Despite last year's stock market volatility, the growth in the number of health savings accounts accelerated in 2022, according to a new survey.
At the end of last year, approximately $104 billion was saved in 35.5 million HSAs, a year-over-year increase of 6% for assets and 9% for accounts, according to a survey by Devenir, a firm that provides investments for HSAs. The survey data were primarily collected in the first quarter of 2023 for the period ending on Dec. 31.
An HSA enables people to save for medical expenses that aren't reimbursed by high-deductible health plans. The accounts are funded with pretax income, grow tax-free and aren't taxed when used for eligible expenses.
“Despite significant market headwinds, we saw more health savings accounts utilizing investments than ever before as account holders continue to recognize the long-term growth potential that HSAs offer,” Jon Robb, senior vice president of research and technology at Devenir, said in a statement.
The survey also showed that HSA contribution and withdrawal activity remains strong. Account holders contributed $47 billion to their accounts in 2022, up 11% from the prior year, and withdrew $34 billion during the year, also up 11% from a year earlier.
Christian Nwasike, board chair of the Association of African American Financial Advisors, noted that the growth of health savings accounts in the United States has been significant in recent years and pointed to several reasons why these accounts are becoming increasingly popular among Black and African American individuals.
“HSAs are available to anyone who has a high-deductible health plan, which has become a more common insurance option in recent years, Nwasike said. "This means that more Black and African American individuals have access to HSAs as a savings tool for health care expenses.”
He added that HSAs offer a triple tax-advantaged savings opportunity for the Black and African American community that can be used to pay for health care expenses, build wealth over time, and convert to an IRA at age 65, making them “an attractive option for those who are looking for ways to improve their financial well-being over the short and long term.”
Devenir predicts that by the end of 2025, the HSA market will approach 43 million accounts that hold almost $150 billion in assets.
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