How do you determine your HSA mix of investments ?

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Hexdump
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How do you determine your HSA mix of investments ?

Post by Hexdump »

Our HSA account balance is getting to the point where I am thinking about where it is invested.
Presently it is invested 100% in a money market fund, T. Rowe Price (TRP) I think.

What I was thinking of doing was keeping the investment in TRP for an amount equal to what I estimate the medical bills will be for one year.
The balance above and beyond that amount I think I will move it into a different fund.
There are about 15 different funds available to me, 2 of which are Vanguard funds VFINX S&P 500 index and VWELX Wellington.

I want to stay with Vanguard and my question is not which fund to choose but rather how did you decide what portion of your HSA $$$ was to go into riskier funds ?
Or did you any analysis like that ?
Also, I do not consider it as part of my AA as it is considered like saving for a new car.
My preliminary method is as stated above and I am eager to see what others have done if anything.

thanks
111
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Re: How do you determine your HSA mix of investments ?

Post by 111 »

I've been thinking about this myself. I have the HSA Bank/TD Ameritrade combo and just moved most of it to TDA.

I only looked at the commission free ETFs and saw VNQ (Vanguard REIT) and since I don't have any REIT in my portfolio and was wanting to add some so I figured I might as well do that there.) The other part of me thinks since it is an HSA I should be more conservative with it than my other accounts (I'm not 100% why though), so I also have some in VGIT Vanguard Inter-Mediate Government Bonds.
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Aptenodytes
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Re: How do you determine your HSA mix of investments ?

Post by Aptenodytes »

Before I had an HSA I planned to use my retirement portfolio to meet any major medical and long-term care needs. Now I have an HSA, and am setting aside almost all of it for long-term use, not day-to-day medical expenses. Therefore there is no big difference between the HSA and the retirement portfolio, for the vast majority of plausible futures. Therefore I invest them pretty much identically.

If I had full confidence that I'd never touch the HSA until well into retirement, I'd have it 100% equities, to take maximum advantage of the tax benefits. But there's some chance a calamity will arise early on requiring liquidating the HSA. So the 50-50 AA provides a kind of hedge.
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RyeWhiskey
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Re: How do you determine your HSA mix of investments ?

Post by RyeWhiskey »

It depends on whether or not you are using your HSA as a part of your retirement savings or as a short-term medical needs expense fund. If the latter then you would keep in in cash or short-term securities. If the former then you would keep it as stated in your IPS. :beer
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111
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Re: How do you determine your HSA mix of investments ?

Post by 111 »

You both bring up good points. I am using mine more as a retirement account. I've been keeping the amount of my deductible ($3,000) in the HSA part, but realistically if something occurs I have enough to meet the deductible outside of the account so I should probably not worry about that and go ahead and invest it too.

This also makes me question how long I should stay in the HDHP so that I can keep contributing to the HSA, but I don't want to hijack the thread. I'll start my own with more details at some point.
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RyeWhiskey
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Re: How do you determine your HSA mix of investments ?

Post by RyeWhiskey »

111 wrote:You both bring up good points. I am using mine more as a retirement account. I've been keeping the amount of my deductible ($3,000) in the HSA part, but realistically if something occurs I have enough to meet the deductible outside of the account so I should probably not worry about that and go ahead and invest it too.
If you're using it as a retirement account it would make more sense to invest the 3k currently being held as cash in the HSA and keep an extra 3k in cash in a savings account. This way you can utilize the tax shelter more efficiently.
111 wrote:This also makes me question how long I should stay in the HDHP so that I can keep contributing to the HSA, but I don't want to hijack the thread. I'll start my own with more details at some point.
The HSA is arguably the most versatile and useful tax shelter. I would keep it as long as possible, personally, unless you felt that it was impacting your ability to get good medical attention. :beer
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bloom2708
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Re: How do you determine your HSA mix of investments ?

Post by bloom2708 »

A good question. I have an HSA from my former employer. It only has about $3,500 in it, but I was wondering if I could move this to Vanguard and invest it better.

I am now covered under my wife's high deductible health plan, so she has an HSA which her employer contributes to and she can contribute to.

Under this scenario I am not sure if I am eligible to contribute to my HSA. I think I am, but need to verify.

With this setup I would consider my HSA "Long Term" and my wife's "Current Term" HSA dollars.

I am doing Asset Allocation within each account, so my allocation would follow my broader allocation (age 43).

65% VTSMX - Total Stock
15% VGTSX - Total International
35% VBMFX - Total Bond

If you are doing AA accross your portfolio, you would have to fit it in the mix.
d0gerz
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Re: How do you determine your HSA mix of investments ?

Post by d0gerz »

There is some good information in the wiki: http://www.bogleheads.org/wiki/HSA#How_to_use_the_plan

The way I read it, if you are not maxing out retirement accounts, then use the HSA to pay current medical expenses. In which case I wouldn't invest it too aggressively.

OTOH if you are maxing out retirement accounts, then use the HSA as just another tax sheltered retirement account and invest according to your investment plan/overall asset allocation.

So I guess how you determine your HSA mix depends on whether you are currently maxing out other retirement accounts or not.
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