Invest in Health Savings Accounts Mutual Funds

In response to the high cost of health insurance, Health Savings Accounts (HSA) were introduced in 2005 and combine a high-deductible health insurance policy with a tax-free investment account. You are able to draw money from these mutual funds or let them accumulate until retirement. As a new financial vehicle, HSA mutual fund investment options were very limited and slightly expensive, but are now more common and affordable.

Do your homework. As a fairly new investment option, HSA mutual funds are still coming into their own. Visit the HSA Insider Web site, listed in Resources below, to learn more about the financial and insurance aspects of HSA investments.

Research HSA insurance first. You can't sign up for HSA mutual funds until you have HSA-eligible health insurance and meet all the necessary requirements.

Get quotes. Visit the eHealthInsurance Web site, listed in Resources below, to get quotations for the appropriate health insurance if you don't already qualify.

Compare plans. Just like investing, choosing insurance requires time, research and patience. Compare the various plans, making sure the one you choose allows for HSA investments. In most cases you can then apply online.

Find an HSA mutual funds provider. The list of financial institutions that carry HSA mutual funds is growing quickly; one of the best collections of HSA providers is on the HSA Insider Web site, which can be found in the Resources section below.

Ask questions. Choosing a long-term investment plan can be very confusing, so don't be afraid to ask your financial institution for advice. Consider the size, duration and type of investment you'd like to make.

Fill out an application. In most cases, you have to send a check with your completed application.

Tips & Warnings

• Purchase your HSA-eligible health insurance before you get your HSA mutual funds.
• The sooner you sign up, the more you are allowed to deduct; your maximum deduction is reduced by a twelfth for each month you wait after January.
• Your health insurance coverage must carry a $1,000 deductible to qualify for an HSA mutual fund.
• HSAs are not available for anyone 65 or older or for those who do not have a high-deductible health insurance policy.
• HSAs are a special provision of law, similar to IRAs, and cannot be opened by individuals. However, it's becoming easier for individuals to research and find banks and trustees to help in this process.