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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: tips^up on March 04, 2019, 04:13:48 PM

Title: Drain HSA or save it for retirement?
Post by: tips^up on March 04, 2019, 04:13:48 PM

My wife and I are expecting our first child this summer.

Both in our early 30s, healthy (generally no health care costs at all), both working stable jobs, expect this to continue after maternity/paternity leave.

My job offered an HSA option for a few years with 50/50 match.  I maxed it out 2 years in a row; about $7k in it now, earning 1% with Lake Michigan Credit Union.  I no longer contribute to it (I did when it was pre-tax contributions).

For this year, we will likely meet our out-of-pocket-max ($2500 - wife's got great insurance).  Should we pay out of pocket and save the HSA for down the road (like a health care rainy day fund, or let it grow for 40 years to $10k), or just use the HSA now?

Any better option out there now than LMCU's 1%?

Title: Re: Drain HSA or save it for retirement?
Post by: maginvizIZ on March 04, 2019, 04:36:14 PM

1%?  You can buy stock with your HSA account, btw.  I'm in Fidelitiy's S&P 500.  Even if you don't want to use your HSA for stock...  Plenty of banks are offering 2.5% (check doctorofcredit.com)

What tax bracket are you currently in?  High = use HSA; low = hmmmmm maybe don't.

Title: Re: Drain HSA or save it for retirement?
Post by: Montecarlo on March 04, 2019, 04:45:20 PM

Can’t you withdrawal to cover the deductible and then make a pretax contribution to bring it back up?

Title: Re: Drain HSA or save it for retirement?
Post by: tips^up on March 04, 2019, 05:40:21 PM

My employer no longer offers the HSA so I don't think I can still contribute pre-tax.

Title: Re: Drain HSA or save it for retirement?
Post by: seattlecyclone on March 05, 2019, 02:36:20 PM

Tax-free growth is generally a good thing when you can get it. If you are able to pay your medical bills from other funds and still max out your retirement accounts, it's optimal to let the HSA grow. Otherwise draining the HSA and using the funds to help you get closer to maxing out your other tax shelters is a fine plan.

If you do let the HSA ride, you should probably move it to a provider such as Fidelity that will allow you to invest the funds for long-term growth.

Title: Re: Drain HSA or save it for retirement?
Post by: tips^up on March 05, 2019, 03:20:31 PM

teltec is right!  I was not aware, but LMCU now offers investments for the HSA.  Minimum $1k must stay in the HSA, the balance can be invested, $35/yr fee (on my $6k to be invested, this is 0.58%).  There are some great Vanguard admiral options.  I just elected:
VFIAX 25%
VTMGX 25%
VIMAX 25%
VSMAX 25%

This may appear an aggressive mix but $1k is still in the 1% HSA.  Any input on allocations?  Options:
https://hsainvestments.com/fundperformance/?p=LMC

With this newly discovered option, I'll let it grow (hopefully more than 1%) and leave it as an emergency medical account.

Title: Re: Drain HSA or save it for retirement?
Post by: Telecaster on March 05, 2019, 04:58:52 PM

Move it to Fidelity and you can invest the whole thing.