Re: How do I handle our HSA account?

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Re: How do I handle our HSA account?

Postby porcupine » Mon Jan 21, 2013 9:04 pm

We just started an HSA in 2012, and have paid for our medical costs in 2012 exclusively out-of-pocket. So, the question is where to move the $6000 to, as it is earning next to nothing right now. The options I see in front of us are (please correct me if I am wrong):

- Health Savings Administrators ($45 annual fee which can be paid from outside the HSA; 0.32% additional fee per Vanguard fund to a maximum of $20k; many decent mutual fund options; do not earn a lot on the cash)

- Alliant Credit Union (no fees; earn 1.25% interest)

- HSA Bank (no interest for first $5000; further deposits can be moved to TDAmeritrade and invested in Vanguard funds for no additional fee)

At this stage in the game, our best option is probably put all the money into Alliant, wait a year or two, then make the move to either Health Savings Administrators or HSA Bank. Would you agree, or have I missed any gotchas?

Should the purpose of money in HSA be invested conservatively or aggressively?

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Re: How do I handle our HSA account?

Postby FB01 » Mon Jan 21, 2013 9:11 pm

Hi,

I am in the same situation as your as I started HSA in 2012. I checked all option and went with Wells Fargo HSA. You have to maintain more than 5K to avoid monthly fees but good thing is you can invest all amount in their mutual fund. The expense ratio is a bit high but I guess WF is better if you want to invest rather than earn 1.25% in Alliant.

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Re: How do I handle our HSA account?

Postby mhc » Mon Jan 21, 2013 9:24 pm

If you have a sufficient emergency fund, then the HSA should be invested according to your investment plan following:

http://www.bogleheads.org/wiki/Principl ... _Placement

You would have to calculate which is better HSA Bank or HS Administrators.
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Re: How do I handle our HSA account?

Postby trekwars2000 » Mon Jan 21, 2013 9:52 pm

Two things.

1) Alliant has Mutual Fund options for their HSA. You need to keep $1000 cash in the savings part and then the fee is $6/month. The options in their mutual funds are very good IMHO.

2) You could move to Alliant, bank the 1.25% and use the HSA account as your actual emergency fund. How much money OOP have you spend the last year on medical expenses? All that can be tapped at any time out of the HSA should an emergency come up.

Also, keep in mind at alliant there are fees for nothing (or at least nothing I have noticed in having my account now for more than 1.5 years). It is simple to join, a $10 donation to a foster care non-profit will allow membership.
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Re: How do I handle our HSA account?

Postby tarnation » Mon Jan 21, 2013 11:06 pm

porcupine wrote:We just started an HSA in 2012, and have paid for our medical costs in 2012 exclusively out-of-pocket. So, the question is where to move the $6000 to, as it is earning next to nothing right now. The options I see in front of us are (please correct me if I am wrong):

- Health Savings Administrators ($45 annual fee which can be paid from outside the HSA; 0.32% additional fee per Vanguard fund to a maximum of $20k; many decent mutual fund options; do not earn a lot on the cash)

- Alliant Credit Union (no fees; earn 1.25% interest)

- HSA Bank (no interest for first $5000; further deposits can be moved to TDAmeritrade and invested in Vanguard funds for no additional fee)

At this stage in the game, our best option is probably put all the money into Alliant, wait a year or two, then make the move to either Health Savings Administrators or HSA Bank. Would you agree, or have I missed any gotchas?

Should the purpose of money in HSA be invested conservatively or aggressively?

- Porcupine

HSABank is paying 0.5% for 5K (not zero). I would go ahead and move it to where you want to be. you could go ahead and get some investing going. you will not earn that much more interest in the meantime for the trouble of moving in another year.
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Re: How do I handle our HSA account?

Postby porcupine » Mon Jan 21, 2013 11:25 pm

tarnation wrote:[...]HSABank is paying 0.5% for 5K (not zero). I would go ahead and move it to where you want to be. you could go ahead and get some investing going. you will not earn that much more interest in the meantime for the trouble of moving in another year.

More like 0.15% if I read their tiers correctly.

Besides, I am unsure if the $5,000 minimum is for the total HSA account (i.e., HSABank Savings + TDA portions combined) or whether there are two independent $5k minimums. I can contact them to find that out tomorrow ...

