Author Topic: High(ish) Fee HSA Account Help?  (Read 4801 times)

2Birds1Stone

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High(ish) Fee HSA Account Help?
« on: March 16, 2015, 01:36:10 PM »
Hey all, thanks to the community here I switched to a HDHP for the first time in my working career and have an HSA account set up.

There is no fee to me for having the HSA funds sitting in the custodian account. However if I want to deposit funds into an investment portfolio, I need to keep $1000 in the "peg account" (basically cash), plus the fund minimum for the Vanguard funds offered through the HSA.

Their fee is $3/month on top of the low ER Vanguard funds offered in the plan.

I just cracked the $1000 peg account level, and will need another $1000 for the TRD funds with Vanguard or another $3000 for VTSAX etc.

Does it make sense to invest considering $36/yr would essentially increase my ER to 3.6% + the Vanguard ER of .05-.2%?

What would you do? 

BrendanJ45

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Re: High(ish) Fee HSA Account Help?
« Reply #1 on: March 16, 2015, 01:57:35 PM »
This sounds like HealthEquity, which is the HSA that I recently joined. In which case the fees for investing are .03% * 12 or .36% which makes investing in  Vanguard a no brainier vs other options in the HSA. I could probably transfer the money out to a different HSA, but I'm not sure that the .36%/year gain is worth it. Assuming you are right though and the fees really are 3.6% you need to figure out how to transfer the money out ASAP or avoid the investment option entirely and only put in enough to cover your yearly health expenses.

2Birds1Stone

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Re: High(ish) Fee HSA Account Help?
« Reply #2 on: March 16, 2015, 02:04:54 PM »
This sounds like HealthEquity, which is the HSA that I recently joined. In which case the fees for investing are .03% * 12 or .36% which makes investing in  Vanguard a no brainier vs other options in the HSA. I could probably transfer the money out to a different HSA, but I'm not sure that the .36%/year gain is worth it. Assuming you are right though and the fees really are 3.6% you need to figure out how to transfer the money out ASAP or avoid the investment option entirely and only put in enough to cover your yearly health expenses.

Hey, its actually a flat $3/month fee. So It would start off at 3.6% annually with a $1000 account balance and then drop with each pay period as I put additional funds into the account.

"Fees. You will be charged a $3.00 monthly service fee for your participation in the UMB HSA Saver List of Mutual Funds Investment
Account."

2Birds1Stone

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Re: High(ish) Fee HSA Account Help?
« Reply #3 on: March 16, 2015, 02:14:44 PM »
Here is a (cluttered) list of the actual investment options. Some good funds, but the $36/yr fee is a little off putting especially starting with $1,000 in the account.

TIAA-CREF Growth & Income Instl TIGRX 0.45 $1,000.00 Equity- Domestic Large Cap S&P 500 Index
TIAA-CREF Mid-Cap Value Instl TIMVX 0.45 $1,000.00 Equity- Domestic Mid Cap Russell Mid Cap Value Index
Touchstone Value Institutional TVLIX 0.68 $1,000.00 Equity- Domestic Large Cap Russell 1000 Value Index
Vanguard 500 Index Adm VFIAX 0.05 $1,000.00 Equity- Domestic Large Cap S&P 500 Index
Vanguard Developed Markets Idx Adm VTMGX 0.10 $1,000.00 Equity- International FTSE Developed ex North America Index
Vanguard Emerging Mkts Stock Idx Adm VEMAX 0.18 $1,000.00 Equity- Emerging Markets FTSE Emerging Index
Vanguard LifeStrategy Cnsrv Gr Inv VSCGX 0.15 $3,000.00 Allocation- Conservative Barclays US Aggregate Bond Index
Vanguard LifeStrategy Growth Inv VASGX 0.17 $3,000.00 Allocation- Aggressive DJ US Total Stock Market Index
Vanguard LifeStrategy Income Inv VASIX 0.14 $3,000.00 Allocation- Conservative Barclays US Aggregate Bond Index
Vanguard LifeStrategy Moderate Gr Inv VSMGX 0.16 $3,000.00 Allocation- Moderate Barclays US Aggregate Bond Index
Vanguard Mid Cap Index Adm VIMAX 0.10 $1,000.00 Equity- Domestic Mid Cap CRSP US Mid Cap Index
Vanguard Short-Term Bond Index VBISX 0.20 $3,000.00 Fixed Income- Short Term Bond Barclays US 1-5yr GovCredit Float Adjusted Index
Vanguard Short-Term Govt Bd Idx Admiral VSBSX 0.12 $1,000.00 Fixed Income- Short Term Bond Barclays US 1-3yr Govt Float Adjusted Index
Vanguard Small Cap Index Adm VSMAX 0.10 $1,000.00 Equity- Domestic Small Cap CRSP US Small Cap Index
Vanguard Target Retirement 2015 Inv VTXVX 0.16 $1,000.00 Allocation- Target Date Target 2015 Composite Index
Vanguard Target Retirement 2020 Inv VTWNX 0.16 $1,000.00 Allocation- Target Date Target 2020 Composite Index
Vanguard Target Retirement 2025 Inv VTTVX 0.17 $1,000.00 Allocation- Target Date Target 2025 Composite Index
Vanguard Target Retirement 2030 Inv VTHRX 0.17 $1,000.00 Allocation- Target Date Target 2030 Composite Index
Vanguard Target Retirement 2035 Inv VTTHX 0.18 $1,000.00 Allocation- Target Date Target 2035 Composite Index
Vanguard Target Retirement 2040 Inv VFORX 0.18 $1,000.00 Allocation- Target Date Target 2040 Composite Index
Vanguard Target Retirement 2045 Inv VTIVX 0.18 $1,000.00 Allocation- Target Date Target 2045 Composite Index
Vanguard Target Retirement 2050 Inv VFIFX 0.18 $1,000.00 Allocation- Target Date Target 2050 Composite Index
Vanguard Target Retirement 2055 Inv VFFVX 0.18 $1,000.00 Allocation- Target Date Target 2055 Composite Index
Vanguard Target Retirement 2060 Inv VTTSX 0.18 $1,000.00 Allocation- Target Date Target 2060 Composite Index
Vanguard Total Bond Market Index Adm VBTLX 0.10 $1,000.00 Fixed Income- Interm Term Bond Barclays US Aggregate Bond Index
Vanguard Total Stock Mkt Idx Adm VTSAX 0.05 $1,000.00 Equity- Domestic All Cap CRSP US Total Market Index

