How to Invest HSA Money in Mutual Funds

Make your HSA an extra retirement fund.

A health savings account, or HSA, allows you to put money aside to pay for medical expenses not covered by your health insurance plan. By combining an HSA and a high-deductible health plan, you can save money on monthly premiums and funnel those savings into your account. Unlike other health-care spending accounts, the money in an HSA rolls over from one year to the next, and you can even invest some of the account in mutual funds and watch your nest egg grow.

Instructions

1. Review your most recent HSA statement and check the balance. It's sensible to invest only part of the HSA in mutual funds, as you want to keep a portion of the funds in safe cash investments. It's important to keep the money you expect to need for current expenses in cash rather than in mutual funds.

2. Contact the administrator of your plan and ask about the mutual funds that are available. A number of financial institutions, including banks, brokerage firms and mutual fund companies, offer HSA accounts, and each one has different mutual funds available.

3. Request a prospectus for the mutual funds available to HSA plans. Review the information in each prospectus carefully and compare the performance and the expenses of each plan. Keeping your expenses low means you have more money to invest, while choosing funds with a strong record of performance helps you grow a larger nest egg.

4. Contribute a portion of each new HSA deposit to the mutual funds if you wish. Just be sure to keep enough money in liquid investments to pay for your current and projected health-care expenses.

References

• CNN Money: What You Need to Know About Health Savings Accounts