Wall Street's greatest talent is to make money with your money. And while Wall Street usually succeeds, you may not.
So if your financial advisor, or someone wanting to be your financial advisor, contacts you about investing your Health Savings Account (HSA) somewhere other than in a Federal Deposit Insurance Corporation (FDIC) bank account, take a close, hard look at what you are really being offered.
Next financial frontier
Recent stories show that Wall Street views HSAs as the next financial frontier, since it has already tapped into our 401ks and IRAs.
That's because they can count how much we've socked away in these accounts. Americans now have $18 billion in HSAs, according to the Employee Benefits Research Institute, a non-partisan group that studies workers' benefits. And that amount could double by 2015, says one consulting firm, as more and more employers shift employees into them.
HSAs are one of the few useful ideas Congress has come up with. It allows pre-tax money to be put aside and spent by those who earned it for their own medical care. It supplements high-deductible health insurance plans by allowing account holders to pay for deductibles and co-pays, medicine and other health care-related items they need but which are not fully covered by their health insurance providers. These items can include, but are not limited to, bandages, crutches and dental work, as well as over-the-counter medication sold in drug and other stores. It can come in handy if, like me, you have allergies.
The other aspect that makes HSAs so valuable is that they carry over, not only from job to job, but also from year to year. If you don't use all of your yearly outlay, it remains in your account and can be added to again next year and in subsequent years as long as you maintain a high-deductible health insurance plan.
And this continues until Medicare becomes your primary health insurance provider. When this happens you can no longer contribute, but the money is still available and still earning interest. I'm contemplating using my HSA to pay for a more sophisticated pair of cataract lenses than the ones Medicare provides.
The honey pot
Since HSAs can be invested like 401ks or IRAs, your financial advisor may decide to try and dip into the honey pot. And I guess you could say, "Why not?"
Here's why. Mutual fund management fees are generally at least 1 percent a year, according to a recent Associated Press story, and maybe more if your advisor puts you into a sophisticated investment. So right off the top, you lose a portion of what could be paying for your health care.
But the more important question is: How safe is this money that you've tucked away in this account?
Those of us familiar with the George W. Bush presidency remember how he tried to privatize Social Security, which would have allowed the work force to invest in the stock market. But before his presidency ended, the nation was engulfed in the throes of the worst recession since the 1930's, and the stock market lost half of its value.
It was a bad time. If you had a 10- or 20-year investment horizon you were okay; the market recovered. But what about the money we could need tomorrow for a medical emergency that your health insurer won't cover, such as a Medevac helicopter?
Experts say that you should keep a portion of your HSA that is equal to your health plan's yearly deductible liquid, in cash or a money market fund.
But in the humble opinion of this non-expert: When Wall Street comes knocking for your HSA, don't open the door.