Author Topic: HSA investing  (Read 2024 times)

Life in Balance

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HSA investing
« on: March 30, 2017, 02:09:07 PM »
My HSA account is automatically moved to "investments" once it hits a minimum threshold (currently set at $3000).  Looking at the funds available, the lowest expense ratio is .45% (Columbia Large Cap Index fund).  I'm considering two options:

1) Let the money accumulate there and it will be "swept" to that fund anytime the balance is over $3000.  I can then use it in the future for health expenses.
2) Withdraw the money (I have receipts for health expenses from several years that I could use over time to keep the balance low) and then invest it in my Roth at Vanguard (Total Market Index)

Is there any disadvantage to option 2?  I'll have saved income taxes on the HSA/health expenses (which I've paid out-of-pocket) and can then grow the money tax-free in my Roth.  If it helps in answering, I will not otherwise fund the Roth this year as I'm trying to divert as much as possible to my pre-tax 403b and 457 accounts.

Thanks for your thoughts. 

Joel

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Re: HSA investing
« Reply #1 on: March 30, 2017, 02:35:30 PM »
Since you have already received the preferential tax treatment on the front end and you are not maxing your available retirement space, I would request reimbursement and use those funds to live off of - then increase the 403b contributions by a similar amount.

You could put the money into a Roth IRA in order to avoid having to save the receipt to reauthe st reimbursement. But once the money is out of the hsa, it can be used for anything. So if your priority is 403b over Roth IRA, then that's what you should do.

Life in Balance

  • Bristles
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Re: HSA investing
« Reply #2 on: March 30, 2017, 06:35:44 PM »
That's an interesting thought, but I've pretty much maxed out both the pre-tax accounts for this year.  I'm just trying to figure out if there is any advantage to keeping the money in the HSA instead of my Roth in the long-term.  I'll keep contributing to the HSA as long as I'm working full-time (max 5 more years) and will maintain the max out-of-pocket there, but would like to maximize growth as much as possible.

Joel

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Re: HSA investing
« Reply #3 on: March 31, 2017, 01:59:48 AM »
I'll have saved income taxes on the HSA/health expenses (which I've paid out-of-pocket) and can then grow the money tax-free in my Roth.  If it helps in answering, I will not otherwise fund the Roth this year as I'm trying to divert as much as possible to my pre-tax 403b and 457 accounts.

In a perfect world, you would have maxed your 403b, 457, Roth IRA, and HSA. You would keep the unreinbursed funds in the HSA for tax free growth hanging onto the receipts until you request reimbursement.

The statement you made above indicated you would not have maxed your Roth IRA for the year (however, it may be worth waiting until 4/15 to see if you were able to). The statement also made it seem like you may not have your 403b/457 completely maxed either. If the 403b/457 are maxed, if you request reimbursement and out these funds in the Roth IRA, the benefit you get (that you weren't already receiving) is the fact you won't have to hang onto the receipts.I would do that if I was certain I couldn't max the account. I would make sure my 403b/457 were maxed first though.

specialkayme

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Re: HSA investing
« Reply #4 on: March 31, 2017, 05:24:00 AM »
Why not just keep it in the HSA?

I was told you can open another HSA account with another firm, i.e. not the one your employer has, and move funds from your current HSA to the new HSA tax free (as long as it maintains HSA status). So pick an place that has investments you like (Vanguard, for example).

Life in Balance

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Re: HSA investing
« Reply #5 on: March 31, 2017, 08:42:36 AM »
Thanks to you both.  I'll explore all of these options.  I have time as I maxed my Roth in 2016, but will not be able to in 2017.  I had health expenses in 2016 that I paid out-of-pocket that I have not had reimbursed yet.  Both my pre-tax accounts through work will hit the contribution limit this year.  I was just thinking that if I move this money to my Roth now as 2017 contributions, I could access it more easily post-retirement (projected 2021, in my early 50s) and it would grow a bit faster (with a lower expense ratio and a better fund).  Long-term I'm on a good path, so now I'm thinking about how to cover age 51-60 as painlessly as possible. 

Joel

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Re: HSA investing
« Reply #6 on: March 31, 2017, 01:17:50 PM »
Thanks to you both.  I'll explore all of these options.  I have time as I maxed my Roth in 2016, but will not be able to in 2017.  I had health expenses in 2016 that I paid out-of-pocket that I have not had reimbursed yet.  Both my pre-tax accounts through work will hit the contribution limit this year.  I was just thinking that if I move this money to my Roth now as 2017 contributions, I could access it more easily post-retirement (projected 2021, in my early 50s) and it would grow a bit faster (with a lower expense ratio and a better fund).  Long-term I'm on a good path, so now I'm thinking about how to cover age 51-60 as painlessly as possible. 

In that case, I would wait until April 2018 as you might find a way to fund your Roth IRA before then.

MojoHusker

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Re: HSA investing
« Reply #7 on: March 31, 2017, 02:17:37 PM »
I hate to sidetrack this thread, but I didn't know of these options with my HSA.  I give the max through the company, and was under the impression that I had to spend the majority of the money for that year (except for a $500 rollover).  We use the HSA card for health care related expenses and purchases now.

Should I be looking into options such as the ones you guys are talking about while I use our cash for these expenses to look for reimbursement later? 

Once again, not trying to hijack you LIB!

Nothlit

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Re: HSA investing
« Reply #8 on: March 31, 2017, 02:20:22 PM »
I hate to sidetrack this thread, but I didn't know of these options with my HSA.  I give the max through the company, and was under the impression that I had to spend the majority of the money for that year (except for a $500 rollover).  We use the HSA card for health care related expenses and purchases now.

Should I be looking into options such as the ones you guys are talking about while I use our cash for these expenses to look for reimbursement later? 

Once again, not trying to hijack you LIB!

It sounds like you are referring to an FSA (flexible spending account), not an HSA (health savings account). FSA money is indeed use-it-or-lose-it (with the $500 carryover under certain circumstances), while HSA money is yours forever until you spend it.

Life in Balance

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Re: HSA investing
« Reply #9 on: March 31, 2017, 04:35:25 PM »
Not a problem, MojoHusker.  It does sound like you might be referring to the rules for an FSA as Nothlit said.