Faith Morrow
Investing your HSA can help you prepare for unpredictable healthcare expenses. HSA funds grow tax-deferred, and withdrawals are tax-free when used for qualified medical expenses. Fidelity offers two dedicated HSA funds that provide a diversified portfolio to save for healthcare expenses. These funds balance growth while seeking to minimize risk and offer greater growth potential than cash. There is no minimum required to open an account, and you can invest any amount. The longer you invest, the greater your potential growth.
| Characteristics | Values |
|---|---|
| Investment gains taxed | No |
| Minimum required to open an account | No |
| Minimum investment amount | $10 |
| Advisory fee for balances under $25,000 | $0 |
| Advisory fee for balances over $25,000 | 0.35% |
| Number of dedicated HSA funds | 2 |
| Investment options | Stocks, bonds, ETFs, mutual funds, etc. |
| Annual contribution limit for individual health plans | $4,150 |
| Annual contribution limit for family health plans | $8,300 |
What You'll Learn
Fidelity Health Savings Fund
Investing in a Fidelity Health Savings Fund can help you prepare for unpredictable healthcare expenses. Fidelity has created two dedicated HSA funds to help you save for healthcare costs in retirement. These funds offer a diversified portfolio that balances growth while seeking to minimize risk. They also offer greater growth potential than cash with a blended fund or an all-index fund.
The first fund, the Fidelity® Health Savings Fund, invests in a mix of active and index funds. The second fund, the Fidelity® Health Savings Index Fund, invests in index funds only. Both funds are designed to help take the guesswork out of choosing and managing your savings.
There is no minimum required to open a Fidelity Health Savings Account, and you can invest any amount. Your investment gains are not taxed and can help pay for qualified health care expenses. The longer you invest, the greater your potential growth. For example, investing $3,000 of unused HSA money per year for 20 years can help offset healthcare costs in retirement.
If you're looking for help investing, Fidelity also offers the Fidelity Go® HSA, which is an easy, affordable way to enjoy the benefits of professional money management.
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Fidelity Health Savings Index Fund
The Fidelity Health Savings Index Fund is one of two dedicated health savings funds offered by Fidelity. It is designed to help individuals better prepare for the unpredictability of healthcare expenses, which can be challenging to predict. This fund invests in index funds only and aims to balance growth while minimising risk.
The fund seeks to provide a diversified portfolio to save for healthcare expenses, making investing easier for individuals. It offers greater growth potential than cash and is designed to provide choice, innovation, and value to help individuals pay for future healthcare costs.
The Fidelity Health Savings Index Fund can be a strategic option for those looking to optimise their personal finance checklist. It is important to note that before investing in any mutual fund, individuals should consider its investment objectives, risks, charges, and expenses.
Investing in a health savings fund can be a great way to complement other retirement accounts, such as a Roth IRA or 401(k). These funds offer a triple tax advantage: contributions are deductible, investment growth is tax-deferred, and withdrawals are tax-free for qualified medical expenses. This makes them a popular choice for covering medical costs.
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Fidelity Go® HSA
There is no minimum amount required to open a Fidelity Go® HSA account. However, to invest your money according to the investment strategy you've chosen, your account balance must be at least $10. For balances under $25,000, there is no advisory fee. For balances of $25,000 and above, there is a 0.35% advisory fee per year, which includes unlimited 1-on-1 coaching calls.
Even though Fidelity Go® HSAs are intended for long-term investing, you can still reimburse yourself for qualified medical expenses paid out of pocket by submitting a withdrawal request. When you do, securities in your account will be sold, and after the money has settled (which can take up to ten business days), it will be sent to you by check, electronic funds transfer (EFT), or transfer of funds to another account.
If you also have a self-directed Fidelity HSA®, you can use a debit card to pay for qualified medical expenses by transferring money over from your Fidelity Go® HSA. This way, you can use money in a self-directed Fidelity HSA® for short-term qualified medical expenses and have quick access to the money needed to reimburse yourself for out-of-pocket expenses.
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Fidelity Freedom Index Income Fund
The Fidelity Freedom Index Income Fund is a mutual fund that offers a simplified, low-cost investment strategy, leveraging Fidelity's retirement research engine. This fund seeks to provide high current income, with capital appreciation as a secondary objective.
The fund achieves this by investing in a combination of U.S. equity funds, international equity funds, bond funds, and short-term funds (excluding any money market funds). Each of these underlying Fidelity funds aims to correspond to the total return of a specific index. This fund is designed for investors with a long-term horizon, typically referring to investing for 10, 20, or even 30 years into the future.
The Fidelity Freedom Index Income Fund has an expense ratio of 0.12%, which is considered low compared to other funds in the same category. This means that for a $10,000 investment, you would pay around $12 in annual fees. The fund has a large blend investment style, with high/moderate credit quality and interest rate sensitivity.
As of October 4, 2024, the fund's Net Asset Value (NAV) was 12.03, with a one-day return of -0.27%. The total assets under management are approximately $1.3 billion.
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Fidelity 500 Index Fund
The Fidelity 500 Index Fund (FXAIX) is a mutual fund that tracks the S&P 500 index. It has a long track record, dating back to 1988, and has delivered an impressive 11% annualised return since its inception, earning it a five-star Morningstar rating.
One of the key advantages of this fund is its low expense ratio of just 0.015% (or 0.02%, according to another source), making it a very affordable option. It also has a minimal portfolio turnover rate of 2%, which makes it tax-efficient. There are no minimum investment requirements, and the fund does not charge any transaction fees.
The Fidelity 500 Index Fund is a good choice for those with a long time horizon who are looking for broad-market exposure. It is a great option for those saving for retirement, as it has delivered strong returns over the past few decades. Over the past 10 years, the S&P 500 index has returned an annualised 12.4% with dividends reinvested, outperforming 87.4% of all US large-cap funds during this period.
This fund is a good example of a buy-and-hold investment strategy, which typically involves investing for a long period of time (10, 20, or even 30 years), not reacting to short-term market fluctuations, and focusing on capital appreciation.
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Frequently asked questions
To be eligible for an HSA account, you must be enrolled in a high-deductible health plan (HDHP) and not be enrolled in Medicare, claimed as a dependent on someone else's tax return, or have other health coverage, with a few exceptions. There is no minimum required to open an account, and you can invest any amount.
HSA accounts have a triple tax advantage. Contributions are deductible, investment gains are not taxed, and withdrawals are tax-free for qualified health care expenses.
Some of the best funds to add to an HSA account include the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX), the Fidelity 500 Index Fund (FXAIX), and the Fidelity Zero Total Market Index Fund (FZROX).
When choosing a fund to invest in, consider the fund's investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.
