The Mistake You Might Be Making With Your HSA

March 12, 2018

No matter how you use it, Health Savings Account (HSA) benefits can help you save. When you spend your funds, you save money by using tax-free dollars to pay for eligible expenses. And when you save your funds, earnings on the interest and funds you put in aren’t taxed.

But, beyond spending and saving, you need to look at investing HSA funds to fully unlock your account's money-making potential. In many ways, a health savings account is a better investment tool than a 401(k) or an IRA, yet only 3 percent of our HSA participants are investing funds. Let’s look at the reasons why you should invest.

Don't miss this HSA opportunity 

You’ll Make More Money

Who doesn’t want to make more money? You need to invest because the expected rate of return on mutual fund investments, which is where your invested funds go, is much higher than the standard interest rate of a health savings account. For example, let’s say you have $10,000 in your health savings account balance and are trying to decide on investing HSA funds.


If you invest HSA funds…

If you build interest on funds …

After five years



After 10 years



After 20 years



* Table indicates fund growth at an 8 percent rate versus interest at a 0.035 percent rate.

The difference is considerable, and those invested funds are growing tax-free!

You’ll Strengthen Your Retirement Plan

A health savings account is considered “an IRA on steroids” and “the holy grail of tax planning.” That's why, beyond helping save for health-related expenses, a Health Savings Account benefits you in the long run. If you’re focused on retirement, you should max it out before investing in an IRA or 401(k). Compare the triple-tax advantage with the advantages of an IRA or 401(k).

  • In a traditional IRA, contributions are tax-free but withdrawals, even in retirement, are taxed. In a Roth IRA, contributions are taxed, but withdrawals are typically tax-free.
  • In a traditional 401(k), contributions are tax-free, but some withdrawals will be taxed. And there are possible penalties for withdrawing funds if you’re 59½ years of age or younger.

With a health savings account, your contributions, withdrawals for eligible expenses and earnings are all tax-free. And, when a big eligible medical expense comes up, you can pay for that expense with your account — whereas you could face penalties for withdrawing funds from an IRA or 401(k) to pay for that expense.

You’ll Love How Easy It Is to Invest HSA Funds

We cater to the investor, which is why we have a low threshold to make it easier for you to start investing. We also offer a number of tools and resources that make HSA investment options easy to compare and contrast, such as:

  • Our integrated investment experience, which lets you view and choose investment options right from your online account.
  • Our employee resource center, where you can find helpful videos and view fund options. Our interactive goal calculator is also located on our website, so you can easily see how investing will help you reach your retirement goals.
  • Our blog, which offers a number of educational posts geared for the investor. We have a variety of posts on related topics, ranging from tips on how to go from spender to saver to why a health savings account is a must-have for millennials who are preparing for retirement.

Want to learn more about how an HSA benefits your retirement savings and the choices you have? Check out our diverse portfolio of  HSA investment options. 

Please note: Discovery Benefits cannot provide investment advice and encourages its participants to seek guidance from a financial adviser for help with investment decisions.

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