Best way to fund non-employer HSA

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Lynn1987
Posts: 115
Joined: Tue Jun 18, 2013 9:00 pm

Best way to fund non-employer HSA

Post by Lynn1987 » Mon Jan 08, 2018 10:36 pm

For those of you who use a HSA other than your employer's (my employer's is Health Equity), how do you fund it? Planning to go with Lively. My employer will place a small amount into Health Equity, so I will have that HSA open. For the part I'm funding, I'm not sure whether to just direct part of my paycheck to Lively or have it go into Health Equity, then periodically move it to Lively. Please share what you do?

killjoy2012
Posts: 999
Joined: Wed Sep 26, 2012 5:30 pm

Re: Best way to fund non-employer HSA

Post by killjoy2012 » Mon Jan 08, 2018 10:42 pm

My approach is probably sub-optimal, but I just make my contribution for the previous year when doing my taxes. So I'll make my entire 2017 HSA contribution in early Feb 2018. Why? No good reason other than I prefer to handle it at the same time I also calculate my rIRA/non-deductible IRA eligibility, etc. Just handle it all in one, while doing taxes.

If you're looking to optimize, you could probably make the entire years contribution on Jan 1, keeping the money invested for the longest time. But my HSA really isn't all that large to worry about to that degree of perfection.

User avatar
whodidntante
Posts: 3427
Joined: Thu Jan 21, 2016 11:11 pm

Re: Best way to fund non-employer HSA

Post by whodidntante » Mon Jan 08, 2018 10:49 pm

Unless you have a high income there is an additional advantage to having your employer withhold your contributions. You will not have to pay social security tax on those earnings. I don't know the limit specifically (it's around 130k), but you could google it.

TIAX
Posts: 1032
Joined: Sat Jan 11, 2014 12:19 pm

Re: Best way to fund non-employer HSA

Post by TIAX » Mon Jan 08, 2018 10:53 pm

whodidntante wrote:
Mon Jan 08, 2018 10:49 pm
Unless you have a high income there is an additional advantage to having your employer withhold your contributions. You will not have to pay social security tax on those earnings. I don't know the limit specifically (it's around 130k), but you could google it.
You also avoid medicare tax, irrespective of your income.

User avatar
camillus
Posts: 290
Joined: Thu Feb 28, 2013 9:55 pm

Re: Best way to fund non-employer HSA

Post by camillus » Mon Jan 08, 2018 11:54 pm

The easiest thing to do is to manually fund Lively out of your checking account.

Another thing you could do is have payroll deductions go to HealthEquity, thus bypassing 7.65% payroll tax (social security & medicare) - effectively giving you an immediate ~7% bump to your contribution. Yet, some wise sages here will say that paying payroll tax (FICA) into social security is actually a good investment - increasing your future social security withdrawals.

As your HealthEquity balance grows, you could do regular custodian-to-custodian transfers from HealthEquity to Lively, done on the Lively side. I've heard of some people doing quarterly transfers.

Some more things to think about:

- LIvely's fees are $30/year.

- Your HealthEquity account is probably free, but the Vanguard funds inside likely have a 40 basis point (0.4%) administrative fee, which on $10k is $40.

- Therefore, if your HSA balance is $10k, you would save ten whole dollars this year by adding an account (Lively) and transferring your HSA money.

- If your HSA balance is $20k, you'd save $50/year. If $30k, $110/year etc. How much do you value your time managing a second account? Once that threshold is reached, you can go HSA shopping. Until then, I recommend sticking with HealthEquity and keeping things simple.

(At one time, I was managing 4 accounts related to HSAs, including pass through windows. I've learned my lesson and am mightily simplified!)

User avatar
camillus
Posts: 290
Joined: Thu Feb 28, 2013 9:55 pm

Re: Best way to fund non-employer HSA

Post by camillus » Tue Jan 09, 2018 12:05 am


Lynn1987
Posts: 115
Joined: Tue Jun 18, 2013 9:00 pm

Re: Best way to fund non-employer HSA

Post by Lynn1987 » Tue Jan 09, 2018 8:48 pm

Thank you all so much! Very helpful info. DH and I have decided that we will start a HSA in his name this year, as he will be turning 55 later this year and will be able to contribute the extra $1000. Since this will be a new HSA it really wouldn't be worth it to move it to Lively to circumvent the extra fee from Health Equity. The current HSA, which is in my name and has about $37k will be transferred to Lively. Now to decide whether to do a custodian to custodian transfer or if it's worth it to try a direct rollover.

Thanks again!
Lynn

Post Reply