Earlier this week, we talked about the Health Savings Account (or HSA as it’s commonly called). The thing that always bothered me about HSAs are how confusing they are compared to a 401(k). I think this is part of the reason that a lot of people don’t really know what an HSA is or how it works. Almost everyone I’ve ever talked to has heard of a 401(k). But very few people in the regular world have heard of an HSA.
The problem with the HSA has to do with the fact that it requires a little bit more work to set up. 401(k)s, for the most part, are basically automatic at this point. Most employers opt you in by default, deduct a certain percentage from your paycheck each pay period, and put your contributions in a default investment option in your 401(k) – typically some sort of balanced fund or a target date fund.
Setting up an HSA, on the other hand, requires a little more work…