Where Should I Set Up My Health Savings Account (HSA)?

Pop quiz: What’s money expert Clark Howard’s favorite tax-advantaged retirement tool?

If you guessed Roth IRA, we can’t blame you. Clark describes himself as “the man from Roth.” But that’s the wrong answer. It’s actually HSAs (Health Savings Accounts).

Clark loves the triple tax benefit:

1. You can contribute dollars that reduce your taxable income.
2. Your investments grow tax-free.
3. You can withdraw the money tax-free in retirement to pay for medical expenses.

Another fact about HSAs that isn’t as well known as it should be: You get to choose where you want your HSA account. So where should you put it?

Why Fidelity Is the Best Place To Set Up Your HSA

Where should I put my HSA?

That’s what a listener recently asked Clark.

Asked Brent in California: “Any recommendations on where to set up an HSA? I do have an HDHP (High-Deductible Health Plan).”

Individuals can contribute up to $4,150 to an HSA in 2024 for self-only and up to $8,300 for family coverage.

Since long-term care insurance policies are going the way of the dodo bird, but we’re living longer, a large percentage of the population will eventually need long-term care.

Taking advantage of a triple-tax savings and building up a nice HSA nest egg over time is a great way to fund those medical expenses in place of a traditional long-term care insurance policy.

“There’s one company that has done the best job on Health Savings Accounts and that’s Fidelity Investments,” Clark says. “Fidelity has an entire section of their website on their HSA accounts.

“If you’re using an HSA for long-term benefit, you want to invest the money. You don’t want it in some regular old savings account. So at Fidelity, you can invest pretty much in anything. There are index funds. There are exchange-traded funds. And [you] build a portfolio in that HSA.”

Clark Explains Love of HSAs

In case you don’t believe me when I say Clark loves HSAs even more than Roth IRAs, here’s how he explained it.

“You get an up-front tax benefit. The money grows tax-free. You spend it tax-free for eligible health expenses,” Clark says. “So it’s even superior to my Roth IRA. The man from Roth says there’s something better.”

If you’re using this strategy to invest for your medical expenses over the long term, just be careful about the administrative company that is running your HSA. You have a right to choose where you want your HSA. So if your employer automatically puts you into something other than Fidelity, ask them to switch.

The company option may not be good.

“A lot of employers will have arrangements with terrible, terrible HSA providers that charge crazy fees and put your money in ultra-low interest savings accounts,” Clark says.

“But you have the right to have your HSA money where you want to have it. And Fidelity to me is the superior choice.”

Final Thoughts

HSAs are amazing. Particularly for long-term medical costs. Take advantage of the triple tax benefit if an HSA is available to you. But ask your company to house your HSA with Fidelity.