Author Topic: Using An HSA As An Investment Tool?  (Read 2890 times)

Willbrewer

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Using An HSA As An Investment Tool?
« on: March 18, 2014, 07:43:57 PM »
Health Savings Account benefits:

-Deposits to account are pre-tax
-Funds can be invested within the account
-Growth is tax deferred
-Medical withdrawals are not taxable
-Funds carry over year to year
-Medical bills can be paid out of pocket, letting receipts accumulate (over several years), and the
    claim can be made for tax free withdrawal at a later date, taking advantage of investment returns.
-Funds can accumulate, and at age 65 can be withdrawn for any reason, but non-medical is taxable

Those are the benefits I'm aware of. There may be more. The negatives:

The deposit I made to my new HSA was posted today, so I checked out my investment options. I learned that the funds offered (some are decent index funds) have expense ratios near the 1% range, with some closer to 2%. I don't like that much, since my IRA Vanguard ETFs range from 0.05% to 0.1%.

The investment amount is limited to the balance over the first $1000 dollars, so I wouldn't get potential returns from the full amount.

Another negative is that the HSA investment account gouges a $24 annual fee, regardless of the balance. I think that literally sucks.

I'm more or less just venting here, but what I think I'll do is just contribute the max for me ($4300) and leave it as cash, uninvested, and be satisfied with only the tax savings aspect. Or...  contribute and invest the max over the next few years, pay my med bills with cash, and take advantage of potential "free" money from investment growth, submitting my med receipts in the future.

Damn. I'm probably overthinking this. Time for a beer.

Oh yeah, what would you do?

Now I'll get a cold one.

clarkm04

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Re: Using An HSA As An Investment Tool?
« Reply #1 on: March 18, 2014, 09:00:58 PM »
Read this.  It's all on how to use your HSA as a retirement account.

http://www.madfientist.com/ultimate-retirement-account/

Willbrewer

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Re: Using An HSA As An Investment Tool?
« Reply #2 on: March 18, 2014, 09:14:33 PM »
Thanks for the link Clarkm04.

Roland of Gilead

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Re: Using An HSA As An Investment Tool?
« Reply #3 on: March 19, 2014, 05:47:19 AM »
Our HSA is a bit better as we have access to some Vanguard total market funds in it with expense ratios of 0.01% or something like that.

We put in the max each year $6450 (our employer actually puts in $2000 of that) and treat it like a Roth.  It is actually better than a Roth as the money goes in before taxes and comes out tax free if you save receipts over the years or use it for future qualified expenses.  We pay our medical bills with a cash back credit card that we pay off with other cash each month.

First world problems!

Gimesalot

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Re: Using An HSA As An Investment Tool?
« Reply #4 on: March 19, 2014, 10:30:08 AM »
If you are maxing out your other accounts, 401k, IRA, etc., then I don't understand why it wouldn't be a good idea to invest in your HSA.  You save money on the taxes, and you get tax free growth.  Although, due to the high fees, your growth will be less. 

I have invested in my HSA over the last two years.  Obviously, these were some of the best years in stock market history.  My total return has been about 9%.  I have paid $72 over that time in fees to allow investments.  I think it was worth the expense.  I fully plan on maxing out my HSA for as long as possible.

Nothlit

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Re: Using An HSA As An Investment Tool?
« Reply #5 on: March 19, 2014, 10:50:50 AM »
If your current HSA doesn't offer appealing investment options, you're not stuck using it. You can open an HSA with any custodian of your choosing and transfer your money.

Willbrewer

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Re: Using An HSA As An Investment Tool?
« Reply #6 on: March 19, 2014, 12:21:47 PM »
Our HSA is a bit better as we have access to some Vanguard total market funds in it with expense ratios of 0.01% or something like that.

We put in the max each year $6450 (our employer actually puts in $2000 of that) and treat it like a Roth.  It is actually better than a Roth as the money goes in before taxes and comes out tax free if you save receipts over the years or use it for future qualified expenses.  We pay our medical bills with a cash back credit card that we pay off with other cash each month.

First world problems!

I will definitely look into using a different HSA account provider.