Author Topic: Investing HSA funds, what are the best choices?  (Read 3662 times)

MVal

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Investing HSA funds, what are the best choices?
« on: February 16, 2017, 09:35:11 AM »
Y'all, I'm trying to figure out how to invest my HSA funds and I called the bank that holds the account and they sent me a sheet of mutual funds I could choose from. I know next to nothing about mutual funds as the only I do with my other accounts is invest in Vanguard index funds like VTSMX. Since I am aiming for FIRE, would I want to stick with Class A or B funds? And does it make much difference which of these funds I choose?

(I tried to copy and paste the information, but I'm not very good at figuring how to make it readable again, sorry!)

Company                    Type                                        Ticker
                                                                                  Class A      Class B                              Class C
Franklin Templeton          Conservative Target           FTCIX                                                   FTCCX
                                        Moderate Target                FMTIX                                                  FTMTX
                                        Growth Target                   FGTIX                                                  FTGTX

John Hancock Investments Lifestyle
Portfolios                         Conservative                      JALRX         JBLCX                                JCLCX
                                         Moderate                          JALMX        JBLMX                                JCLMX
                                         Balanced                           JALBX        JBLBX                                 JCLBX
                                         Growth                              JALGX       JBLGX                                 JCLGX
                                         Aggressive                         JALAX       JBLAX                                 JCLAX
Russell LifePoints Funds Target
Portfolio Conservative RCLAX RCLCX
800-787-7354 Moderate RMLAX RMLCX
www.russell.com Balanced RBLAX RBLCX
 Growth RALAX RALCX
 Equity Growth REAAX RELCX

MFS Allocation Fund Conservative MACFX MACBX MACVX
800-225-2606 Moderate MAMAX MMABX MMACX
www.mfs.com Growth MAGWX MBGWX MCGWX
 Aggressive Growth MAAGX MBAGX MCAGX
{00231381 v1 CONFIDENT } 2

Oppenheimer Portfolio Series Conservative OACIX OBCIX OCCIX
800-255-2755 Moderate OAMIX OBMIX OCMIX
www.oppenheimerfunds.com Active OAAAX OAABX OAACX
 Equity OAAIX OBAIX OCAIX

Pacific Life Optimization Funds Conservative POAAX POABX POACX
800-800-7646
Moderate
Conservative POBAX POBBX POBCX
www.pacificlife.com Moderate POCAX POMBX POMCX
Moderate
Aggressive PODAX PODBX PODCX
 Aggressive POEAX POEBX POCEX

Principal SAM Flexible Income SAUPX SBUPX SCUPX
800-222-5852
Conservative
Balanced SAIPX SBIPX SCIPX
www.principalfunds.com Balanced SABPX SBBPX SCBPX
 Conservative Growth SAGPX SBGPX SCGPX
 Strategic Growth SACAX SBCAX SWHCX

Putnam Absolute Return 100 Fund PARTX PARPX PARQX
800-225-1581 300 Fund PTRNX PTRBX PTRGX
www.putnam.com 500 Fund PJMDX PJMBX PJMCX
 700 Fund PDMAX PDMBX PDMCX
« Last Edit: February 16, 2017, 09:38:51 AM by MVal »

MVal

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Re: Investing HSA funds, what are the best choices?
« Reply #1 on: February 16, 2017, 10:48:13 AM »
So, apparently there is no Vanguard stuff to choose from, so I have absolutely no idea what to do. As far as I know, I can't move the funds out of the account while still employed, unless you all know otherwise.

What are reasonable fees to expect with investing in mutual funds like this? I suppose I can just start looking at prospectuses on Morningstar or something and find one that has the lowest fees and is the most aggressive, but I don't know if that's the way you do this or what.

Proud Foot

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Re: Investing HSA funds, what are the best choices?
« Reply #2 on: February 16, 2017, 12:57:36 PM »
The best way would be to look up the funds and run the numbers using your assumptions.  For reference the John Hancock has a higher front load but lower ER for class A than class C. Here are the Aggressive portfolios

JALAX (A)  Load:5%, ER: 1.4%
JCLAX (C) Load: 1%, ER: 2.11%

Using the historical 10 year return for these funds to compare, you would be around even after 10 years assuming you contributed the same amount each year.  JALAX (A) outperforms over longer periods, while JCLAX (C) outperforms over shorter periods.  Obviously there are things you cannot control such as the bank offering better funds or your employer using a different bank, but use your best estimates on the things you can control (annual contributions, how long you will stay there).  It also wouldn't hurt to try to convince your employer to look at other options for the HSA bank.

missundecided

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Re: Investing HSA funds, what are the best choices?
« Reply #3 on: February 16, 2017, 01:08:46 PM »
While you can't change which bank your employer DEPOSITS the money, there is nothing stopping you from TRANSFERRING to another account. Just make sure that the original account (the one your employer uses) stays open.

That said, I can't remember if you are limited to how many transfers per year.

Nothlit

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Re: Investing HSA funds, what are the best choices?
« Reply #4 on: February 16, 2017, 01:16:48 PM »
While you can't change which bank your employer DEPOSITS the money, there is nothing stopping you from TRANSFERRING to another account. Just make sure that the original account (the one your employer uses) stays open.

That said, I can't remember if you are limited to how many transfers per year.