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Re: How do I handle our HSA account?

Postby tarnation » Mon Jan 21, 2013 11:29 pm

porcupine wrote:
tarnation wrote:[...]HSABank is paying 0.5% for 5K (not zero). I would go ahead and move it to where you want to be. you could go ahead and get some investing going. you will not earn that much more interest in the meantime for the trouble of moving in another year.

More like 0.15% if I read their tiers correctly.

Besides, I am unsure if the $5,000 minimum is for the total HSA account (i.e., HSABank Savings + TDA portions combined) or whether there are two independent $5k minimums. I can contact them to find that out tomorrow ...

- Porcupine


Current Interest Rates and Annual Percentage Yield (APY)
Effective Date: May 11, 2012

Daily Balance
Rate
APY
$5,000 - $9,999.99
0.49%
0.50%
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Re: How do I handle our HSA account?

Postby grabiner » Mon Jan 21, 2013 11:39 pm

porcupine wrote:Besides, I am unsure if the $5,000 minimum is for the total HSA account (i.e., HSABank Savings + TDA portions combined) or whether there are two independent $5k minimums. I can contact them to find that out tomorrow ...


The tiers are independent; HSA Bank doesn't know what the TD Ameritrade account is invested in, and any cash there will be in a money-market fund, earning money-market rates. (I am in this situation, keeping a small balance at HSA Bank, and when the balance gets large enough, transferring it over to TD Ameritrade to make a single ETF transaction. The day I transferred the cash out, my interest rate decreased.)
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Re: How do I handle our HSA account?

Postby porcupine » Mon Jan 21, 2013 11:49 pm

tarnation wrote:
porcupine wrote:
tarnation wrote:[...]HSABank is paying 0.5% for 5K (not zero). I would go ahead and move it to where you want to be. you could go ahead and get some investing going. you will not earn that much more interest in the meantime for the trouble of moving in another year.

More like 0.15% if I read their tiers correctly.

Besides, I am unsure if the $5,000 minimum is for the total HSA account (i.e., HSABank Savings + TDA portions combined) or whether there are two independent $5k minimums. I can contact them to find that out tomorrow ...

- Porcupine


Current Interest Rates and Annual Percentage Yield (APY)
Effective Date: May 11, 2012

Daily Balance
Rate
APY
$5,000 - $9,999.99
0.49%
0.50%

I will go with your word as you have an account and are probably keeping track; but to me, the way it reads is similar to how the IRS tax brackets are set, i.e., the first $2000 (I believe) gets an interest rate of 0.09%, next $3000 gets 0.19%, next $5000 gets $0.49% etc.

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Re: How do I handle our HSA account?

Postby grabiner » Mon Jan 21, 2013 11:54 pm

porcupine wrote:I will go with your word as you have an account and are probably keeping track; but to me, the way it reads is similar to how the IRS tax brackets are set, i.e., the first $2000 (I believe) gets an interest rate of 0.09%, next $3000 gets 0.19%, next $5000 gets $0.49% etc.


Banks rarely do this; if they do, they describe the interest rates as "blended", not "tiered".

HSA Bank uses tiered interest rates; as soon as your balance exceeds $5000, you get the interest rate on accounts of $5000. I have seen this on my statement; as soon as a deposit took my account balance over $5000, there was a note, "Interest rate change, old interest rate X.XX%, new interest rate Y.YY%".
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Re: How do I handle our HSA account?

Postby porcupine » Mon Jan 21, 2013 11:57 pm

grabiner wrote:
porcupine wrote:Besides, I am unsure if the $5,000 minimum is for the total HSA account (i.e., HSABank Savings + TDA portions combined) or whether there are two independent $5k minimums. I can contact them to find that out tomorrow ...


The tiers are independent; HSA Bank doesn't know what the TD Ameritrade account is invested in, and any cash there will be in a money-market fund, earning money-market rates.
David:

Here is making me antsy:
HSA Bank does not provide brokerage services; brokerage services are provided by TD Ameritrade and DEVENIR. If your HSA balance falls below $5,000, you may incur a monthly investment fee. HSA Bank does not offer investment advice.
Does this mean a separate $5,000 minimum in the TDA balance, or are they still talking about the total sum of money in HSABank (i.e., an all-inclusive sum)?
grabiner wrote:(I am in this situation, keeping a small balance at HSA Bank, and when the balance gets large enough, transferring it over to TD Ameritrade to make a single ETF transaction. The day I transferred the cash out, my interest rate decreased.)

