The Money Mustache Community

Learning, Sharing, and Teaching => Investor Alley => Topic started by: Megatron on December 26, 2013, 09:11:01 AM

Title: Invest through HSA account?
Post by: Megatron on December 26, 2013, 09:11:01 AM

I have an HSA account with Optum and I've been maxing out the contributions the last 2 years, since all my other tax advantage accounts have been maxed already. We have the option of investing from a list of mutual funds (a few vanguard funds are on the list, S&P 500 and Wellington fund) Was wondering if anyone out there is doing any investing through their HSA. Any advice or pitfalls to watchout for?

Title: Re: Invest through HSA account?
Post by: TheDude on December 26, 2013, 09:15:57 AM
I'm not yet but I should be in the next few months. I am just waiting for my yearly contribution to hit. Once it gets there I am going rollover the amount to ELFCU as they have TD Ameritrade access. I dont touch my account for me its just another retirement account.
Title: Re: Invest through HSA account?
Post by: hoppy08520 on December 27, 2013, 09:23:31 PM
Assuming that you're using your HSA as another tax-advantaged retirement account (which is a smart move), then choose your funds the same way as you would if it were an IRA or 401(k) plan.
Title: Re: Invest through HSA account?
Post by: hoppy08520 on December 27, 2013, 09:46:07 PM
I looked up Optum. The only fund I'd pick from their list is the Vanguard 500-index or Wellington. The others are expensive actively-managed funds. The monthly investment fees are consistent with other hsa's

If you go with VFINX then you might want to complement it with a small-cap fund in one of your other accounts to get full US market exposure. If you keep this account for a few more years, consider transferring your hsa funds into a better one with more investment options. If this hsa is through your company, just keep it and do your payroll deductions through it, but transfer your balance every year or so to a better hsa with more options (if your need those options). You can have 2 or more hsa accounts.
Title: Re: Invest through HSA account?
Post by: athomeintheworld on December 28, 2013, 12:01:26 AM
I looked into doing this with my HSA but the fees were ridiculous I wasn't sure it would be worth it.  Make sure you read all the details!
Title: Re: Invest through HSA account?
Post by: hoppy08520 on December 28, 2013, 08:38:38 AM
Based on the research I've done (and you can google around to see the same thing) most HSA's charge an "account maintenance fee" of around $3.00 per month if you open an investment account. Some will waive or reduce the fee if you keep a minimum balance of your HSA ($2,000 to $5,000 or more) in their low-interest savings accounts.

So, if you have a $10,000 investment with the HSA, a $36 annual maintenance fee is equivalent to a 0.36% surcharge on top of any fund expense ratio. For the OP, if she goes with the Vanguard 500-index fund VFINX at 0.17% ER then add 0.36% for a total expense of 0.53%. This is about what an average 401(k) will charge. The higher your balance, of course, the lower the fee percentage since the fee is flat.

While I'm not happy about paying these fees, that's the market right now. We can hope that as HSA plans get more popular that the market will get more competitive and fees will go down. Your alternative to paying these fees is to let the money earn a meager ~0.25% in the HSA's savings account. I'd rather pay the fees and invest.

Also, it looks like Optum charges a $20 fee to transfer assets out of it into another HSA. This is not uncommon. Typically most HSA plans will not charge you to transfer money in, since they want your money and they don't want to discourage incoming transfers. This is why I recommended transferring only annually, if you decide to go that route.
Title: Re: Invest through HSA account?
Post by: moneetalks on December 28, 2013, 09:18:02 AM
 I have an optum account too, and I agree with Hoppy's recommendation - although I'd add the other vanguard fund - global equity I believe its called.  None of the other choices come close, in my opinion.
Title: Re: Invest through HSA account?
Post by: fmzip on December 30, 2013, 01:41:52 PM
I have my HSA through HSA administrators. They offer Vanguard funds and you have access to the admiral shares without the $10K minimums.

All my HSA funds were in the Admiral Vanguard Index 500 fund for the past two years. Very happy about that! (Just reallocated after reading about the Boglehead three fund approach.)

I also found out that I can transfer money from of my wife's Aetna HSA account to HSA administrators as well. All I needed to do was open up an account for her, fill out a form and then they will transfer the cash to the new account from Aetna.

This hold true for anyone who has their HSA somewhere else through an employer. Just because they send your HSA funds to "wherever", you are free to move it somewhere else.

No need to sit on zero to 1% return on HSA funds particularly if you don't plan to use the money anytime soon. The way I look at it, I will need this money more so in retirement than I do now.