We tried it: Opening (and investing in) an HSA / 89

Opening a Health Savings Account (HSA) sounds like something that requires hours of research and a dozen decisions. In reality? After putting it off for almost a year, Cassidy finally opened one in eight minutes.

In this episode, we’re sharing exactly how we opened, funded, and invested our HSAs — from choosing a provider to deciding how much to keep in cash versus invest. We also talk about when it makes sense to use your HSA for medical expenses today and when you might choose to let that money grow for the future.

✨ Episode Highlights ✨

• [00:00] Why HSAs can be so powerful — and why investing the money is worth considering
• [03:30] How we chose where to open an HSA and set up contributions
• [06:30] A real-life look at our HSA investments (and realizing we may have some adjustments to make!)
• [09:00] Putting off opening an HSA for almost a year — only to get it done in 8 minutes
• [11:30] Funding and investing an HSA, including how much to keep available in cash
• [13:30] Using your deductible as a guide for deciding how much HSA money to keep in cash
• [15:00] Therapy, menstrual products, and other expenses that may qualify for HSA funds

✨ Resources ✨

• Health Savings Accounts (HSAs): The incredible financial tool you may be overlooking  (Finance Girlies episode 54)
• Fidelity HSA
• IRS list of qualified medical expenses

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Transcript

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SPEAKER_01 0:00

Hey girlies, often the biggest hurdle when it comes to bettering your finances is just starting. For example, opening the account, putting money in it, and actually investing. So today we are talking about opening and investing HSAs, also known as health savings accounts.

SPEAKER_00 0:15

If you want to learn more about why HSAs are these like super magical, really awesome accounts to put money into, then we encourage you to go back and listen to episode 54. We did a deep dive into health savings accounts in that episode. But on a very high level, HSAs are super cool because the money that goes into the account is completely tax-free. It grows tax-free. And then you can use that money on qualifying medical expenses completely tax-free too. So you're not taxed on the money whatsoever. It's purely there to help you pay for medical costs. By and large, a lot of people will use an HSA strictly for qualified medical expenses. So if you go to the doctor and you need a copay, or you go to the doctor and you end up with a medical bill, or you need to buy medication, whether it's like over-the-counter medication at Walmart, or you're like picking up your prescription at the pharmacy, you can use your HSA like debit card essentially to cover all of those expenses. But what a lot of people don't know is that you can actually take the money inside of your HSA and invest it, just like you would invest the money in your 401, a Roth IRA, a traditional IRA, or any other type of retirement account or investment account that you have. And so what a lot of financial experts recommend is like maybe you keep a portion of your HSA in like the cash part of it. So you can continue using your card or the account to cover medical expenses if you need to, but then invest a larger chunk of it so it can grow and have time to earn you more money, just like all of your other investment accounts. And so that's what Emily and I have done, and that's what we're gonna walk you through today.

SPEAKER_01 1:59

Welcome to the Finance Girlies, a podcast for millennial and Gen Z women who are curious about money but have never quite felt at home in traditional finance spaces.

SPEAKER_00 2:08

We are Emily Vatdorf and Cassidy Horton, podcast hosts, longtime friends, and finance writers for brands like AOL and Yahoo Finance.

SPEAKER_01 2:16

Rather than giving you prescriptive advice, we talk about money the way friends actually do. With stories, questions, and a lot of figuring it out in real time.

SPEAKER_00 2:24

So you can typically open a health savings account if you have a high deductible health care plan, which uh you will learn more about my story in a moment, but I opened up a high deductible health care plan almost a year ago to the day because I wanted to be able to invest or put money into a health savings account as well. And I did not open up the HSA until just a few weeks ago because I was holding it off. It was one of those tasks where I figured it wouldn't take that long, but my brain was like, we don't want to do this. We're gonna keep kicking it down the line and pushing it off. And then I finally did it and I immediately laughed at how easy it was and how uh quickly it was marked off my to-do list.

SPEAKER_01 3:00

Yeah, and we both put this off so much longer than we needed to. And we're hoping that sharing our stories can help you get over the hump if this is something you've also been meaning to do, or if you have another financial task that just feels like the last thing you want to do. But before we get started, we also wanted to let you know about our weekly newsletter. So every Wednesday we send out a free newsletter announcing our latest episode, but that's just the beginning. You can also expect some personal reflections, our favorite personal finance content from the week, an actionable money tip, and little updates from our lives. So if you want to subscribe, head to thefinance girlies.com slash newsletter or use the link in our show notes.

SPEAKER_00 3:37

All right, so Emily, you have had a health savings account a little bit longer than I have. So do you want to walk us through the story of how you set it up, how you chose the the company you ended up opening it through, and all those details?

