Reviews

Lively HSA Review: Pros, Cons & Why It’s The Best

Save money for retirement with an HSA
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This Lively HSA review is broken down into two parts:

  1. Health Savings Account 101. There’s a lot of confusion about HSAs, so Part 1 covers the most important things to know.
  2. Lively HSA Review. You’ll learn what Lively has to offer, how it works and whether Lively is the best HSA provider for you.
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Lively's fee-free HSA, array of low-cost investment options, and top-notch tech make it a top pick among HSA providers.

Lively Pros:
  • A fee-free health savings account.
  • Great (commission-free) short-term and long-term investment options through TD Ameritrade.
  • Easy sign-up and very user friendly app. Features include automated contributions, ability to add expenses, store receipts and more.
Lively Cons:
  • For those wanting to invest, two separate accounts (one with Lively and one with TD Ameritrade) must be maintained.
  • Optional done-for-you portfolios have a .5% fee
  • Pays 0.01% on cash balances

Health Savings Accounts 101

An HSA is a way to save money for out-of-pocket healthcare expenses when you have a high deductible health plan.

The account can be used to pay for any “qualified medical expense,” such as copays, coinsurance and a surprisingly long-list of everyday healthcare items.

HSA contributions reduce your taxable income, so more and more people are seeing them as a way to not only pay for healthcare costs, but also as a way to save money for retirement (more on the mechanics of that below), as contributions can also grow tax-free.

HSA Eligibility

The IRS determines who can can open an HSA. 

These are the requirements:

  • You must be at least 18 years old.
  • You must be covered under a qualifying high-deductible health insurance plan (HDHP) on the first day of a given month. For 2021, an HDHP is defined as a plan with a deductible of at least $1,400 for an individual and $2,800 for a family. Yearly out-of-pocket expenses (including deductibles, copayments and coinsurance) can’t be more than $7,000 for an individual or $14,000 for a family.
  • You cannot be covered under any health plan that does not qualify as an HDHP (with limited exemptions). In other words, if you have a secondary insurance policy with a low deductible, you may not be eligible.
  • You must not be enrolled in Medicare.
  • You cannot be claimed as a dependent on another person’s tax return.

How HSAs Work

Every year, you decide how much money to contribute to your HSA account, up to the limits. For 2021, the HSA contribution limits are $3,600 for individuals and $7,200 for families. If you’re over the age of 55, you can contribute an extra $1,000.

The money in your HSA can be used to pay for qualified medical expenses. Any money remaining in your account at the end of the year is rolled over for the following year.

These rollovers do not count towards your annual contribution limit, and therein lies the real value of the account: if you don’t spend all your HSA funds, you can keep stacking them on top of each other year after year.

Better yet, you can invest those funds, similar to how you’d invest via an IRA or 401(k). Your HSA can then not only serve as a way to save money on healthcare costs, but also as an additional tax advantaged account.

Once you turn 65 and enroll in Medicare, you’re no longer eligible to contribute to the HSA — but you can still use your HSA funds to pay for any qualified medical expense.

Note that you can withdraw funds from your HSA for any reason at any time. However, if you use those funds for non-qualified medical expenses, they will be treated as taxable income and be subject to a 20% penalty.

Once you turn 65, that 20% penalty no longer applies. 

Lively HSA Overview

Lively is a fee-free HSA provider. Most HSA providers are banks, but Lively is a software company, which gives it some distinct advantages over its competitors (as we’ll discuss below).

Lively doesn’t charge a monthly maintenance fee, an account opening fee, or an account closing fee. And there’s no minimum balance necessary to open an account.

However, in order to set up a Lively HSA account, you must currently have an HSA with funds in it, or you must enroll in an HSA-compatible high deductible health plan.

If you already have an HSA, you can roll it over to a Lively HSA during the open enrollment period. The money you contribute can either be held in cash in an FDIC insured bank account (earning a very low-interest rate) or invested.

Lively works with two different investment providers:

  1. TD Ameritrade. You can invest through a self-directed brokerage account with TD Ameritrade. With this option, you’re getting full control of your investments, similar to how you would invest in a taxable brokerage.
  2. HSA Guided Portfolio through Deniver. For a .5% annual investment fee, you can choose from a portfolio of mutual funds that align with your risk tolerance.

Lively Key Facts

Monthly fee:$0
Minimum cash balance:$0
Minimum investment balance:$0
Investment options:Invest through TD Ameritrade and Devenir.
Commission-free ETFs available:Yes.
Portfolio management fee:0% for TD Ameritrade, and .5% to access the HSA Guided Portfolio by Devenir.
Interest rate:.01% earned on your HSA dollars.
Closing fee:$0.
Automatic investments:Available.

How It Works: Using Your Lively HSA for Medical Expenses

After joining Lively, you’ll get a debit card that will give you access to the money in your HSA when you need to pay for qualified medical expenses.

Note that the term “qualified medical expenses” can be tricky. It’s pretty easy to understand that things like copays and prescriptions fall under the term, but what about health-related items you buy from a pharmacy? Are those considered qualified medical expenses?

Lively has a useful tool to help you answer this question. When you need to make a purchase, you can quickly access a search engine that will tell you whether or not a given item can be purchased with your HSA debit card.

Members can also access HSA Store, an online shop that offers a curated selection of HSA-compliant items, right from their Lively dashboard. You might be surprised to find that items like sunscreen, saline nasal mist, digital thermometers and lots more qualify.

