A 2025 Guide to HSA Investments

A health savings account (HSA) provides a tax-advantaged opportunity to grow funds to cover future medical expenses. The funds can be contributed tax-free, grow tax-free and be withdrawn tax-free for qualified medical expenses. Understanding how to maximize the potential of HSA investments is more crucial than ever. HSAs are not just about saving for medical expenses; they also provide a unique avenue for tax-advantaged growth, making them an attractive option for savvy investors. With the ability to invest in a variety of assets, from mutual funds to stocks, HSAs can significantly enhance your financial strategy.

If you want a more personalized look at HSA investments for your financial future, then we can connect you with a financial advisor who can help.

What’s the Right Approach for HSA Investments?

Unlike traditional savings accounts, HSAs provide a triple tax advantage: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free. This makes them an attractive option for those looking to maximize their savings and investment potential. However, to fully benefit from an HSA, it’s crucial to understand the right approach to investing within this account.

1. Managed Approach

In some cases, a managed approach is the right move. With a managed HSA, the provider will take your risk tolerance and goals into account when selecting investments for you. Essentially, you can expect to answer some questions about your goals and risk tolerance before the provider takes over for you.

A managed HSA is the right approach for someone who wants to tap into the tax advantages of building an investment portfolio in their HSA but doesn’t have the time or ability to build the portfolio on their own.

Beyond building an investment portfolio that aligns with your goals, a managed HSA option often takes care of rebalancing for you. Since rebalancing is a critical part of a long-term investment plan, you can breathe easy knowing that your HSA provider is keeping your asset allocation within your preferred levels.

This approach provides the potential for higher returns and allows for the professional management of risks. However, this could come with higher costs or the risk of not keeping up with the market.

2. Self-Guided Approach

If a managed approach isn’t your style, then you can choose a self-guided approach. In this case, you would have the flexibility to choose individual investments for your portfolio. You may choose to invest in stocks, bonds, ETFs, mutual funds and more.

A self-directed approach puts more responsibility on your shoulders. But if you feel up for the challenge, then a self-directed HSA could be the right move. This approach provides the flexibility to choose individual investments and complete control over your investment choices. However, this requires more responsibility for you and more time to manage the process.

3. Robo-Advisor Approach

Some robo-advisors can digitally manage your investment portfolio within an HSA. A robo-advisor will handle all the investment details for you. Since there is no human component to a robo-advisor, you’ll often find that this option is a more affordable option for those seeking a managed portfolio approach.

This approach has a lot of advantages such as lower costs than other options and it allows you to put your portfolio on autopilot. However, there is a lack of personalization when saving for specific goals and there is no emotional support for the ups and downs of the market.

Tips to Stay on Track With HSA Investments

When selecting your HSA investment strategy, there are some tips you can implement to stay on track. Here’s what you should keep in mind about HSA investments and some tips to help you move forward with your own account:

Choose the right approach: The first step to building a portfolio that aligns with your goals is to consider what amount of time you have to dedicate to your HSA investment portfolio. You’ll need to choose between a self-directed or managed HSA approach. The right choice will depend on your unique time restraints and skill set.

Make regular contributions: A key part of making the most of an HSA is to contribute as much as possible. As of 2025, the contribution limit for an individual account is $4,300 or $8,550 for a family account. However, if you are over 55, you can contribute an additional $1,000 to your health savings account. You might not be able to make the maximum contribution, but making your HSA contributions a priority in your budget can pay off in the long run.

Consider a rollover: If you have funds stored in an individual retirement account (IRA), you can roll the funds into your HSA. Although this is allowed, the amount rolled over will count against your contribution limit for the year. For example, let’s say that you roll over $2,000 from your IRA into your HSA in 2025. With that, you’d only be able to contribute $2,300 more for 2025. It’s important to complete this rollover correctly. Otherwise, you could face negative tax implications.

Don’t forget to rebalance: Your asset allocation represents the mix of investments you have in the portfolio and reflects your risk tolerance, timeline and goals. The most appropriate asset allocation changes as you approach retirement. Although you may initially set up your portfolio with the correct asset allocation, unbalanced growth across asset classes leads to the need for an occasional rebalance so it’s important to regularly rebalance.

Leverage the HSA’s tax efficiency: The triple tax advantages of an HSA mean tax efficiency is less of a concern than it would be if you were investing with a taxable brokerage account. For example, whereas in a taxable account, you might need to consider tax-free securities like municipal bonds and iBonds for the fixed-income portion of your portfolio to boost its tax efficiency, investing with an HSA could entail more choices of securities because you wouldn’t have the same worries about possible tax consequences as you would investing with a taxable account.

Bottom Line

Understanding the nuances of HSA investments becomes increasingly crucial for those seeking to maximize their healthcare savings. Health Savings Accounts (HSAs) offer a unique trifecta of tax advantages: contributions are tax-deductible, growth is tax-free and withdrawals for qualified medical expenses are also tax-free. This makes them an attractive option for savvy investors aiming to bolster their financial health.

Tips on HSA Investments

Choosing the right mix of HSA investments is easier said than done. A financial advisor can help you choose the right investments for your financial goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Need help visualizing your asset allocation with your risk tolerance? Check out our asset allocation calculator.