Fidelity HSA Account: Your Ultimate HSA Solution

One type of investment account has been making waves since its introduction in 2003: the health savings account, or HSA. While still relatively young, this financial tool is rapidly gaining prominence as a powerful retirement and medical expense management vehicle. Fidelity, a leading player in the investment brokerage world, has recently entered the fray by offering individual HSAs to its customers. In this comprehensive guide, we will review the various aspects of Fidelity’s HSA offerings, including their two distinct account types: the self-directed brokerage account and the “Fidelity Go” HSA.

The Rising Popularity of Health Savings Accounts (HSAs)

Before diving into the specifics of Fidelity’s HSAs, it’s essential to understand why these accounts are becoming increasingly attractive. Health savings accounts offer several unique benefits that make them appealing for individuals seeking tax-advantaged investment options alongside medical cost management:

1. Tax-free contributions: Contributions made by the account holder are not subject to federal income taxes, making this a compelling option for retirement planning and emergency funds.
2. Tax-free growth: All gains (interest, dividends, and capital appreciation) within the account are also tax-free, further enhancing its potential as an investment vehicle.
3. Tax-free withdrawals for medical expenses: Account holders can make withdrawals to pay for qualified healthcare expenses without incurring any federal income taxes.
4. Portability: HSAs are entirely owned by the individual and are not tied to a specific employer, allowing for seamless transitions between jobs or self-employment.
5. Retirement flexibility: Once an account holder reaches 65 years of age, they can make non-medical withdrawals without incurring penalties. Although these withdrawals are subject to federal income taxes, HSAs still provide more flexibility than traditional retirement accounts.

Fidelity’s Health Savings Account Offerings

Fidelity has introduced two distinct types of HSA accounts for its customers: the self-directed brokerage account and the “Fidelity Go” HSA. Both options cater to varying preferences, so it is essential to understand their features before making a decision.

Fidelity Self-Directed Brokerage Account (HSA)

This first offering empowers account holders to manage and invest their funds directly, with access to over 3,400 commission-free mutual funds and ETFs from leading fund families such as Vanguard, BlackRock, Fidelity, and Schwab. Key features of the self-directed brokerage HSA include:

1. Low fees: No account minimum or maintenance fees, with a $4.95 trade commission for stock purchases and ETF transactions (excluding fractional share trading).
2. Unlimited investment options: Wide-ranging investment choices from both Fidelity’s vast selection and other fund families.
3. Fractional share trading: The ability to invest in mutual funds and ETFs with a minimum purchase of $1, providing flexibility in managing smaller balances.
4. Robust research and tools: Fidelity provides comprehensive research resources, including its proprietary stock screener and mutual fund evaluator, to support informed investment decisions.
5. Integrated retirement planning: The Fidelity website offers seamless integration with other retirement accounts for a holistic financial overview.

Fidelity Go HSA

The newer “Fidelity Go” HSA caters to individuals seeking a more hands-off approach to managing their health savings account. Fidelity manages the investments on the account holder’s behalf, following an algorithm that aims to strike a balance between growth and preservation of principal. Key features of the “Fidelity Go” HSA include:

1. Unlimited 1-on-1 coaching calls: Account holders have access to personalized consultations with Fidelity’s financial professionals, providing guidance on various aspects of their HSA usage and investments.
2. Lower minimum balance requirements: This account requires a lower minimum initial deposit of $10, making it more accessible for those starting from scratch.
3. Automatic rebalancing: Fidelity monitors the performance of the portfolio and adjusts the asset allocation as needed to maintain the desired risk profile.
4. Convenience: The “Fidelity Go” HSA is ideal for individuals who prefer a more hands-off approach, freeing them from the responsibility of managing their investments directly.

Choosing the Right Fidelity HSA for You

While both account types have merits, your decision will ultimately depend on your preference for control and investment flexibility (self-directed brokerage) or a more passive, hands-off approach to investing (Fidelity Go). It’s also worth noting that Lively is another option in the marketplace, offering a similar HSA experience with no additional fees for investing.

Regardless of your choice, Fidelity’s entry into the individual HSA arena signifies an endorsement of the immense potential these accounts hold as powerful financial tools in personal finance planning. By understanding the specific offerings and features of each account type, you can make a more informed decision that aligns with your investment goals and risk tolerance.