HSA as part of asset allocation

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runner23
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Joined: Sat Oct 17, 2015 8:45 am

HSA as part of asset allocation

Post by runner23 »

I am having a hard time deciding how to invest the funds in my HSA. I am 26 and just became eligible for the plan through work. I have a pre-established asset allocation that I use for my retirement funds. I would like to use the account for retirement purposes as well. Would it be reasonable to place all of the funds in the S&P fund that has an expense ratio of .25 bps or the small cap blend that has an expense ratio of .15 bps? Should I include the account when considering rebalancing and my overall retirement equity exposure?
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Aptenodytes
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Re: HSA as part of asset allocation

Post by Aptenodytes »

Between those two I would probably go with the small-cap fund. In general for an HSA that is treated as part of your retirement portfolio you want to find the sweet spot of high expected return and low cost. You don't worry about volatility in the HSA, but rather use assets outside the HSA to manage volatility.

I'm not sure how to interpret your other question about treating the HSA as part of your overall retirement equity exposure. This is a personal choice you have to make. If you are going to let the HSA ride into retirement, then it is part of your overall retirement equity exposure. If you want to tap into it from time to time for health care expenses before you retire, then it is not.

If you treat it as part of your overall retirement equity exposure then you take it into account when rebalancing.
Topic Author
runner23
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Re: HSA as part of asset allocation

Post by runner23 »

Aptenodytes - That is consistent with what i was thinking for equity exposure. You interpreted my question correctly. I think I will go with the small cap fund and rebalance outside, if necessary. Thanks for the input.
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tinscale
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Re: HSA as part of asset allocation

Post by tinscale »

Small cap fund with lower ER than S&P 500 fund? Doesn't sound right.
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runner23
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Re: HSA as part of asset allocation

Post by runner23 »

Tin scale - The only two passive equity funds available are Wells Fargo Index Admin WFIOX (large) and Northern Small Cap Index NSIDX (small). The ratios I listed are correct. Luckily in my 401k I get access to the vanguard institutional S&P fund.
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grabiner
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Re: HSA as part of asset allocation

Post by grabiner »

Since you are saving the HSA for medical expenses in retirement, it makes sense to treat the fund as an extension of the IRA and 401(k) which you are using to save for other expenses in retirement. Choose the best options which fit your retirement needs. If the best fund in your HSA is a small-cap fund, then use that in the HSA, and balance it out with a large-cap fund elsewhere.
Wiki David Grabiner
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