48 KIPLINGER’S PERSONAL FINANCE^ 04/2020
MONEY
and your contributions
are deducted from your
paycheck pretax. With a
non-workplace HSA, how-
ever, you make after-tax
contributions. You’re still
eligible for a full break
on federal, state and local
taxes on those contribu-
tions, but you don’t collect
until you declare them on
your tax return.Shop smart. Finding a good
health savings account is
tricky, in part because there
are hundreds of plans out
there. Of the few plans that
offer investing capabilities,
some feature only mutual
funds, and others allow you
to invest in stocks, mutual
funds and exchange-traded
funds. Ben Lake, a financial
adviser at Altfest Personal
Wealth Management in
New York City, has helped
some of his clients find and
set up an HSA on their own.
“It’s kind of tough,” he says.
Morningstar, the finan-
cial-data firm, rates a hand-
ful of the biggest HSA plans
every year. Its 2019 report
ranks 11 HSA providers on a
variety of investing criteria,
giving high grades to firms
that charge low fees and
that offer an appropriate
range of high-quality, low-
cost, core investment op-
tions, among other things.
Fidelity came in first, fol-
lowed by the HSA Authority
and Bank of America. In ad-
dition to strong investment
options, Fidelity’s HSA plan
“charges rock-bottom fees
that no other provider can
compete with,” says Morn-
ingstar analyst Leo Acheson,
who conducted the HSA
study with Megan Pacholok.
(Though any stock, ETF orTo open an HSA, you must be enrolled in a qualified high-deductible health plan, which means the
plan has a deductible of at least $1,400 for single coverage and $2,800 for family coverage,
among other measures. In 2020, singles can contribute a maximum of $3,550, and families
$7,100, to an HSA. One strategy is to invest the HSA money for retirement or other long-term
goals and pay for current medical costs out of pocket. Here’s help deciding if that makes sense:Do you have enough cash on hand to cover your annual
deductible and any additional out-of-pocket health care costs
without tapping your HSA?Have you met the plan’s minimum
balance requirements to avoid any
maintenance fees or to invest?Save enough in your HSA to meet
any required account minimum to
avoid a maintenance fee. Use sav-
ings above the minimum to cover
health care costs. At the end of the
year, consider investing any remain-
ing balance above the minimum.Once you’ve met your
minimum, invest any remaining
balance and new contributions, and
decide when you’ll need the money.Save enough to satisfy any minimum
account balances and avoid monthly
maintenance fees.Invest in cash and
short-term, high-
quality bond funds.Invest in a good, low-
cost balanced fund, or
in funds with a 60%
stock, 40% bond
portfolio in mind.Invest in a time ap-
propriate, low-cost
target date fund, or
in funds with an 80%
stock, 20% bond
portfolio in mind.