SPEAKER_01 3:51

Yes. So my husband and I have always had a high deductible health care plan, but when we first got married, we didn't feel like we had enough extra money to invest in a in an HSA. We both were contributing to Roth IRAs and saving for various things, and also we're like not earning a ton. So we kind of put it off for a number of years, but the more we learned about HSAs, the more we realized how powerful of an investment tool they are, and we really wanted to benefit from one. So we did a little research online and settled on Fidelity. Listeners of this podcast, you probably know that both Cassidy and I are fans of Vanguard as a brokerage, but Vanguard does not offer HSAs. So we had to look elsewhere, and Fidelity kind of came up on all the lists of best HSAs. So that's how we settled on that. We did not spend much time at all making that decision. It was kind of like this probably doesn't matter that much. Let's just pick one. And we funded the account initially with some savings we were comfortable parting with. We had kind of been stockpiling some savings either to invest in a brokerage account or an HSA. And so we had the money there ready to go. And then after that initial deposit, we set up automatic contributions from my husband's paycheck. So through my husband's HR department, part of his paycheck every month just goes straight into that HSA. And we have adjusted over the years how much of that paycheck we want to go into the HSA. I think like other investments have pulled back recently because we're saving for a house. And then there have been years where we get to the end of the year and have some extra savings and are able to, if we haven't already, max out that HSA. So we just we do make automatic contributions. So we're always contributing something, but again, we are not concerned about making sure we're contributing the exact same amount every month and every year. We just kind of let that be a little bit flexible. And that's kind of how I approach my other investments as well, like Roth IRA. And before you and I recorded this episode, I had to log into my account to see what I was invested in. And honestly, I was a little surprised. So I am mostly invested in a Fidelity Total Stock Market Index Fingested 100% in stocks might seem a little risky, but with my age and timeline, I'm I'm not concerned about it. However, a small portion of our portfolio is also invested in a target date fund, which is what we do with other investments. And I don't, honestly, I I can't explain that. The point of a target date retirement fund is that you don't have to invest in anything else because it's already diversified in rebalances for you. So this was kind of a wake-up call, I guess, to me to go in there and reallocate that portfolio because being invested in a total stock market index fund and a target date retirement fund doesn't really make any sense.

SPEAKER_00 7:04

Do you think you would prefer to just be totally in the retirement target date fund or in the index fund? So yeah.

SPEAKER_01 7:11

I think so. I think if we're just consistent across the board, that would feel good. But yeah, I don't think I've ever like sold shares to then reinvest in something else because I've always been in a target date fund. I've never had to like actually rebalance. So this will be a bit of a learning curve for me.

SPEAKER_00 7:30

So how much of your HSA are you keeping in cash versus keeping invested?

SPEAKER_01 7:35

So we as of now just have like $500 in cash. Our goal is to treat the HSA as an investment account. So we're not using this to pay medical expenses right now, or we're treating it strictly as an investment in another retirement account. Um, we just keep the minimum in cash and invest everything else. We pay for medical expenses out of pocket. And then the cool thing about an HSA is years, decades into the future, we can actually reimburse any medical expenses that we've paid for out of pocket with money from that HSA. And there's no time limit on that. So as long as you keep the receipts, you can reimburse yourself with money from your HSA. And the the benefit of doing that is that you are paying your expenses essentially with money that your money has earned. So by leaving that money in the account now, it'll compound, you know, ideally for decades into the future, earning interest, and I can use those earnings then to kind of pay myself back for what I've paid out of pocket earlier, decades before. You recently opened an HSA. Tell us what that process was like, how easy or hard was it, how you chose your investments, all of that kind of stuff.