Lively HSA Investment Options

Paying for your sunblock with tax-free money is great, but if you really want to put your HSA dollars to work for you, you need to invest them.

Lively HSA makes that process easy, enabling members to invest their HSA contributions through either TD Ameritrade or an HSA Guided Portfolio through Deniver.

While many other HSAs require a minimum balance before you can start investing (sometimes as much as $2,000), Lively does not. Plus, Lively has plenty of investment options (such as index funds), many of which are very low-cost.

You can also use the money in your Lively HSA to invest in more than 300 commission-free exchange-traded funds (ETFs) and more than 13,000 mutual funds (of which 2,000+ don’t charge a transaction fee).

ETFs and mutual funds are great ways for beginning investors to get started because neither requires a lot of financial savvy. Even for more experienced investors, they provide a good way to diversify investments while keeping fees low.

The benefit of using an HSA Guided Portfolio, which is offered through Deniver, is that the portfolio is customized to your risk tolerance and automatically rebalances over time. While this is a nice feature for very hands-off investors, it comes with a .5% annual investment fee.

Considering the fact that many of the funds available through the HSA Guided Portfolio can also be purchased through TD Ameritrade, I would personally just invest through the latter.

Lively HSA Alternatives

Until Lively came along in 2016, Fidelity’s HSA offering topped most lists of the best HSA providers. As you can see, there’s a lot to like about Fidelity.

Here’s how the two compare:

Lively HSA
Fidelity HSA
Name
Name
Lively HSA
Fidelity HSA
Account Minimums
Account Minimums
$0 for HSA, $0 for self-directed investments and .5% for done-for-you portfolios.
$0 for HSA, investment fees depending on account size.
Management Fees
Management Fees
$0.
$0.
Commission Free ETFs Available
Commission Free ETFs Available
Yes.
Yes.
What Stands Out
What Stands Out
User experience and self-directed brokerage account with TD Ameritrade.
Single account login for existing Fidelity users.

Overall, they both stand out with their low fees. Also, both offer the ability to invest on their own through a brokerage account.

Where they differ slightly is in their managed portfolios.

For the Fidelity Go HSA, the fees are as follows:

  • Under $10,000: $0.
  • $10,000 – $49,999: $3 per month.
  • $50,000 and above: 0.35% per year.

In comparison, the fees for Lively’s customized portfolios are a bit higher at .5%.

Overall, it’s a very close race between the two. We give Lively a slight edge for its top-notch tech, while Fidelity has lower-cost managed options.

Using a Lively HSA

Signing up for Lively is easy and only takes about five minutes via their app.

The app allows you to see your HSA fund balance, review your recent transactions, automate your contributions, and view and monitor your investments. 

If you’re standing in the pharmacy and not sure whether a particular product is HSA-eligible, you can find out on the spot by using the in-app search engine.

You can also use the app to upload and store receipts related to your healthcare spending — which you need to keep for tax purposes — rather than trying to indefinitely hold onto a bunch of paper receipts.

Many banks are still using outdated technology, and it often shows when you’re using one of their HSAs. Conversely, Lively has created a cutting edge, modern HSA platform that users will love.

Is Lively HSA Right for You?

Many people are concerned about outliving their money, and for good reason. While it makes sense to think about the relative benefits of a Roth and traditional IRA, and to look for ways to improve your 410(k), you should consider whether using an HSA as another tool for tax-advantaged retirement investing makes sense in your particular situation.

Keep in mind that if you’ve maxed out your other retirement accounts, an HSA gives you an extra $3,600 to $7,200 to invest each year in a tax-advantaged account.

That’s why I’m a big proponent of HSAs in general. Healthcare expenses are so high that it only makes sense to take advantage of anything that will help reduce those costs and provide a tax benefit.

I’m a big fan of Lively HSA in particular, whether you want to invest your HSA money or not. If the idea of investing all of your dedicated healthcare funds is a little too risky for you, you can always opt to invest a portion of the money and keep the rest in cash inside your account.

Many other HSA administrators charge fees. Usually, those fees are assessed either monthly or yearly. Lively doesn’t. Add to that their partnership with TD Ameritrade and a terrific mobile app that facilitates ease of use, and Lively HSA is a winner for anyone who wants to get the most out of their HSA plan.

Learn more about Lively.

R.J. Weiss
R.J. Weiss is the founder and editor of The Ways To Wealth, a Certified Financial Planner™, husband and father of three. He's spent the last 10+ years writing about personal finance and has been featured in Forbes, Bloomberg, MSN Money, and other publications.

4 Comments

  1. I set up an account with them, funded with 1k cash, no issues, then did a over 55 rollover from vangaurd. They have sat on the money for over 8 weeks, stating that bulk mail takes 6-8 weeks to be received. This is not correct as I spoke with vanguard they said 7-10 days. SO i have 7k sitting somewhere, now I am stop paying my check and going to fidelity.

  2. Similar thing. They take too long for transfers and their customer service is pretty bad. Rep does not know what’s going on.

  3. As of 8/3/2022 they are paying .01% interest. When contacted they said that is the market rate and they have no plans to change it. There are literally dozens of other HSA providers paying up to 2%. I’m planning to transfer my account.

    1. Good point, as when we originally wrote the review in an ultra low-interest rate environment, any interest earnings were so minimal wasn’t a factor.

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