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HSAs

Question: My employer is switching from a high-deductible health insurance plan to a traditional plan. I have accumulated enough in my HSA to be able to invest it in Wells Fargo mutual funds, which my employer provides along with the insurance. But with the switch I will no longer be able to add to the funds, and Wells Fargo will begin to charge me an account fee every month. What can I do with my HSA money? Andy, Ankeny, IA.

Answer: You're in a good financial situation. With your Health Savings Account (HSA), the contributions were made with pretax dollars. Withdrawals are tax-free as long as the money goes toward qualified medical expenses, which include everything from acupuncture to organ transplants to quit-smoking programs.

Your account remains tax sheltered. The only restriction is that you can't make new contributions. But you can always tap the account to pay for qualified medical bills that aren't covered by insurance. Better yet, if you don't need the money, it will compound in the account over time. You can then make tax-free withdrawals to help defray medical expenses in retirement. After all, Medicare pays for at most half the average retiree's health bill now, and most forecasts say that percentage will shrink.

One other point: As the sums in HSAs grow, more and more people are interested in managing the HSA for long-term growth. Instead of keeping the money parked in a low-risk bank money-market account, as is typical, some of that money is finding its way to equity mutual funds for the long haul. You could keep the money in the mutual fund accounts you have with the Wells Fargo managed HSA or you could roll it into another financial institution, too. (There can be restrictions, so check out the rules with your plan.)

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