You are limited to one rollover per 12 months. You also have to make sure you report it correctly on your income tax return, otherwise the IRS may think it's an unqualified distribution and charge you taxes and penalties.

Alternatively, you can do unlimited trustee-to-trustee transfers (where Bank A sends the money directly to Bank B and it never passes through your hands, thus does not count as a rollover). However, one or both banks may charge a fee for trustee-to-trustee transfers.

MVal

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Re: Investing HSA funds, what are the best choices?
« Reply #5 on: February 20, 2017, 10:30:15 PM »
While you can't change which bank your employer DEPOSITS the money, there is nothing stopping you from TRANSFERRING to another account. Just make sure that the original account (the one your employer uses) stays open.

That said, I can't remember if you are limited to how many transfers per year.

You are limited to one rollover per 12 months. You also have to make sure you report it correctly on your income tax return, otherwise the IRS may think it's an unqualified distribution and charge you taxes and penalties.

Alternatively, you can do unlimited trustee-to-trustee transfers (where Bank A sends the money directly to Bank B and it never passes through your hands, thus does not count as a rollover). However, one or both banks may charge a fee for trustee-to-trustee transfers.

Interesting! Are there any good places where we Mustache folks like to park such HSA funds? Is the Vanguard HSA a good option?

Nothlit

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Re: Investing HSA funds, what are the best choices?
« Reply #6 on: February 21, 2017, 06:20:04 AM »
Vanguard doesn't offer HSA's directly. They recommend either HealthSavings Administrators or HealthEquity. Both charge additional fees, but I'm not aware of any independent HSA custodian that doesn't. HSA Bank is another option that I've seen mentioned a lot. I don't personally use any of them, as my employer preferred HSA is actually pretty decent.

VoteCthulu

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Re: Investing HSA funds, what are the best choices?
« Reply #7 on: February 21, 2017, 11:00:29 AM »
I have HealthEquity, and I do not suggest using them. They charge both monthly fees and an additional 0.40% ER on top of the fund's ER.

Saturna currently has the best fee structure for investing 100% once per year, but HSA bank and HSA administrators are good too.
« Last Edit: February 21, 2017, 12:08:52 PM by VoteCthulu »

Milkshake

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Re: Investing HSA funds, what are the best choices?
« Reply #8 on: February 21, 2017, 11:50:47 AM »
My company uses Fidelity for both 401k and HSA, so I have my HSA invested in ITOT funds, which is very similar to VTI (Vanguard's total market ETF).

MVal

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Re: Investing HSA funds, what are the best choices?
« Reply #9 on: June 23, 2017, 11:53:54 AM »
I just found out my company is going to switch to Fidelity for the HSAs next year, but our old funds will stay with Key Bank. I may not even do the HSA next year due to wanting to address some health concerns, so I guess I might as well move my funds to a better custodian now.

FrugalFisherman10

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Re: Investing HSA funds, what are the best choices?
« Reply #10 on: June 23, 2017, 01:23:57 PM »
What are reasonable fees to expect with investing in mutual funds like this?

There isn't such thing as 'reasonable fees' with these.  :)

But really, this seems like a good place to start:
just start looking at prospectuses on Morningstar or something and find one that has the lowest fees and is the most aggressive, but I don't know if that's the way you do this or what.
yes that's the way you should do it. Proudfoot shows a good method of thinking about it/modeling it too..you'll have to figure out the differences between how the various fees work (Load = up front, ER = as a percentage of your Assets under their management, etc. Investopedia would be a good place to learn more about the fees you'll be facing with these)

Also, just to make sure I'm understanding you correctly - you're considering not doing the HSA next year (and foregoing a HDHP) because you would instead do a low deductible health plan since you know you have costs coming up? Is that correct? Do you have a low deductible health plan avaialble to you? If so, I agree that likely makes sense.

If not, and you will still have a high deductible health plan (HDHP), then you should likely use the HSA still to pay for your medical bills since you get a tax break

MVal

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Re: Investing HSA funds, what are the best choices?
« Reply #11 on: June 23, 2017, 02:02:04 PM »
What are reasonable fees to expect with investing in mutual funds like this?

There isn't such thing as 'reasonable fees' with these.  :)

But really, this seems like a good place to start:
just start looking at prospectuses on Morningstar or something and find one that has the lowest fees and is the most aggressive, but I don't know if that's the way you do this or what.
yes that's the way you should do it. Proudfoot shows a good method of thinking about it/modeling it too..you'll have to figure out the differences between how the various fees work (Load = up front, ER = as a percentage of your Assets under their management, etc. Investopedia would be a good place to learn more about the fees you'll be facing with these)

Also, just to make sure I'm understanding you correctly - you're considering not doing the HSA next year (and foregoing a HDHP) because you would instead do a low deductible health plan since you know you have costs coming up? Is that correct? Do you have a low deductible health plan avaialble to you? If so, I agree that likely makes sense.

If not, and you will still have a high deductible health plan (HDHP), then you should likely use the HSA still to pay for your medical bills since you get a tax break

Yes, I've been forgoing the fancy insurance for a few years, but I have some chronic conditions I need to address and right now it is too expensive with my HDHP. I really don't want to pay for a CT scan of my sinuses or other such things out of pocket.