Investment Options in HSAs Improve Savings Potential

Balances in HSAs that leverage 401(k)-like investments are six times larger than those without them.

At the end of 2014, account balances in health savings accounts (HSAs) with investments averaged $10,261, or about six times the average $1,709 balance in HSAs without investments, according to the Employee Benefit Research Institute (EBRI).

In 2014, 6.4% of accounts in the EBRI HSA Database of 2.9 million HSAs had used the investment option portion of the account. Forty-seven percent of the HSAs with investments were opened between 2005 and 2008, compared with 8% of HSAs without investments. Among HSA owners with investments, the average age was 48.5 in 2014, compared with 43 among HSA owners without investments.

Individuals contributed an average of $2,636 to HSAs with investments and $1,224 to HSAs without investments. Annual distributions for health care claims from HSAs with investments averaged $1,777 in 2014, and $1,293 from HSAs without investments.

“HSAs often have an investment account option that allows account owners to invest in not just a money market account, but in mutual funds and other investment vehicles much like they would in a 401(k) plan,” explains Paul Fronstein, director of EBRI’s Health Research and Education Program and author of the report. “Some HSA owners may use the investment account option as a means to increase savings for retirement, while others may be using it for shorter-term investing.”

In fact, EBRI issued another report on HSAs late last year that found, depending on the deferral rates and rate of return realized, an individual who saves in an HSA for 10 years could accumulate between $35,000 and $68,000, while those saving for 20 years could accumulate between $118,000 and $193,000.

EBRI’s full report can be downloaded here.