefit of alternative investments, which have the potential to earn income at a faster pace than traditional investments. You also have complete control over your funds and can direct them into investments that you are familiar with and feel confident about.

On the other hand, with a managed HSA, a robo-advisor chooses and manages your investments for you based on your long-term goals and risk tolerance. This option may be preferable if you don't want to make your own investment decisions or don't have the time to do so. There is no minimum to open a managed HSA account, and advisory fees are low, making this a cost-effective option.

Both self-directed and managed HSAs offer unique advantages, and the right choice for you will depend on your financial goals, risk tolerance, and how involved you want to be in managing your investments.

Frequently asked questions