SPEAKER_00 8:52

So I have health insurance through the marketplace. I don't have an employer-sponsored plan or anything like that. So whenever it was time for me to choose which health insurance plan I wanted, I specifically chose a high deductible health insurance plan because I wanted the option to be able to open and save money in an day. So I got my health insurance plan in September of last year. It's currently July. And I just opened up my HSA, like the end of June, just a few weeks ago. So I've I've had this account open for almost a year, many, many, many, many months. And I kept delaying actually opening up the HSA because I thought it would be complicated. I thought it would take a long time. And I don't know. I just it was just one of those tasks where I'm like, this will require enough thought that my brain just wants to like keep pushing it off. And so I did until a few weeks ago. And I timed myself opening up this account when I finally opened it up, and it took literally eight minutes. It was so fast. Um, and I kind of laughed at myself. I was like, how have you held this off for so long? It's so funny. But anyway, for some context, I did have an HSA a decade ago when I I was working as an academic advisor at a university, and it was through my employer. So I didn't I didn't have to do anything to set up this account or anything. I just told my employer how much of my paycheck I wanted redirected into this account, and that was literally all I had to do. And I will also say because I felt super broke at the time, did not have a lot of discretionary income, I did use that HSA account for actual medical expenses. So if I had to go to the grocery store and buy Tylenol, I was swiping my HSA card for that Tylenol. If I needed to go to urgent care, I was paying for that visit with my HSA card because I did not feel like I had any discretionary income. And it was truly a matter of if I don't use my HSA, I'm gonna feel like I can't actually go to the doctor, you know, and I like didn't want to not go to the doctor because I felt like I couldn't afford it when I had the money in that account. So yeah, that could also be a personal decision for you depending on what season of life you're in. But fast forward to today, I do feel like I'm in a season of life where I can continue to pay for my medical expenses out of pocket and just let the money like continue to be invested and like grow inside of my HSA, which is my purpose for opening up one now. And so that's just how things have kind of shifted for me over the years. But even though I had an HSA in the past, I felt like I was opening up one for the very first time because it was just magically provided to me through my employer before. So I tried to take the easiest way out possible. I knew that Emily had her HSA through Fidelity. I was like, I'm not even gonna research any other companies, I'm not gonna waste the time. Emily has said good things about hers. So I went to Fidelity's website, I clicked open an HSA. It asked me to enter like my name, my address, my social security number, did that stuff. The account was open in a matter of minutes, and then all I had to do was then make a bank transfer to fund the account. If you've listened to episode 80, you know that June was a high income earning month for me after like a string of slower months. So I went ahead because I knew I would have more income than I needed for that month, I went ahead and maxed out my HSA for the year. So because I have an individual health insurance plan, I can put a max amount of $4,400 in there for the year. So I went ahead and put that money in there. If you have a high deductible health insurance plan and have a family plan, like it's more than just you on your health insurance, then the max you can contribute for 2026 is $8,750. But I did go ahead and put the $4,400 in there for myself. And then what I did is I kept $1,000 of that in the cash portion and I invested $3,400 of it into like the investment account part of the HSA. And I put all of that money in VOO, which is a Vanguard index fund that tracks the S P 500. So it's like an ETF. And that is what I did.

SPEAKER_01 12:55

So do you plan on using that $1,000 just kind of as needed to pay medical expenses? I'm on the fence.

SPEAKER_00 13:03

I feel because my income seems to fluctuate so much and it's like just my income now. I do feel like I go through waves where some months, if I have a large medical expense, I'm like, I really do not want to like I don't really have extra savings. Like I'm I would be pulling out of my emergency fund to pay this off. And then other months I do feel like I have the money to do it and not really worry about it. So I wanted the thousand dollars in there just as a buffer in case I ever do have a medical expense and I don't feel like I have enough cash on hand to cover it, I can just use the card and and it's fine.

SPEAKER_01 13:37

Yeah. I've heard the advice too, and I don't remember where I heard this. An idea once you have like a significant amount of money in your HSA is to keep in cash, in the cash portion, keep however much your deductible is. So that you can always, you know, pay for what you need throughout a year before your insurance kicks in. And then just go ahead and invest the rest, knowing that you have plenty of money in your cash portion if your regular cash flow isn't gonna cover your medical expenses. So that's an idea too. But it might take a while to build up, you know. Obviously, with a high deductible health care plan, you have a higher deductible. So that is a good amount of money that you would need to save up first. Yeah.

SPEAKER_00 14:19

I will also say, just as an aside, but I just recently found out within the past year or so that if you are attending therapy, a lot of times your therapist can bill your health insurance. So if you're paying out of pocket for therapy, it can count toward your deductible. And so that is something that I have been doing. I go to therapy like every other week, and that like $150 or however much it costs goes toward my deductible. And because of all of that, I have gone to the doctor a little bit this year too, but I'm like already almost at my deductible for the year just through like therapy and me needing to go to the doctor a few times.

SPEAKER_01 14:56

So good to know that you can do that.

SPEAKER_00 14:59

Yeah. And also you can use your HSA to pay for therapy. It might not be there might be like specific types of therapy, but you know, there could be some asterisks onto that, but you can use your HSA to cover some types of therapy.

SPEAKER_01 15:13

Yeah. We can also in the show notes link um to like a list of qualifying expenses. There are a lot with an HSA, so it gives you quite a bit of flexibility.

SPEAKER_00 15:23

And I think too, as of a few years ago, you can also use your HSA to pay for mental products like pads and tampons and things like that. Yeah. You can't, but yeah.

SPEAKER_01 15:33

Okay. So the moral of the story is if you're waiting to open an HSA because you think uh it'll be too complicated or it'll take a couple of hours, or I don't know. What other excuses are there? Those are the two big ones. Yeah. Don't do it. Don't wait. Just do it now. It will take literally eight minutes, and you can be on your way toward either earning interest on your savings, or if you choose to invest, you can start seeing those returns.

SPEAKER_00 16:00

But with that, we will see you next week for another episode. Love ya, bye.

SPEAKER_01 16:08

That's a wrap on another episode of the Finance Girlies podcast. Nothing in this episode is meant to be taken as financial advice.

SPEAKER_00 16:15

Please do your own research and talk to a professional if you need advice. If you like this episode, consider leaving a review. Better yet, listen to the show to a friend who might enjoy it too. Love ya, bye. Nailed it.