Field123

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Re: High(ish) Fee HSA Account Help?
« Reply #4 on: March 16, 2015, 02:49:35 PM »
Mine is similar with a $2.50 monthly fee that is waived if the cash account exceeds $3000. Since that fee amounts to only 1% of $3,000, I keep only the minimum peg value of $1,000 in and invest the rest. Paying $30 or $36 per year is not ideal, but the tax benefits and (expected) investment gains far outweigh it. My advice is just max out the account, put the funds in Vanguard and try not to worry about the $36.

seattlecyclone

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Re: High(ish) Fee HSA Account Help?
« Reply #5 on: March 16, 2015, 03:04:27 PM »
A couple of things:

1) Even if your HSA is run through your employer, you're allowed to roll the funds over to a better provider at any time. There may be fees and/or hassle to doing this, but it is an option.
2) Given the fixed monthly investment fee, you may just want to keep your HSA in cash for a year or two until balance would be high enough for the investing fee to be below 1% of invested assets. Feel free to decrease your cash emergency fund accordingly in the interim.

MoneyRx

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Re: High(ish) Fee HSA Account Help?
« Reply #6 on: March 16, 2015, 03:37:53 PM »
HSAs are very fee happy, but the one you are in is similar to mine (mybenefitwallet, which is $2.9/month fees and $1k cash balance) and is about as good as it gets. As the years go on, if you get more funds in there, it will continue to reduce the fee on a % basis. They are definitely worth it though since it is tax free investing and spending if spent on healthcare.
« Last Edit: March 16, 2015, 03:41:38 PM by MoneyRx »

2Birds1Stone

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Re: High(ish) Fee HSA Account Help?
« Reply #7 on: March 16, 2015, 04:12:51 PM »
I will absolutely continue to max it out. I have my contributions set for the max this year. And as icing on the cake the employer put in $500 in January as an incentive for us to do the HDHP.

I was just trying to figure out if its worth putting in the $1000 over the $1000 peg amount immediately into the brokerage side of the account. I would pretty much need to get a guaranteed 4%+ return to break even on the fees. Now once I have $2000+ that number starts to drop significantly.

I think I will hold off till the end of this year, then I will have $2,350 to dump in there for a much more reasonable 1.5% which will continue to drop every month as the account grows.

MDM

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Re: High(ish) Fee HSA Account Help?
« Reply #8 on: March 16, 2015, 10:23:49 PM »
See http://whitecoatinvestor.com/choosing-an-hsa-provider/ for a good review of HSA plans offered by the providers listed below. 

The article generally recommends
     HSA Bank or Fidelity HSA

It also covers
     HSA Administrators
     Alliant Credit Union
     Stanford Federal Credit Union
     Wells Fargo
     Adirondack Trust
     Lake Michigan Credit Union
     Bank of the Sierra

Any of the above might be "best" for someone, depending on one's specific plans for an HSA.

Also, the article is a couple of years old so things may have changed.

MooseOutFront

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Re: High(ish) Fee HSA Account Help?
« Reply #9 on: March 17, 2015, 06:51:52 AM »
In a similar situation, I resolved to keep my HSA balance in cash until the expense ratio dropped below 1.00% including fixed fees and fund fees.  They're probably paying decent interest on that cash.  Then if there's ever a big market drop and you want to go in then you have some dry powder there.

For the record since coming up with this plan a few years ago, I would have been much better off just paying the high fees and being in the market.  ymmv

2Birds1Stone

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Re: High(ish) Fee HSA Account Help?
« Reply #10 on: March 17, 2015, 07:15:43 AM »
In a similar situation, I resolved to keep my HSA balance in cash until the expense ratio dropped below 1.00% including fixed fees and fund fees.  They're probably paying decent interest on that cash.  Then if there's ever a big market drop and you want to go in then you have some dry powder there.

For the record since coming up with this plan a few years ago, I would have been much better off just paying the high fees and being in the market.  ymmv

Despite all the hating on market timing going on here.......I will bet my left nut that we will not see the same ROR over the next 5 years as the past 5.

This is a GREAT plan. I will consider the HSA as dry powder for a correction till I can get that fee under 1% total. Fantastic idea.