Define "small" (in bold above).

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Re: How do I handle our HSA account?

Postby grabiner » Tue Jan 22, 2013 12:04 am

porcupine wrote:
grabiner wrote:(I am in this situation, keeping a small balance at HSA Bank, and when the balance gets large enough, transferring it over to TD Ameritrade to make a single ETF transaction. The day I transferred the cash out, my interest rate decreased.)

Define "small" (in bold above).

- Porcupine


My balance dropped from about $12,000 to almost zero on the day I made the transfer; I transferred almost everything out so that I could make one large ETF purchase. I don't pay low-balance fees because my health insurance pays them; however, my interest rate dropped back to the rate on balances below $2500.
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Re: How do I handle our HSA account?

Postby tarnation » Tue Jan 22, 2013 12:10 am

grabiner wrote:
porcupine wrote:
grabiner wrote:(I am in this situation, keeping a small balance at HSA Bank, and when the balance gets large enough, transferring it over to TD Ameritrade to make a single ETF transaction. The day I transferred the cash out, my interest rate decreased.)

Define "small" (in bold above).

- Porcupine


My balance dropped from about $12,000 to almost zero on the day I made the transfer; I transferred almost everything out so that I could make one large ETF purchase. I don't pay low-balance fees because my health insurance pays them; however, my interest rate dropped back to the rate on balances below $2500.
curious, are you not using the freebie etfs? or you want to trade in larger block?
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Re: How do I handle our HSA account?

Postby grabiner » Tue Jan 22, 2013 12:12 am

tarnation wrote:
grabiner wrote:My balance dropped from about $12,000 to almost zero on the day I made the transfer; I transferred almost everything out so that I could make one large ETF purchase. I don't pay low-balance fees because my health insurance pays them; however, my interest rate dropped back to the rate on balances below $2500.
curious, are you not using the freebie etfs? or you want to trade in larger block?


The only ETF in this account (RZV) is one on which TD does charge commissions. However, the commission isn't the main issue; RZV is low-volume enough that it takes a while to trade without losing a lot to the spread, and I may lose more on spreads than on commissions. Therefore, I prefer to buy it 100 or more shares at a time, and a side benefit is that the commission becomes trivial on that large an order.
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Re: How do I handle our HSA account?

Postby stlutz » Tue Jan 22, 2013 2:50 am

You might also want to check out the Saturna brokerage HSA. As I understand it, there are no HSA fees, but you pay $15 a trade. If you're just making one trade per year, that's a good deal.

I don't have an account there and you'd of course want to verify that I've understood things correctly.

http://www.saturna.com/hsaesa/hsa4.shtml
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Re: How do I handle our HSA account?

Postby porcupine » Tue Jan 22, 2013 9:33 am

grabiner wrote:
tarnation wrote:
grabiner wrote:My balance dropped from about $12,000 to almost zero on the day I made the transfer; I transferred almost everything out so that I could make one large ETF purchase. I don't pay low-balance fees because my health insurance pays them; however, my interest rate dropped back to the rate on balances below $2500.
curious, are you not using the freebie etfs? or you want to trade in larger block?


The only ETF in this account (RZV) is one on which TD does charge commissions. However, the commission isn't the main issue; RZV is low-volume enough that it takes a while to trade without losing a lot to the spread, and I may lose more on spreads than on commissions. Therefore, I prefer to buy it 100 or more shares at a time, and a side benefit is that the commission becomes trivial on that large an order.

David:

Now I am curious - is there no corresponding Vanguard ETF or does TDA not offer it?

I think I've figured out what will work best for us. Move all HSA money to Alliant Credit Union and get the interest on it (this would work out good because I've had losses in Roth IRA that I've not been able to recoup or write-off in taxes - once bitten, twice shy!). Simultaneously, move EF cash to TDA and invest it into the Vanguard Index ETFs. If market goes up, do nothing. If market goes down, sell and book the losses (which would not be possible in HSA) - I would assume that I could rotate between S&P500 and extended stock market indices without falling foul of the wash sales rule.

