HSA Investment Portfolio - am I doing right?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
AHumanInterest
Posts: 24
Joined: Mon Jun 12, 2017 7:00 pm

HSA Investment Portfolio - am I doing right?

Post by AHumanInterest » Sat Jul 21, 2018 3:13 pm

Hi all,

I am looking for a sanity check on my current HSA positions.

I am a late-twenties software engineer living in a high-cost-of-living location. I have a high-deductible insurance along with an health savings account (HSA). I also have a separate set of retirement and taxable investment accounts. This post is only about the HSA though.

My HSA is managed by HSA Bank which allows me to trade with TD Ameritrade [0]. I contribute the maximum allowable amount to the HSA each year. I intend to pay for medical expenses out of my taxable income while using HSA for retirement health issues. For this account I'd like to be somewhat more conservative. The other investment accounts are already quite aggressive. I also want to make use of the fact that this account is triple-tax-free.

My current positions are:
  • Symbol - Qty - Percent - Net Expense Ratio
  • SPAB - 20.05 - 0.04%
  • SPEM - 20 - 0.11%
  • SPTM - 271.154 - 0.03%
  • VTI - 10 - 0.04%

Cash in HSA Bank: $2000
Cash in TD: $187

Am I doing this right? Are there obvious changes I should make?

Note that I don't particularly enjoy managing money and would be willing to take a small reduction in return in order to avoid having to constantly deal with this.

[0] Devenir is another other option but appears to only have high cost actively managed funds.

asif408
Posts: 1425
Joined: Sun Mar 02, 2014 8:34 am
Location: Florida

Re: HSA Investment Portfolio - am I doing right?

Post by asif408 » Sat Jul 21, 2018 3:51 pm

A little challenging to help much without knowing your specific overall asset allocation, but here are a few general suggestions. With such a small balance, I'd probably only hold one or two funds in the HSA account and use other accounts to counterbalance your asset allocation between stocks, bonds, etc. That would simply things.

Second, you seem to have conflicting goals, where you say you want to be conservative with the account but you don't plan on using it to pay for health expenses until retirement. If the second part is true and you are only in your twenties, I'd be aggressive with the HSA, as you would be taking best advantage of the triple tax free benefit, and be more conservative somewhere else.

User avatar
jhfenton
Posts: 3253
Joined: Sat Feb 07, 2015 11:17 am
Location: Ohio

Re: HSA Investment Portfolio - am I doing right?

Post by jhfenton » Sat Jul 21, 2018 5:26 pm

I agree with asif408. Given your anticipated use of the HSA solely as a retirement health account, I'd simplify and be more aggressive in the HSA. We have the same goal for our HSA, so I treat it as part of our overall retirement allocation. In our case, our entire HSA is invested entirely in emerging markets. Our HSA is only a little over 5% of our portfolio, so I see no reason to try to divide it among multiple asset classes.

We also have my HSA at TD Ameritrade, albeit through Lively ($2.50/month from linked checking account, no cash requirement). It's possible to do an in-kind transfer at TD Ameritrade between HSA Bank and Lively if you don't have a job-related reason to keep it at HSA Bank. There are a couple of threads on the topic.

AHumanInterest
Posts: 24
Joined: Mon Jun 12, 2017 7:00 pm

Re: HSA Investment Portfolio - am I doing right?

Post by AHumanInterest » Sat Jul 21, 2018 6:14 pm

One reason I had/have it split between different asset classes in of itself, is that its easier to set & forget. My money is otherwise split among
(banks, vanguard, robo-investors). Resolving that situation will make it easier to view as a holistic part of my portfolio. Figuring out that step is next.

It does make sense, given its a small percentage of the overall funds, to put into one asset class, and then adjust the others to match.

jcerickson
Posts: 29
Joined: Sat Aug 13, 2016 11:08 am
Location: Tampa, FL

Re: HSA Investment Portfolio - am I doing right?

Post by jcerickson » Sat Jul 21, 2018 8:32 pm

I believe that you are duplicating your Total Stock Market allocation by having two similar ETF''s: SPTM (SPDR Portfolio TSM) and VTI (Vanguard TSM). At a minimum, you could pick one of these Total Stock Market ETF''s and consolidate them.

drk
Posts: 716
Joined: Mon Jul 24, 2017 10:33 pm
Location: Seattle

Re: HSA Investment Portfolio - am I doing right?

