HSA in California : VTAPX or VIPIX

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Lynx310650
Posts: 64
Joined: Fri Sep 15, 2017 1:33 pm

HSA in California : VTAPX or VIPIX

Post by Lynx310650 » Tue Apr 17, 2018 7:04 pm

Right now my HSA is in a default FDIC insured account of some sort that has a paltry 0.05% interest. I want to get a bit more return on it. However, I don't want to fully invest it. My desire for the HSA is to use it as a medical emergency fund. Small everyday medical expenses, I will pay outside the HSA. But if I do run into a big emergency that costs a good chunk of money, then I feel like I might as well spend the HSA funds. But mostly I'm planning on letting it grow into retirement.

My HSA provider offers a variety of Vanguard funds. Since I'm in California and I want to keep it pretty low-risk, I was thinking VTAPX or VIPIX. Would these be okay choices, and which would be preferred? Am I correct in that these funds are fully invested in TIPS and thus not subject to California income tax?

Thanks!

ebrasmus21
Posts: 285
Joined: Tue Nov 29, 2016 6:06 pm

Re: HSA in California : VTAPX or VIPIX

Post by ebrasmus21 » Wed Jan 02, 2019 6:16 pm

Bump. Interested in hearing thoughts on this. Would really appreciate input if anyone is willing.

bluquark
Posts: 221
Joined: Mon Oct 22, 2018 2:30 pm

Re: HSA in California : VTAPX or VIPIX

Post by bluquark » Wed Jan 02, 2019 6:21 pm

As far as I know, TIPS are subject to state income tax [EDIT: I was wrong about this, see my update below]. I would recommend a Vanguard California municipal bond fund such as VCADX.
Last edited by bluquark on Wed Jan 02, 2019 7:11 pm, edited 1 time in total.

ebrasmus21
Posts: 285
Joined: Tue Nov 29, 2016 6:06 pm

Re: HSA in California : VTAPX or VIPIX

Post by ebrasmus21 » Wed Jan 02, 2019 6:43 pm

bluquark wrote:
Wed Jan 02, 2019 6:21 pm
As far as I know, TIPS are subject to state income tax. I would recommend a Vanguard California municipal bond fund such as VCADX.
Unfortunetly, in my HSA the only two funds that are remotely up for consideration are:

VTAPX: Vang Short Term TIPS
VIPIX: Vang TIPS

I don't have access to any CA state munis.

bluquark
Posts: 221
Joined: Mon Oct 22, 2018 2:30 pm

Re: HSA in California : VTAPX or VIPIX

Post by bluquark » Wed Jan 02, 2019 6:55 pm

In that case, I would keep the money in the zero-interest settlement account and spend down the HSA as fast as possible (or optimistically wait for California to recognize HSAs, I suppose). I gather HSA California state tax is among the most hellish tax problems, because the HSA providers do not send you any paperwork under the assumption that they're actually tax-advantaged. It's unclear that the tax-filing labor is worth the return in this case.

ebrasmus21
Posts: 285
Joined: Tue Nov 29, 2016 6:06 pm

Re: HSA in California : VTAPX or VIPIX

Post by ebrasmus21 » Wed Jan 02, 2019 7:00 pm

bluquark wrote:
Wed Jan 02, 2019 6:55 pm
In that case, I would keep the money in the zero-interest settlement account and spend down the HSA as fast as possible (or optimistically wait for California to recognize HSAs, I suppose). I gather HSA California state tax is among the most hellish tax problems, because the HSA providers do not send you any paperwork under the assumption that they're actually tax-advantaged. It's unclear that the tax-filing labor is worth the return in this case.
This is one of the most depressing responses I've ever received on this board - nonetheless I appreciate you providing feedback. CA is amazingly annoying re: taxes.

bluquark
Posts: 221
Joined: Mon Oct 22, 2018 2:30 pm

Re: HSA in California : VTAPX or VIPIX

Post by bluquark » Wed Jan 02, 2019 7:09 pm

ebrasmus21 wrote:
Wed Jan 02, 2019 7:00 pm
This is one of the most depressing responses I've ever received on this board - nonetheless I appreciate you providing feedback. CA is amazingly annoying re: taxes.
Ah! Less depressing update: sorry, looks like I was wrong about the TIPS, government bonds actually are except from state tax: https://investor.vanguard.com/investing ... ment-bonds . I hadn't heard about this.

https://personal.vanguard.com/pdf/USGO_012016.pdf says VTAPX is 100% from government income, so it should work.

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