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Re: How do I handle our HSA account?

Postby grabiner » Tue Jan 22, 2013 8:12 pm

porcupine wrote:
grabiner wrote:The only ETF in this account (RZV) is one on which TD does charge commissions. However, the commission isn't the main issue; RZV is low-volume enough that it takes a while to trade without losing a lot to the spread, and I may lose more on spreads than on commissions. Therefore, I prefer to buy it 100 or more shares at a time, and a side benefit is that the commission becomes trivial on that large an order.

David:

Now I am curious - is there no corresponding Vanguard ETF or does TDA not offer it?


Vanguard has no comparable ETF. RZV has much smaller cap range and higher value exposure than Vanguard's VBR (or VIOV, the S&P 600 ETF), so I need less of RZV to get the same small-cap exposure.

But the commission disappears in the noise. I don't care much about paying $10 to buy $10,000 worth of an ETF that I expect to hold for years.
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Re: How do I handle our HSA account?

Postby Recshooter » Tue Jan 22, 2013 9:48 pm

I've had an HSA since they were first created and tried investing a portion of it through TD Ameritrade. When the market crashed in 2008 taking my HSA account down with it, I learned for my own piece of mind that investing HSA funds is a mistake. I'm getting my return on this money by paying medical bills with tax free money. The amount of the HSA is too small to make a difference in my assets, yet taking the risk on losing it in the market was my dumbest mistake. Don't misunderstand me, I'm a real believer in growing your wealth through investments. But HSA's are for paying medical expenses with tax free money and that's the real profit in it.
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Re: How do I handle our HSA account?

Postby grabiner » Tue Jan 22, 2013 11:23 pm

Recshooter wrote:I've had an HSA since they were first created and tried investing a portion of it through TD Ameritrade. When the market crashed in 2008 taking my HSA account down with it, I learned for my own piece of mind that investing HSA funds is a mistake. I'm getting my return on this money by paying medical bills with tax free money. The amount of the HSA is too small to make a difference in my assets, yet taking the risk on losing it in the market was my dumbest mistake. Don't misunderstand me, I'm a real believer in growing your wealth through investments. But HSA's are for paying medical expenses with tax free money and that's the real profit in it.


And the reason I invest mine is that I treat it as an extension of my IRA, which makes sense only if you can max out your retirement accounts. I max out mine so the HSA allows me to save more tax-free. And when I have medical expenses, I pay them out of pocket, and save the receipts so that I can withdraw from the HSA later; this gives me more tax-deferred growth on the HSA. Thus, I don't care much if the HSA loses half its value occasionally, just as I don't care if my IRA loses half its value (which it did in 2007-2009); what matters is how much I will have to spend when I retire, years from now.
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Re: How do I handle our HSA account?

Postby tarnation » Tue Jan 22, 2013 11:24 pm

Recshooter wrote:I've had an HSA since they were first created and tried investing a portion of it through TD Ameritrade. When the market crashed in 2008 taking my HSA account down with it, I learned for my own piece of mind that investing HSA funds is a mistake. I'm getting my return on this money by paying medical bills with tax free money. The amount of the HSA is too small to make a difference in my assets, yet taking the risk on losing it in the market was my dumbest mistake. Don't misunderstand me, I'm a real believer in growing your wealth through investments. But HSA's are for paying medical expenses with tax free money and that's the real profit in it.

I think the moral of this story is twofold: If you are planning on using the money soon, equities may not be the best place. Secondly, don't hold so much equity that you get out at the low spot. (and maybe even threefold: don't put money in equities you can't afford to lose). A cautionary tale for sure, but not really specific to HSA's.
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Re: How do I handle our HSA account?

Postby tarnation » Tue Jan 22, 2013 11:28 pm

grabiner wrote:
porcupine wrote:
grabiner wrote:The only ETF in this account (RZV) is one on which TD does charge commissions. However, the commission isn't the main issue; RZV is low-volume enough that it takes a while to trade without losing a lot to the spread, and I may lose more on spreads than on commissions. Therefore, I prefer to buy it 100 or more shares at a time, and a side benefit is that the commission becomes trivial on that large an order.