Post by drk » Sat Jul 21, 2018 8:57 pm

AHumanInterest wrote:
Sat Jul 21, 2018 6:14 pm
One reason I had/have it split between different asset classes in of itself, is that its easier to set & forget. My money is otherwise split among
(banks, vanguard, robo-investors). Resolving that situation will make it easier to view as a holistic part of my portfolio. Figuring out that step is next.

It does make sense, given its a small percentage of the overall funds, to put into one asset class, and then adjust the others to match.
If you're having trouble seeing your asset allocation across accounts, check out livesoft's thread on using different Portfolio Watch-type tools. Just assembling all the information in one place should help, and it won't require all the upfront effort of figuring out a spreadsheet that you like.

TropikThunder
Posts: 994
Joined: Sun Apr 03, 2016 5:41 pm

Re: HSA Investment Portfolio - am I doing right?

Post by TropikThunder » Sat Jul 21, 2018 9:39 pm

jcerickson wrote:
Sat Jul 21, 2018 8:32 pm
I believe that you are duplicating your Total Stock Market allocation by having two similar ETF''s: SPTM (SPDR Portfolio TSM) and VTI (Vanguard TSM). At a minimum, you could pick one of these Total Stock Market ETF''s and consolidate them.
Most likely, OP has both total stock funds (VTI and SPTM) due to TDA changing their commission-free ETF list (older purchases of VTI, newer purchases of SPTM). Consolidating now would incur a fee to sell VTI. It’s not a big fee, but it’s not insignificant considering the low balance.

AHumanInterest
Posts: 24
Joined: Mon Jun 12, 2017 7:00 pm

Re: HSA Investment Portfolio - am I doing right?

Post by AHumanInterest » Sat Jul 21, 2018 10:05 pm

drk wrote:
Sat Jul 21, 2018 8:57 pm
AHumanInterest wrote:
Sat Jul 21, 2018 6:14 pm
One reason I had/have it split between different asset classes in of itself, is that its easier to set & forget. My money is otherwise split among
(banks, vanguard, robo-investors). Resolving that situation will make it easier to view as a holistic part of my portfolio. Figuring out that step is next.

It does make sense, given its a small percentage of the overall funds, to put into one asset class, and then adjust the others to match.
If you're having trouble seeing your asset allocation across accounts, check out livesoft's thread on using different Portfolio Watch-type tools. Just assembling all the information in one place should help, and it won't require all the upfront effort of figuring out a spreadsheet that you like.
Thanks! Those tools will be great for figuring out what's going on.

User avatar
camillus
Posts: 480
Joined: Thu Feb 28, 2013 9:55 pm

Re: HSA Investment Portfolio - am I doing right?

Post by camillus » Sat Jul 21, 2018 10:28 pm

Hi AHumanInterest,

I will continue the counterpoint along the lines of what others have said: simplify & get more aggressive in your HSA.

It might be worth studying this article in the wiki: https://www.bogleheads.org/wiki/Tax-eff ... _placement

Given you have other accounts, including taxable but also presumably a deferred 401k, it doesn't make sense to be conservative in an HSA. Your HSA has the possibility to be "never taxed money" and will not be subject to RMDs, while your 401k balance will be taxed and subject to RMDs. Therefore, it makes sense to hold *all* of your bonds in deferred accounts, like your 401k. Meanwhile, your HSA can hold all of your "high flyers" and grow like crazy.

Upon retirement, you will have held all your bonds in your 401k, and so the balance will not have grown as much relative to your HSA, Roths, and Taxable. That's good, because you will have to pay income tax on your 401k balance.

The growth of your Roths (also having held stocks) will not be taxed. Your taxable will only be taxed as LTCGs. Your HSA may not be taxed if used to pay for healthcare. You are going to want these accounts to have grown their balances as much as possible since growth is untaxed or taxed little. That's why their contribution limits are set so low. If you are going to hold stocks and bonds somewhere, it makes sense to hold the assets that grow a lot in accounts where growth is not taxed.

What does this mean for you? Perhaps the easiest way is to increase your bonds in your deferred accounts and hold two stock funds in your HSA: total domestic and total international. That should keep rebalancing a little easier for now.

AHumanInterest
Posts: 24
Joined: Mon Jun 12, 2017 7:00 pm

Re: HSA Investment Portfolio - am I doing right?

