HSA investing - Is conservative the way to go?

[MVal]

I began an HSA account last year and fully funded it and have plans to do the same this year. The bank holding my HSA informed me that I can begin investing funds when I have enough to keep $2500 liquid in the account and at least $1000 above that to move to an investment account. I just spoke with them and the gentleman explained about several groups of funds they have; the one he said they typically recommend is through Principal Funds and is called a Flexible Income portfolio, although they also offer several others through Oppenheimer, Franklin Templeton, etc., all at different stock/bond mixes and risk levels. So this Flexible Income one is a fund of many mutual funds and has a fairly conservative blend. They have A, B and C funds which vary in fees. Basically, the A funds have a 5% charge on initial investment and then low fees afterwards, but the B and C are the opposite with no loading fees, but high fees later.

I found this information on the fund he described. https://www.principalfunds.com/InvestmentProfiles/index.faces?symbol=SAUPX&retail=true&pf=true


What do you all do with your HSA funds? Do you pick funds that are more conservative than what you typically choose for your IRAs and 401Ks since it's a health account that could potentially be unusable in an medical emergency if you went too aggressive and your funds were worth peanuts at the time?

[OmahaSteph]

Well, assuming you never have to pay more than $2,500 out of pocket for your (high-deductible) insurance, quickly getting at whatever extra you've invested shouldn't be an issue, right?

[BarkyardBQ]

Do you have the cash flow to cover the deductible without pulling it from the HSA? If you do, consider your HSA a long term investment and go aggressive.

We have an HSA, it keeps 2k in cash, and we have a 3k deductible, we can cover it in cash instead of using the HSA. So we invest in the HSA, as if we won't be withdrawing from it for 15-30 years. Currently, all stock 75/25 US/Intl.

[MVal]

Do you have the cash flow to cover the deductible without pulling it from the HSA? If you do, consider your HSA a long term investment and go aggressive.

We have an HSA, it keeps 2k in cash, and we have a 3k deductible, we can cover it in cash instead of using the HSA. So we invest in the HSA, as if we won't be withdrawing from it for 15-30 years. Currently, all stock 75/25 US/Intl.

I suppose I do have the fund to cover it, as my liquid savings hit $10,000 last month.

[iamlindoro]

Do you have the cash flow to cover the deductible without pulling it from the HSA? If you do, consider your HSA a long term investment and go aggressive.

We have an HSA, it keeps 2k in cash, and we have a 3k deductible, we can cover it in cash instead of using the HSA. So we invest in the HSA, as if we won't be withdrawing from it for 15-30 years. Currently, all stock 75/25 US/Intl.

This.  I am (finally!) getting going on my HSA this year and this is my plan.  HSA will be treated as essentially just another lump in our investments.  I'll have enough medical/dental expenses this year to more than exhaust the max, but we'll just pay out of pocket and keep the receipts to withdraw in the future.  Then we'll just let that sucker grow.

[Paul der Krake]

Yeah OP, you can safely disregard 99% of the mainstream advice on HSAs. They were meant to help the hand-to-mouth crowd who can't cashflow their health expenses, not healthy Mustachians with piles of money lying about.

I'll have enough medical/dental expenses this year to more than exhaust the max, but we'll just pay out of pocket and keep the receipts to withdraw in the future.

$7k worth of foreseeable health expenses in a year? Ouch. Maybe aside from childbirth, I would start looking at medical tourism options as soon as you enter 4 digit territory...

[ZiziPB]

I just look at the HSA account as part of my overall portfolio and invest it in accordance with my overall allocation.

[MoonShadow]

Up until this past December, I kept $2K in cash and the rest was very aggressive growth.  I did this because I consider the HSA to be better than even a Roth IRA as a long term investment option, and keep my pre-tax (mostly 401k) accounts conservative in order to keep my total portfolio somewhat balanced.  I jumped 90% out of the stock market in early December, because I thought the P/E ratios were getting absurd, and that made me nervous.  Market timing is dangerous, but it looks like a win this time around.  I have less in my Roth than my HSA, but the Roth is also the only account I have direct stock trading available, so I mostly buy individual dividend stocks I intend to keep for decades; so it's hard to determine just how aggressive that account actually is.

That said, I intend to return to a very aggressive stance inside my HSA about July, after the bulk of the carnage is past.

[iamlindoro]

Yeah OP, you can safely disregard 99% of the mainstream advice on HSAs. They were meant to help the hand-to-mouth crowd who can't cashflow their health expenses, not healthy Mustachians with piles of money lying about.

I'll have enough medical/dental expenses this year to more than exhaust the max, but we'll just pay out of pocket and keep the receipts to withdraw in the future.

$7k worth of foreseeable health expenses in a year? Ouch. Maybe aside from childbirth, I would start looking at medical tourism options as soon as you enter 4 digit territory...

Spot on!  Yep, I'm having some extensive dental work completed this year, and I'm having it done abroad at ~50% of the US cost (and that's including travel/lodging, which helpfully is also covered in the HSA).  Not my favorite way to spend money, but I'm at least trying to minimize cost and optimize taxes!