The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: stlbrah on October 15, 2015, 09:20:06 PM
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I am currently maxing out 401k, roth IRA, and get some additional profit sharing. I also put 1000/month into a non-retirement taxable account.
I now have the opportunity to get 400/year into an HSA from my employer, so I am thinking about putting the other $2950 in myself.
My portfolio is a 70/30 (stocks/bonds and reits) split of index funds in my retirement accounts, and 80/20 in my non-retirement accounts. I am thinking of doing this HSA more conservatively, like maybe 40/60 and then set it to always have $1500 cash. It is Wells Fargo, and has plenty of no-load funds to choose from.
I am wondering if anyone has any additional advice as far as what kind of investments to choose for this - I assume more conservative since its an HSA, but maybe my logic is wrong?
Also, is there anything else I should look out for?
Thanks
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Yes, max out your HSA, but if you can afford to pay out of pocket, there is no reason to make that more conservative.
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Yes, max out your HSA, but if you can afford to pay out of pocket, there is no reason to make that more conservative.
+1
Given your current saving rate it appears you are well able to pay the out-of-pocket max, out of pocket.
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Absolutely. HSA's are one of the better investment options out there, plus you get $400 free. All the money is tax free if used for health expenses at any time (with documentation), and you can withdraw it like an IRA after 65.
http://www.milesdividendmd.com/portable-bliss/
http://whitecoatinvestor.com/choosing-an-hsa-provider/
http://whitecoatinvestor.com/should-i-pay-for-health-care-with-my-h-s-a-friday-qa-series/
(why are all my sources doctors?)
I have Wells Fargo for my employer HSA too. Remember you can move this to any HSA provider you want, but Wells Fargo has 0.25% ER for their S&P500 index fund, with no other expenses, which right now makes me feel it is close enough to the best choice. The only good Wells Fargo option is the S&P500 fund, so there is no point being conservative here. All the bond funds and other stock funds all are actively managed with ER's of at least 0.7, and don't do well compared to benchmarks. (Actually their S&P500 index fund doesn't do that well compared to the S&P500 index either.... but still OK, most of the poor tracking looked to be from 2008-9).
Edit: looks like there is an OK small cap index fund too, ER 0.5%. Not conservative though.
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Yes, max out your HSA, but if you can afford to pay out of pocket, there is no reason to make that more conservative.
+1
Given your current saving rate it appears you are well able to pay the out-of-pocket max, out of pocket.
I also concur. Do max out your HSA. My wife certainly does! (I'm job free already.)
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Echo the others. Also worth mentioning that if you enroll in HSA contributions via automatic payroll deduction, you avoid paying FICA taxes on that money, too.
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Echo the others. Also worth mentioning that if you enroll in HSA contributions via automatic payroll deduction, you avoid paying FICA taxes on that money, too.
This may or may not be true depending on how your employer has things set up. It needs to be through a section 125 "cafeteria" plan for this to be true. I think it'd pretty common though.
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The HSA is actually the best retirement fund out there due to the lack of payroll taxes.
Max that sucker out!
http://www.madfientist.com/ultimate-retirement-account/
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Echo the others. Also worth mentioning that if you enroll in HSA contributions via automatic payroll deduction, you avoid paying FICA taxes on that money, too.
This may or may not be true depending on how your employer has things set up. It needs to be through a section 125 "cafeteria" plan for this to be true. I think it'd pretty common though.
My job has HDHP with HSA, but how do I know that it is section 125 "cafeteria" plan. Is there a way to find out?
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Echo the others. Also worth mentioning that if you enroll in HSA contributions via automatic payroll deduction, you avoid paying FICA taxes on that money, too.
This may or may not be true depending on how your employer has things set up. It needs to be through a section 125 "cafeteria" plan for this to be true. I think it'd pretty common though.
My job has HDHP with HSA, but how do I know that it is section 125 "cafeteria" plan. Is there a way to find out?
I'm pretty sure that as long as your employer offers HSA contributions straight from your paycheck then it's payroll tax free. Definitely set this up.
If you contribute cash from your own checking account you don't get the payroll tax deduction. It's 7.65% so it is worth it.
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Thanks for the replies.
