Consumers with certain types of high-deductible health insurance are eligible to open HSAs. For those with HSAs, contributions provide an upfront tax deduction. Any investment buildup inside an HSA avoids income tax while withdrawals can be tax-free if used for qualified health care expenses. While most HSA assets are in bank accounts, the money also can be invested in stocks, bonds, funds, and other types of investments.
Health savings account owners contributed an estimated $13.2 billion in 2012 and withdrew $10.2 billion. “With both record contributions and withdrawals in HSA accounts in 2012, we continue to see that not only are people using their HSA dollars for current medical expenses, but more importantly they are actually accumulating savings for future medical expenses,” Jon Robb, vice president of research at Devenir, said in a statement.
According to Devenir, the average HSA account balance at the end of 2012 grew was $1,879, or $2,283 if you eliminate identified zero balance accounts. However, the average investment account holder had an $8,918 average total balance (deposit and investment account), almost four times the average account holder balance.
Devenir projected that HSA investments would more than triple, growing to $5.6 billion at the end of 2015. While only 11% of HSA assets are now held in investments, Devenir estimated that 21% of HSA assets would be in investments by 2015. Thus, it appears that HSA owners increasingly are using their accounts for investments rather than depositing their contributions in a bank.
This year, the maximum HSA contribution is $3,250 for an individual and $6,450 for a family contribution, which can be divided between the spouses. For those 55 or older, the maximum contributions in 2013 are $4,250 for an individual and $7,450 for a family. As of 2011, the penalty tax on nonqualified withdrawals from HSAs has increased from 10% to 20%.