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Investing Specialists

Don’t Settle for a Subpar Health Savings Account

Investors have a valuable escape hatch if their employer-provided HSA comes up short.

Love them or hate them, it's hard to see health savings accounts losing traction any time soon. Used in conjunction with high-deductible healthcare plans, the accounts have been touted as a way to put downward pressure on healthcare costs. With a fixed pool of their own dollars to spend, the thinking goes, HSA owners might be more judicious about shelling out for healthcare services than would be the case if they were covered by a more encompassing healthcare plan, such as a preferred provider organization.

In reality, however, many people with HSAs do not take full advantage of them, according to a study by HelloWallet, a Morningstar company. Even though HSAs are the only triple tax-advantaged vehicle in the tax code--allowing for pretax contributions, tax-free compounding, and tax-free withdrawals for qualified medical expenses--only a tiny share of HSA owners fund the accounts to the maximum. An even smaller sliver takes the step of investing HSA dollars in anything but a savings account.

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