David:

Now I am curious - is there no corresponding Vanguard ETF or does TDA not offer it?


Vanguard has no comparable ETF. RZV has much smaller cap range and higher value exposure than Vanguard's VBR (or VIOV, the S&P 600 ETF), so I need less of RZV to get the same small-cap exposure.

But the commission disappears in the noise. I don't care much about paying $10 to buy $10,000 worth of an ETF that I expect to hold for years.

This made me think of another thing I like about TDAM, AQR Small Cap Momentum ( ASMOX) is available without minimums.
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Re: How do I handle our HSA account?

Postby Recshooter » Tue Jan 22, 2013 11:50 pm

tarnation wrote:I think the moral of this story is twofold: If you are planning on using the money soon, equities may not be the best place. Secondly, don't hold so much equity that you get out at the low spot. (and maybe even threefold: don't put money in equities you can't afford to lose). A cautionary tale for sure, but not really specific to HSA's.


Then you clearly missed the "moral" of the story. The point wasn't about how you decide to invest your money. The point was the value in paying medical expenses with tax free money and the value with having that money when you need it.
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Re: How do I handle our HSA account?

Postby grabiner » Tue Jan 22, 2013 11:56 pm

Recshooter wrote:
tarnation wrote:I think the moral of this story is twofold: If you are planning on using the money soon, equities may not be the best place. Secondly, don't hold so much equity that you get out at the low spot. (and maybe even threefold: don't put money in equities you can't afford to lose). A cautionary tale for sure, but not really specific to HSA's.


Then you clearly missed the "moral" of the story. The point wasn't about how you decide to invest your money. The point was the value in paying medical expenses with tax free money and the value with having that money when you need it.


And since I plan to pay my 2013 medical expenses with tax-free money in 2033, I don't need to have the money in 2013, so my HSA is entirely in stock just as my IRA is. (I hold all my bonds in an employer plan.)
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Re: How do I handle our HSA account?

Postby tarnation » Wed Jan 23, 2013 11:06 am

Recshooter wrote:
tarnation wrote:I think the moral of this story is twofold: If you are planning on using the money soon, equities may not be the best place. Secondly, don't hold so much equity that you get out at the low spot. (and maybe even threefold: don't put money in equities you can't afford to lose). A cautionary tale for sure, but not really specific to HSA's.


Then you clearly missed the "moral" of the story. The point wasn't about how you decide to invest your money. The point was the value in paying medical expenses with tax free money and the value with having that money when you need it.

You say your point was not about how to invest the money, but then say there is value in having the money when you need it. Those are not decoupled. More explicitly, if you are going to need to liquidate your investment on a short time horizon, then a high volatility investment is probably not the best choice. Two my second point, how did the crash wipe out your account, unless you liquidated at some low point? If you were still invested, you would be mostly whole again. Unless you had it all in AIG? (ugh don't remind me).
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Re: How do I handle our HSA account?

Postby porcupine » Wed Jan 23, 2013 11:51 am

tarnation wrote:[...]Two my second point, how did the crash wipe out your account, unless you liquidated at some low point?[...]
Happens when your discipline (or lack thereof) is like mine. I've - within the last couple of years - called the market bottom on BP and BPT with my sells (in my play money, I should add - before I get buried) :oops:

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Re: How do I handle our HSA account?

Postby chipmonk » Wed Jan 23, 2013 12:46 pm

porcupine wrote:We just started an HSA in 2012, and have paid for our medical costs in 2012 exclusively out-of-pocket. So, the question is where to move the $6000 to, as it is earning next to nothing right now. The options I see in front of us are (please correct me if I am wrong):

- Health Savings Administrators ($45 annual fee which can be paid from outside the HSA; 0.32% additional fee per Vanguard fund to a maximum of $20k; many decent mutual fund options; do not earn a lot on the cash)

- Alliant Credit Union (no fees; earn 1.25% interest)

- HSA Bank (no interest for first $5000; further deposits can be moved to TDAmeritrade and invested in Vanguard funds for no additional fee)

At this stage in the game, our best option is probably put all the money into Alliant, wait a year or two, then make the move to either Health Savings Administrators or HSA Bank. Would you agree, or have I missed any gotchas?