Post by AHumanInterest » Sat Jul 21, 2018 10:49 pm

camillus wrote:
Sat Jul 21, 2018 10:28 pm
Your HSA has the possibility to be "never taxed money" and will not be subject to RMDs, while your 401k balance will be taxed and subject to RMDs. Therefore, it makes sense to hold *all* of your bonds in deferred accounts, like your 401k. Meanwhile, your HSA can hold all of your "high flyers" and grow like crazy.
This explains it the best
What does this mean for you? Perhaps the easiest way is to increase your bonds in your deferred accounts and hold two stock funds in your HSA: total domestic and total international. That should keep rebalancing a little easier for now.
Which funds are those? SPDW (international) and SPDR (domestic) ?

drk
Posts: 716
Joined: Mon Jul 24, 2017 10:33 pm
Location: Seattle

Re: HSA Investment Portfolio - am I doing right?

Post by drk » Sat Jul 21, 2018 11:00 pm

AHumanInterest wrote:
Sat Jul 21, 2018 10:49 pm
camillus wrote:
Sat Jul 21, 2018 10:28 pm
What does this mean for you? Perhaps the easiest way is to increase your bonds in your deferred accounts and hold two stock funds in your HSA: total domestic and total international. That should keep rebalancing a little easier for now.
Which funds are those? SPDW (international) and SPDR (domestic) ?
There isn't a good total international option at TDA, so you would have to use SPDW and SPEM to replicate it (about 80/20). SPTM is the total domestic option. Really, though, I would recommend getting an idea of your overall allocation and opting for one fund in your HSA. From where you currently stand, that would be easiest with SPTM (plus the small amount of VTI).

AHumanInterest
Posts: 24
Joined: Mon Jun 12, 2017 7:00 pm

Re: HSA Investment Portfolio - am I doing right?

Post by AHumanInterest » Sat Jul 21, 2018 11:05 pm

drk wrote:
Sat Jul 21, 2018 11:00 pm
AHumanInterest wrote:
Sat Jul 21, 2018 10:49 pm
camillus wrote:
Sat Jul 21, 2018 10:28 pm
What does this mean for you? Perhaps the easiest way is to increase your bonds in your deferred accounts and hold two stock funds in your HSA: total domestic and total international. That should keep rebalancing a little easier for now.
Which funds are those? SPDW (international) and SPDR (domestic) ?
There isn't a good total international option at TDA, so you would have to use SPDW and SPEM to replicate it (about 80/20). SPTM is the total domestic option. Really, though, I would recommend getting an idea of your overall allocation and opting for one fund in your HSA. From where you currently stand, that would be easiest with SPTM (plus the small amount of VTI).
Alright. I'll try and post my full details, likely on a new thread. As much as everyone here says its easy, every time I sit down and and deal with this I wish there was set-it-and-forget-it option.

User avatar
camillus
Posts: 480
Joined: Thu Feb 28, 2013 9:55 pm

Re: HSA Investment Portfolio - am I doing right?

Post by camillus » Sat Jul 21, 2018 11:08 pm

drk wrote:
Sat Jul 21, 2018 11:00 pm
Really, though, I would recommend getting an idea of your overall allocation and opting for one fund in your HSA.
This is what I do. I also use Personal Capital to get an "xray" of my portfolio.

drk
Posts: 716
Joined: Mon Jul 24, 2017 10:33 pm
Location: Seattle

Re: HSA Investment Portfolio - am I doing right?

Post by drk » Sat Jul 21, 2018 11:19 pm

AHumanInterest wrote:
Sat Jul 21, 2018 11:05 pm
Alright. I'll try and post my full details, likely on a new thread. As much as everyone here says its easy, every time I sit down and and deal with this I wish there was set-it-and-forget-it option.
Sorry. :D

Now, that said, I will go back to your original post and answer your question:
AHumanInterest wrote:
Sat Jul 21, 2018 3:13 pm
Am I doing this right? Are there obvious changes I should make?
Honestly, yes, your HSA is fine as-is. Going forward, you could consider just buying SPTM. In the event that you wanted to spice, you could also buy more SPEM.

Miriam2
Posts: 2250
Joined: Fri Nov 14, 2014 11:51 am

Re: HSA Investment Portfolio - am I doing right?

Post by Miriam2 » Sun Jul 22, 2018 11:31 pm

AHumanInterest wrote: Note that I don't particularly enjoy managing money and would be willing to take a small reduction in return in order to avoid having to constantly deal with this . . . As much as everyone here says its easy, every time I sit down and and deal with this I wish there was set-it-and-forget-it option.
Agree to just put your money in a single low cost stock index fund and let it be (for quite a while). At current funding max's, your HSA is unlikely to ever become your largest account, and with luck may be the account you access last - when you're 80 years old or so :D

Post Reply