HSA Cashed Out- How to Make The Most Out Of Situation?

[Gatsby]

I have an HSA which has grown to $17k invested in index funds over the past 6 years and it was recently cashed out automatically ( only option) when my company changed HSA custodians. It's a bit frustrating/nerve wracking to now be faced with the decision on how to reinvest it it. My plan is to DCA back into the same index fund Fid 500, over the new months but I am wondering if there are other options I should be considering to make the most out of this.
Such idea- Since its already in cash- use this as an opportunity to pay myself back for several years of medical expenses I havent yet submitted and invest this money into high growth stocks in my Roth IRA. ( does this even make sense)
Reinvest this into a few different index funds for more diversity.
Actually use a small portion of this cash for preventive/wellness optimization options that are HSA approved.
Any thoughts on how to best proceed?

[secondcor521]

Did they send you a check for the $17K?  If so, what date did you receive it?

If they sent you the money and you do not redeposit it within 60 days of receipt into a new HSA, then you will owe ordinary income tax plus a 20% penalty on any amounts that exceed your qualified medical expenses.  I personally would avoid this ordinary income tax and 20% penalty situation as much as humanly possible.

I personally would prefer not making the withdrawal for the accumulated qualified medical expenses.  I would prefer to save those receipts and let the money grow tax-free in the HSA for longer, especially if I were young.  The only exception would be if I really needed the money to make rent or pay basic expenses (doesn't sound like you, but maybe).

It really doesn't make sense to me to redirect the money from the HSA into the Roth IRA, unless you've changed your mind and are certain that you won't have enough qualified medical expenses to drain the HSA at some point in the future.

Fidelity seems to have a pretty great HSA account, so if you decide to recontribute the money I'd give them a look.

[Gatsby]

Thanks for the opportunity to clarify. The funds are all still in an HSA so no tax implications- it was just liquidated into a new HSA custodian.

[seattlecyclone]

Why would you not immediately reinvest the whole sum? It's not like you made any sort of decision to convert to cash in the first place. If your cat walked on your keyboard in exactly the right pattern to liquidate all your shares in your IRA, would you reinvest it all right away, or would you trickle your cash back into the market over a period of several months?

[reeshau]

Why would you not immediately reinvest the whole sum? It's not like you made any sort of decision to convert to cash in the first place. If your cat walked on your keyboard in exactly the right pattern to liquidate all your shares in your IRA, would you reinvest it all right away, or would you trickle your cash back into the market over a period of several months?

+1

Unless you were thinking these thoughts with the old account, you should put it right back to work, in the same way.  If you thought some of these things were good ideas, you could have done them at any time.  An unrelated administrative event should not compel you to change your investment strategy.  Citing that as the reason clearly marks anything as a bad idea.

[yachi]

I didn't realize this was possible.  When my previous company implemented an HSA, HR stressed that it's an individual account.  Unlike the 401(k) they would not know your balance.  I'm surprised your company was able to move your HSA money from one custodian to another.  Did they ask you first if you wanted your money moved?

I guess I need to get on my old HSA to move the balance to my new HSA account to keep something similar from happening.

[reeshau]

I didn't realize this was possible.  When my previous company implemented an HSA, HR stressed that it's an individual account.  Unlike the 401(k) they would not know your balance.  I'm surprised your company was able to move your HSA money from one custodian to another.  Did they ask you first if you wanted your money moved?

I guess I need to get on my old HSA to move the balance to my new HSA account to keep something similar from happening.

My former company also moved our HSA's.  Fortunately, to Fidelity, where our 401k's were.  It may not be true, but at the time Fidelity wasn't accepting individual HSA's, only groups.  May not be true now, but I've rolled over the 401k, and the HSA is still there, open to invest in whatever my heart desires.

[terran]

I would immediately reinvest it if you can convince yourself to do so. DCA has been shown to be suboptimal on average, so it's only useful as a behavioral trick to get you to invest as soon as possible if you're nervous.

Since you mention cashing out and investing in Roth, does that mean you can't afford to invest in Roth from your current salary/savings? I would cash out from an HSA for past medical expenses before I let Roth contribution limits go to waste. Growth in a Roth is tax free while growth in an HSA is only tax free if removed for qualified medical expense. I'd only cash out from the HSA if you have no other options available like contributing to Roth from salary savings or from a taxable account.

[SimpleCycle]

Reinvest it right away.  Don't try to time the market or anything, just invest it all the way it was previously invested and keep on keeping on.