What Charles Schwab offers for HSA accounts

Charles Schwab does offer Health Savings Accounts (HSAs), but not through Charles Schwab Bank itself. Instead, Schwab partners with a separate company called Lively to provide HSA services. If you want an HSA with Schwab, you would open it through Lively, though your account can be linked to your Schwab banking and investment accounts for easier management.

An HSA is a savings account designed specifically for people enrolled in a high-deductible health insurance plan. Money you put into an HSA is not taxed, and you can use it to pay for may have access to medical expenses without paying taxes on those withdrawals. Unlike a flexible spending account (FSA) at your employer, an HSA stays with you even if you change jobs, and unused money rolls over year to year.

The reason Schwab uses Lively rather than offering HSAs directly is that HSAs require specialized administration and compliance with federal tax rules. Lively handles those requirements while Schwab handles the banking and investment side of your account.

Key Takeaways

  • Charles Schwab offers HSAs through a partnership with Lively, not directly through Charles Schwab Bank.
  • You can link your Lively HSA to your Schwab bank account and investment accounts for streamlined money management.
  • HSAs require enrollment in a high-deductible health insurance plan, which you must verify with your insurance provider before opening an account.
  • Money in a Schwab-Lively HSA can be invested in stocks, bonds, and mutual funds once you reach a certain balance, allowing it to grow beyond basic savings.

How to open an HSA through Schwab and Lively

To open an HSA, you start at Lively's website rather than Schwab's. Lively will ask you to confirm that you are enrolled in a high-deductible health plan and will request basic information like your name, Social Security number, and date of birth. The process typically takes 10 to 15 minutes online.

Once your Lively HSA is open, you can link it to an existing Charles Schwab bank account or brokerage account. This linking lets you move money between accounts easily and see all your accounts in one place when you log into Schwab. You do not have to use Schwab for banking to open a Lively HSA, but linking makes the experience smoother if you already bank or invest with Schwab.

You will receive a debit card from Lively that you can use to pay for medical expenses directly. You can also reimburse yourself from the HSA for expenses you paid out of pocket, or leave the money invested and pay medical costs from your regular checking account while letting the HSA grow.

Investment options within a Schwab-Lively HSA

One advantage of opening an HSA through Schwab and Lively is that you can invest the money rather than leaving it in a savings account. Once your HSA balance reaches a certain threshold (typically $1,000 to $2,000, depending on Lively's current rules), you can move funds into stocks, bonds, mutual funds, and exchange-traded funds (ETFs) through Schwab's investment platform.

This matters because HSA money grows tax-free, and investment growth is also tax-free as long as you use withdrawals for may have access to medical expenses. Over time, this can turn an HSA into a powerful long-term savings tool, especially if you do not need to withdraw the money when ready for current medical costs.

If you are not comfortable choosing individual investments, Schwab offers target-date funds and other managed options within the HSA. You can also keep some money in the savings portion for near-term medical expenses while investing the rest.

Costs and fees to know about

Lively charges a monthly account fee, though the amount varies depending on which HSA plan you choose. Some plans have no monthly fee but charge per transaction, while others charge a flat monthly fee. You should review Lively's current fee structure on their website, as these fees change periodically.

If you invest money within the HSA, you may also pay investment fees depending on which funds you choose. Schwab's own funds typically have low fees, but other mutual funds and ETFs carry their own expense ratios. These are separate from the HSA account fee and are deducted from your investment returns.

There are no fees for linking your Lively HSA to a Schwab bank or brokerage account. The linking itself is free; you only pay Lively's HSA fees and any investment fees you incur.

Who can open an HSA with Schwab and Lively

To open an HSA through Lively, you must be enrolled in a high-deductible health insurance plan. The IRS sets the definition of what counts as high-deductible, and the threshold changes each year. For 2024, a high-deductible plan generally means a deductible of at least $1,600 for individual coverage or $3,200 for family coverage, though you should confirm your plan's status with your insurance provider or employer.

You cannot have an HSA if you are covered by a non-high-deductible health plan, a Health Savings Account through another provider, or Medicare. You also cannot be claimed as a dependent on someone else's tax return. If any of these explore to you, Lively will not let you open an account.

If you are self-employed or buy insurance on your own, you can still open an HSA as long as your plan meets the high-deductible definition. You do not need to have an employer-sponsored plan.

Moving an existing HSA to Schwab and Lively

If you already have an HSA with another provider, you can transfer it to Lively. This is called a rollover or trustee-to-trustee transfer. The money moves directly from your old HSA to your new Lively HSA without being taxed or counted as a withdrawal.

To start a rollover, contact your current HSA provider and ask for a trustee-to-trustee transfer form. You will provide Lively's information as the receiving institution. The process usually takes one to two weeks. During the transfer, your money is in transit and cannot be invested, so plan accordingly if you need access to it.

You can also withdraw money from your old HSA and deposit it yourself, but this is riskier because you have only 60 days to deposit it into the new HSA or it becomes taxable income. A trustee-to-trustee transfer avoids this risk.

Frequently Asked Questions

Can I use my Schwab-Lively HSA debit card at any store?

The Lively debit card works at pharmacies, doctors' offices, and hospitals, but not at all retailers. If you try to use it for non-medical purchases, the transaction will be declined. You can also withdraw cash from an ATM and use it to pay for may have access to medical expenses out of pocket, then reimburse yourself from the HSA.

What happens to my HSA if I leave my job?

Your HSA stays with you. Unlike a flexible spending account, an HSA is your personal account that does not depend on your employer. You can keep it open, continue to invest the money, and use it for medical expenses even after you change jobs or retire. You just need to make sure you remain enrolled in a high-deductible health plan to continue contributing new money.

Can I withdraw money from my HSA for non-medical expenses?

Yes, but you will pay income tax on the withdrawal plus a 20% penalty if you are under age 65. After age 65, you can withdraw money for any reason without the penalty, though you still pay income tax on non-medical withdrawals. If you use the money for a may have access to medical expense, there is no tax or penalty.

Do I have to use my HSA money by the end of the year?

No. Unlike a flexible spending account, HSA money rolls over year to year with no limit on how much you can carry forward. This is one reason an HSA can be a better long-term savings tool than an FSA.

What if I no longer have a high-deductible health plan?

You can no longer contribute new money to your HSA, but you can keep the account open and continue to use existing money for may have access to medical expenses. The money stays in the account and can continue to be invested. Once you turn 65, you can withdraw money for any reason without the 20% penalty, though non-medical withdrawals are still taxed as income.