My company does offer auto deposit which I plan to use. Biweekly paycheck, so a little over 100/paycheck taken out pretax to max out the account. This was good news to me because I thought I would have to do the 8889 form and have another thing to deal with on tax returns.
I decided to go for it. If the wells fargo funds the poster said before all suck besides the s&p 500 index and the small cap stock index, I will just do 100% stock and put a higher percentage of money into the bond fund in my roth IRA to balance it out.
I wish I would have been doing the HSA the last 2 years. O well, better late than never.
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If I understand correctly, there's no reason why you can't let your employer direct-deposit into the company-affiliated HSA to avoid the payroll tax and then transfer it to a second HSA that you open yourself in order to get better investment choices. The only downsides to it are the extra complication and the fact that you might have two sets of account fees or minimum balances or whatever.
(My company HSA lets me invest in VTSMX and doesn't have too many annoying fees, so I haven't bothered to do this myself.)
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HSA contributions also avoid FICA taxes, if taken directly from your paycheck by your employer. No other tax advantaged account can do this.
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Echo the others. Also worth mentioning that if you enroll in HSA contributions via automatic payroll deduction, you avoid paying FICA taxes on that money, too.
This may or may not be true depending on how your employer has things set up. It needs to be through a section 125 "cafeteria" plan for this to be true. I think it'd pretty common though.
My job has HDHP with HSA, but how do I know that it is section 125 "cafeteria" plan. Is there a way to find out?
Just ask HR or payroll. They should know. Or just set it up and if your FICA taxes go down then it is.
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Yep, always always max out your HSA if you have access to one. They're the best tax free savings account available due to the triple tax saving! Money is not taxed going in, investments grow tax free, and can withdraw for qualified expenses tax free! Booyah!
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My 3% merit raise will be at the same time as the enrollment, so the paycheck will be almost the same amount.
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Yes MAX out HSA, in fact in my opinion it is #2 on the order of things to do.
1) Contribute to 401K up to Employer Match
2) MAX HSA
3) MAX Roth IRA (or backdoor...)
4) MAX 401K
5) After tax brokerage acct.
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If you ask the employer, they might not even care which HSA provider you use. My wife's company gave out brochures for one that had no investment options at all but when I asked they had no issue depositing with a completely different provider.
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Yes MAX out HSA, in fact in my opinion it is #2 on the order of things to do.
1) Contribute to 401K up to Employer Match
2) MAX HSA
3) MAX Roth IRA (or backdoor...)
4) MAX 401K
5) After tax brokerage acct.
I like this order. I think I am going to switch as I'm currently 1, 3, 4, 2, 5.
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If you ask the employer, they might not even care which HSA provider you use. My wife's company gave out brochures for one that had no investment options at all but when I asked they had no issue depositing with a completely different provider.
Whats a good provider to use? I would like to be able to use Vanguard funds, but I don't mind Fidelity either.
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There's been a couple threads recently about that.
Vanguard (sorta kinda) recommends Health Savings Administrators. I'm using them and seems fine.
HSA Bank was another name mentioned by quite a few around here.
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Just a note, your W-2 may show if you are enrolled in a Section 125 plan.
I would discuss with HR.
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I would consider in the beginning with an HSA keeping at least your max out of pocket uni-vested within the account. That way you can always be sure you will have enough to cover a bad medical year.
Typically most wont let you invest HSA money unless you have over a certain amount of money anyway.
Also if you ever pay a medical expense out of pocket with post-tax dollars and realize you regret it. You can pay yourself back for the expense out of your HSA to reimburse the cost anytime before you complete your taxes for the year. Just keep the receipt for the medical costs.
Typically in a healthy year the HSA will grow faster than you can use it. Even if you cover all costs with the HSA. Which I would recommend because why pay taxes on medical services if they can be tax free.
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Just signed up to max out my HSA through payroll deduction in 2016. Thanks, this forum, for cluing me in on why this is an excellent idea.
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I would consider in the beginning with an HSA keeping at least your max out of pocket uni-vested within the account. That way you can always be sure you will have enough to cover a bad medical year.
Yep, this is my plan. I am also asking if I can use a different HSA provider when I sign up.