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Disclosure: This post might contain affiliate links. If you click through and make a purchase, I’ll earn a commission, at no additional cost to you. Read my full disclosure here.
In my previous post titled “HSA: The Best Retirement Account” I gave an overview of the Health Saving Accounts (HSA). I explained the benefits of an HSA, the ways to optimize your contributions and your withdrawals, as well as a comparison of the top HSA providers. In this post, I will talk about Lively HSA, which is an excellent provider with no hidden fees.
The reason that I decided to review Lively HSA is because of its origin and its promise for “no hidden fees”. The HSA industry is full of big companies that charge monthly account fees, force minimum account holders to keep cash balances, and charge fees for the investments. In summary, they charge customers a lot of hidden fees for using their services.
In contrast, Lively HSA is a startup that has disrupted this industry. They are committed to helping customers maximize their healthcare savings through intuitive design, accessible support, and ongoing education. Their goal is to help customers maximize their healthcare savings through intuitive design, accessible support, and ongoing education. This is also shown in its mission, which is to inspire people to confidently embrace a healthy future.
Lively HSA was founded by Alex Cyriac, a computer engineer, and Shobin Uralil, an MBA from MIT Sloan, in 2017. They came up with the idea of founding an HSA provider a couple of years earlier, in 2015, when they realized that their parents, immigrants from Southern India, had not taken into account the high cost of healthcare in the US. As a result, their parents were not prepared to cover these costs.
Alex and Shobin decided that they wanted to prevent other people from getting into this situation by reducing (or even eliminating) fees. They wanted to make it really simple for customers to manage their money, so they have simplified both the online and the online experience for account management. They have created a digital-native product.
Even though their company is still a startup, they have a wide set of accomplishments, including:
- Y Combinator, the most famous startup incubator, gave them seed funding in January 2017
- Kevin Durant, the famous NBA star, and his partners invested $3.5M in Lively HSA in October 2017
- $11M additional investment was raised in October 2018
- Forbes magazine featured them in March 2019
- Another $27M investment was raised in October 2019
- The HSA Report Card, Investor’s Business Daily, Investor Junkie, and Morningstar, as well as multiple other publications, rate them as one of the top HSA providers in 2019 and 2020
Pricing and fees
Since one of Lively HSA’s main benefits is the promise of “zero hidden fees“, I wanted to start by taking a closer look at their fee structure. As you can see in the above matrix, they don’t charge any money for most of the common scenarios. There is $0 monthly fee, $0 minimum balance and $0 fund transfer fee. This is in direct contrast to most of the other HSA providers, which charge money.
How does Lively HSA make money?
- Employers pay $2.95 per month for each employee.
- This fee is paid by the employer, not by the employee
- If you decide to invest using a Guided Portfolio, then there is an annual fee of 0.5%
- This is one of the two investment options. You can also select to invest on your own (instead of using a Guided Portfolio) and avoid this fee
- I will explain all investing options in the next section
As I discussed in my previous post “HSA: The Best Retirement Account“, I believe that the best strategy related to withdrawing funds from an HSA account is to:
- Invest all HSA contributions into low-fee index funds, e.g. S&P 500
- Pay all medical expenses using a credit card with rewards (e.g. 3%-5% cash back)
- Keep all receipts from medical charges in a digital format (e.g. scan them and upload them to cloud)
- Use the above receipts to withdraw funds in the far future (e.g. in retirement)
Lively HSA provides 2 options that allow you to invest your money:
- Self-Directed Brokerage Account (by TD Ameritrade)
- HSA Guided Portfolio (by Devenir)
The following matrix compares both options:
|Self-Directed Brokerage Account||HSA Guided Portfolio|
|Recommended for||DIY-investors, who want to select their own funds||Hands-off investors, who prefer a low maintenance strategy and automated rebalancing|
|Transaction costs||– Stocks/ETFs: $0|
– No-load Mutual Funds: $25 (one time/fund, if using auto-investments)
– Other Mutual Funds: $0
– Options: $0.65/contract
– Bonds/CDs: $0
|N/A (included in the annual fee)|
|Available funds||Wide variety of investment options, including:|
– Mutual funds
|Pre-selected list of high-quality, low cost funds across asset classes|
My recommendation would be to:
- Use the Self-Directed Brokerage Account (by TD Ameritrade) to avoid the annual fee
- Select a low-cost stock ETF (e.g. VTI) and a low-cost bond ETF (e.g. BND) to avoid the transaction costs
- Decide the asset allocation between the two ETFs, based on your own investing strategy
- If you need help to decide an asset allocation, you can take a look at my previous post “8 Critical Decisions for a Successful Investing Strategy“
All HSA accounts give you the option to keep your HSA balance in cash, in order to pay for medical expenses. Lively HSA’s spending account provides you with the following benefits:
- $0 investment threshold: You can decide, if you want to leave some money as cash or invest it all.
- This is in direct contrast with most of the other HSA providers, which require anywhere between $500 and $2,000 as minimum balance in cash
- Cash interest rate of 0.01%: The cash will accrue 0.01% interest
- FDIC insured: All assets are backed by the full faith and credit of the United States government
- Lively HSA Debit card: It’s really easy to directly pay for any medical expenses using the debit card that is provided by the Lively HSA
- Mobile app for iOS and Android: Account owners can manage their HSA account directly from their mobile phones