The Best Health Savings Accounts

If you want to make your healthcare dollar stretch a bit further, a health savings account (HSA) may be for you. The best health savings account will offer access to your funds with low fees or no fees for even those with low account balances. If you can save more in the account, however, it may be worth paying a fee for the ability to earn interest. We took a look at the many HSAs on the market today to help you decide which account is right for your situation and to help you save on taxes this year.

The 4 Best HSAs

BankInterestMonthly FeeMinimum Deposit
HSA Bank0.05% – 0.25%$2.50$1,000
Bank of America0%$2.50$1,000
Lively0.25% – 0.60%$0$1
Fidelity0%$0$1

What is a Health Savings Account?

A health savings account, also called an HSA, is a special type of savings account available only to qualified taxpayers who have a high-deductible health insurance plan. It’s designed to give you tax savings by allowing you to contribute up to a set amount each year pre-tax so that it’s not counted as your income when you file your tax return. You can use the funds for qualified medical expenses, such as medications or your deductible portion of a health procedure prior to age 65. You can keep money in the account for as long as you want to, and after age 65 —  or retirement age —  you can use it to pay for health insurance premiums or long-term care premiums, too. A health savings account isn’t tied to your employer, making it a good option for everyone who wants to save on their taxes while putting money aside for medical needs.

HSA vs Traditional Savings Account

Both a health savings account and a regular bank savings account are vehicles for storing up cash for when you need it. Only the HSA can save money on your tax bill through pre-tax contribution — up to the annual limit allowed by the IRS. You can only use your HSA funds for qualified medical expenses, however, or you’ll be hit with a penalty. HSA accounts also don’t usually earn as much interest as the better savings accounts. If your goal is to save, regardless of the purpose, and you don’t care about tax savings, a traditional savings account is your better pick.

HSA vs Flexible Spending Account

Both an HSA and an FSA (flexible spending account) are funded with pre-tax dollars and can save money on your final tax bill. They can also be used for qualifying medical expenses. While HSAs are available to anyone, even those who are self-employed, FSAs are an employee benefit that can only be arranged through your employer. FSA money must be used in the same year you fund it, or the money goes to your employer. HSA money is yours to keep and is a better fit for those who don’t want to be tied to their job for this perk.

HSA vs Roth IRA

While many people think of an HSA as a medical savings vehicle and a Roth IRA as a retirement savings vehicle, the HSA can do the work of both. Both types of accounts allow pre-tax contributions, but only the HSA also allows you to withdraw that money tax-free (provided it’s used for qualified medical expenses.) An IRA, on the other hand, assesses income taxes upon retirement withdrawals. After 65, HSA funds can be used for Medicare supplemental premiums and long-term-care insurance. If you foresee having large medical bills in retirement, an HSA may be the better pick of the two.

The 4 Best HSAs

HSA Bank – Best for reputation

With “HSA” in the name, it’s no surprise that this HSA administrator is a top choice, serving over 3 million members and managing $8 billion in total assets nationwide. It has a low monthly maintenance fee of just $2.50, which can be waived if you keep your account balance above $5,000. They charge no set-up fees, and the application can be filled out online in just 10 minutes. You won’t even need an initial deposit to get started —  just an email address and some basic information.

For those who want to invest, HSA Bank partners with TD Ameritrade and Devenir HSA. You’ll pay the various trading fees that TD Ameritrade or Devenir charge all their customers; some investing options, such as ETFs, have low or even no fees. HSA Bank is a good option for those who want a mix of self-directed investing and the support of a well-respected HSA administrator.

Bank of America – Best for spenders

Not everyone wants to keep a large balance in their HSA account. If you don’t care about earning interest on your account for the short term, Bank of America offers a full-service account for a low $2.50 monthly fee. What’s included? Get up to nine free Visa® chip technology debit cards with no transaction fees, unlimited online payments, unlimited reimbursements, access to the mobile app and your choice of paper or electronic quarterly statements. It’s ideal for anyone who wants to sock away money just long enough for those medical bills.

If your balance exceeds $1,000, you’ll have the choice of investing your money into mutual funds. So, even if you don’t start out with a very high account balance, annual rollovers of your unused money can get you access to some low-cost investment options for later in life. Bank of America also provides 24/7 customer reps to help with your questions, day or night.

Lively – Best for easy transfers

For those who want the benefits of an HSA without paperwork or extra steps in their finances, Lively offers a modern, seamless approach toward both basic savings and future investing. It has a simple, no-minimum-balance, fee-free HSA account that’s FDIC-insured and pays up to 0.60% APY. However, its interest is tiered, so smaller accounts won’t earn as much. With paperless statements, easy transfers from your connected bank account, and a five-minute online enrollment process, it makes signing up for an HSA less of the dreaded task we make it out to be.

If you want to boost your returns with traditional investments, you can connect your Lively account to a TD Ameritrade account and get access to those investment options (though you may have to pay additional fees for transfers at TD Ameritrade prices). Moreover, Lively is versatile; it starts small but can grow with you when you need more sophisticated investment opportunities down the road.

Fidelity – Best for retirement

One of the top names in investment and retirement planning is Fidelity. It has offered an employer-based HSA for some time, but it has also recently made personal accounts available as a direct-to-consumer option. These accounts have no minimums and come with many of the perks of a traditional brokerage account. It’s one of the better options of the market for those hoping to see a more holistic approach toward retirement planning through the tax-deferred benefits of an HSA.

It charges no administration fees, debit card use, order charges or paper statement fees. It also considers itself free from investment fees. It’s important to note that this means it has fee-free investment options through its zero-cost funds;  it doesn’t charge commissions and has a 0% expense ratio for these funds. If you want to invest in opportunities outside of these, however, you will pay regular Fidelity fees.

The Final Word

When compared to other savings vehicles, a health savings account is an attractive option that provides both substantial tax savings and a way to steadily fund large medical expenses down the road. Since qualified withdrawals are also tax-free, putting money into one now can set you up for an expensive retirement. Because we have no way of knowing just how expensive future Medicare premiums and long-term care insurance will be, it’s safe to say that funding an HSA now could save you some significant cash later. For those who are eligible, it’s worth putting some capital into this account type.