I'm in the exact same boat, with ~$6k in my HSA. Mine is in Alliant right now, but I'd much rather have it in a stock mutual fund and Alliant's $6/mo for investments is way too high (effectively a 1.2% ER).

porcupine wrote:Should the purpose of money in HSA be invested conservatively or aggressively?

I want to invest mine aggressively in the strategy outlined by grabiner. It's basically just an extra IRA for me, with the additional advantage that I'll be able to make tax-free withdrawals by deferring reimbursement of today's medical expenses until many years down the road.

stlutz wrote:You might also want to check out the Saturna brokerage HSA. As I understand it, there are no HSA fees, but you pay $15 a trade. If you're just making one trade per year, that's a good deal.

I don't have an account there and you'd of course want to verify that I've understood things correctly.

http://www.saturna.com/hsaesa/hsa4.shtml
Very very interesting! I'd never seen this before. Yeah, I would be happy to just make one trade a year when I rollover the previous year's contributions. With $6k in my HSA now, that'd be effectively an ~0.25% ER.

Do any Bogleheads actually use the Saturna HSA? What has your experience been like?
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Re: How do I handle our HSA account?

Postby porcupine » Wed Jan 23, 2013 3:58 pm

chipmonk wrote:[...]I'm in the exact same boat, with ~$6k in my HSA. Mine is in Alliant right now, but I'd much rather have it in a stock mutual fund and Alliant's $6/mo for investments is way too high (effectively a 1.2% ER).
[...]Very very interesting! I'd never seen this before. Yeah, I would be happy to just make one trade a year when I rollover the previous year's contributions. With $6k in my HSA now, that'd be effectively an ~0.25% ER.

Do any Bogleheads actually use the Saturna HSA? What has your experience been like?

You are mixing things up. The numbers that you are quoting are not ERs, but they are add-ons to the ERs. And neither is palatable. Not only that, I don't think I really saw Saturna's ERs (maybe I did not dig enough).

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Re: How do I handle our HSA account?

Postby chipmonk » Wed Jan 23, 2013 4:21 pm

porcupine wrote:
chipmonk wrote:[...]I'm in the exact same boat, with ~$6k in my HSA. Mine is in Alliant right now, but I'd much rather have it in a stock mutual fund and Alliant's $6/mo for investments is way too high (effectively a 1.2% ER).
[...]Very very interesting! I'd never seen this before. Yeah, I would be happy to just make one trade a year when I rollover the previous year's contributions. With $6k in my HSA now, that'd be effectively an ~0.25% ER.

Do any Bogleheads actually use the Saturna HSA? What has your experience been like?

You are mixing things up. The numbers that you are quoting are not ERs, but they are add-ons to the ERs. And neither is palatable. Not only that, I don't think I really saw Saturna's ERs (maybe I did not dig enough).

- Porcupine

Right, I'm aware that these are in addition to the ER from the Mutual funds/ETFs themselves (which would be small by comparison, since I wouldn't consider anything other than Vanguard funds or index ETFs).

It looks like Saturna allows you to invest in non-Saturna funds for $15/trade. As pointed out above, this is a pretty good deal if you just do 1 trade/year and do all your rebalancing in other accounts.
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Re: How do I handle our HSA account?

Postby coachtv » Thu Dec 12, 2013 8:59 am

My Alliant HSA is reporting 0.7% APR. Did I miss something? I don't see the higher rate.
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Re: How do I handle our HSA account?

Postby tbradnc » Thu Dec 12, 2013 10:20 am

I'm not as savvy as many of you but I've been taking a crash course on HSA's the past few weeks.

I opened ours with HSA Administrators and will fully fund it on January 2, 2014. I chose to have 100% of my funds invested in the cash account so that we could access the full amount via the supplied debit card. My plan is to fund it 100% again in January 2015 and this time I will invest 100% of the funds into the same Vanguard funds that I hold directly with Vanguard in line with my current asset allocation.

So, the first year medical expenses will be paid with money earning nearly nothing but the tax deduction makes this acceptable.

For this to really work best we need to stay healthy in 2014.
tbradnc
 
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