Author Topic: HSA investing for short term?  (Read 698 times)

dnmccoy

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HSA investing for short term?
« on: February 24, 2020, 08:41:11 AM »
I have a $2800/year deductible and as of right now I have that and more in my newly formed HSA. At the moment Im only contributing enough each month to cover the $2800/year deductible, but the last couple years I have had some money left over on my deductible.

My thought it to take any money above the $2800/year and put it in an index fund

My question is what should I do to maximize returns on the $2800 for this year while not losing any of it? CDs? Money market?

DadJokes

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Re: HSA investing for short term?
« Reply #1 on: February 24, 2020, 02:15:05 PM »
First of all, if you aren't maxing out your HSA, then you're missing out on one of the best retirement accounts. Any money invested in the HSA that isn't spent today can be spent years from now tax free on medical expenses.

To answer your question, if you plan on spending money in the short term, it probably best to invest it as conservatively as possible. Options will vary by provider. In my case (Payflex), I can do the one bond option, which usually returns from 3-4%, or I could take a meager 0.05% to leave it in cash.

EliteZags

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Re: HSA investing for short term?
« Reply #2 on: February 24, 2020, 03:04:55 PM »
real answer is to max out and stop spending any of the HSA entirely, there is not a single more advantageous way to invest money in any other way, so if you're saving/investing anything on top of your 401k match then use those funds to pay deductible/med expenses instead of the HSA, and fully invest the max HSA contribution each year. Nothing else is tax free going in, tax free accumulation, and tax free withdrawal.
« Last Edit: February 24, 2020, 03:07:18 PM by EliteZags »

dnmccoy

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Re: HSA investing for short term?
« Reply #3 on: February 24, 2020, 05:11:44 PM »
I guess I shouldve clarified. Im paying off debts right now so the only thing Im putting in there is enough to cover the deductible. Once I hit my deductible I have ZERO out of pocket costs.

I just didnt know if a bond ETF would be a good idea, its through Fidelity, so I have the option to get into anything they offer

GoCubsGo

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Re: HSA investing for short term?
« Reply #4 on: February 25, 2020, 08:25:17 AM »
On such a small amount and the fact it doesn't sound like you have much of a cushion, I'd just stick it in their highest yielding money market account. Especially if you have to use that money.

Not sure how a CD in a HSA would work.  You'd be locking up money you might need.  Either way your chasing pennies. 

I second trying to plow as much in the HSA and don't ever touch it.  Then apply whatever your planned overall asset allocation is (80/20, 60/40, etc.) to those funds in the HSA and let it grow.

EliteZags

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Re: HSA investing for short term?
« Reply #5 on: February 25, 2020, 11:13:24 AM »
are they all high interest/CC debts? anything under 4-5% I would slow on to be able to max the HSA and keep it invested
you're throwing away the rare gift of tax free growth by using any of it
« Last Edit: February 25, 2020, 11:18:59 AM by EliteZags »

thesis

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Re: HSA investing for short term?
« Reply #6 on: February 25, 2020, 11:29:41 AM »
I'm pretty much 100% in a total bond market fund. I actually think the returns will solidly pay my typical medical expenses for the whole year, and then some.

Granted, a common strategy does involve paying out of pocket, saving the receipts, and letting the money in the HSA grow. There's only so much you can contribute, so it's smart to let it grow. I'm not a terribly great optimizer, though, but I do like having a huge chunk of money laying around in non-taxable bonds, earning me some money. YMMV.

(this is in stark contrast to some of my other accounts, which are pretty much 100% VTSAX, but then I also intend to use the HSA for medical expenses. There are better strategies out there, though)
« Last Edit: February 25, 2020, 11:31:16 AM by thesis »

harvestbook

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Re: HSA investing for short term?
« Reply #7 on: February 26, 2020, 11:25:26 AM »
We reimburse our medical expenses out of HSA and invest the reimbursement in Roth accounts, basically getting a tax-free Roth contribution. Of course this isn't optimal if you're well off enough to max all your retirement accounts.

We use an HSA at the local credit union that pays 2.5 percent.