Investments for HSA - California

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JayinLA
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Investments for HSA - California

Post by JayinLA » Wed Oct 17, 2018 10:11 am

Hello - Newbie here,with a question I’ve been wondering about for awhile. I currently have about $13,500 in an HSA through HSA Bank, with an attached TD Ameritrade account. I am hoping to keep it invested to use in retirement. However, I have yet to figure out what the best investments for this account may be. I have about $550,000 spread across several retirement accounts, most of which is managed by Vanguard at a 60/40 allocation, some of it is self managed. I’m hoping to retire in about 7 years. Generally I feel I have a high risk tolerance but for the HSA I don’t feel I should be as aggressive. I’d prefer to find some less volatile higher yield securities as this is an account that I may need to use if we have some high medical expenses. (My husband is on retirement disability and is on Medicare, and his income is pretty low.) Should I just stick with the basic total market, total bond, S&P 500 and total international Vanguard etfs or are there more targeted investments that anyone can suggest? Thanks!
Last edited by JayinLA on Fri Oct 19, 2018 1:23 pm, edited 1 time in total.

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jakehefty17
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Location: New York

Re: Investments for HSA

Post by jakehefty17 » Wed Oct 17, 2018 11:32 am

Hello!

I would stick with your 60/40 allocation. Total Market, Total Bond, and Total International 3 fund portfolio makes sense. Approximately 30% of stock holdings being international is the typical advice. Keep it simple.

You should strive to hold your desired asset allocation across all accounts. Stick to your asset allocation and stay the course.

Just my advice.
"The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence." -Charles Bukowski

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Duckie
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Re: Investments for HSA

Post by Duckie » Wed Oct 17, 2018 5:14 pm

JayinLA, welcome to the forum.
JayinLA wrote:I currently have about $13,500 in an HSA through HSA Bank, with an attached TD Ameritrade account.
<snip>
Generally I feel I have a high risk tolerance but for the HSA I don’t feel I should be as aggressive. I’d prefer to find some less volatile higher yield securities as this is an account that I may need to use if we have some high medical expenses.
Put all bonds in the investible portion of your HSA. Those bonds (and the cash non-investible portion) will be part of your 40% fixed income AA.

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Artsdoctor
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Re: Investments for HSA

Post by Artsdoctor » Wed Oct 17, 2018 6:40 pm

JayinLA wrote:
Wed Oct 17, 2018 10:11 am
Hello - Newbie here,with a question I’ve been wondering about for awhile. I currently have about $13,500 in an HSA through HSA Bank, with an attached TD Ameritrade account. I am hoping to keep it invested to use in retirement. However, I have yet to figure out what the best investments for this account may be. I have about $550,000 spread across several retirement accounts, most of which is managed by Vanguard at a 60/40 allocation, some of it is self managed. I’m hoping to retire in about 7 years. Generally I feel I have a high risk tolerance but for the HSA I don’t feel I should be as aggressive. I’d prefer to find some less volatile higher yield securities as this is an account that I may need to use if we have some high medical expenses. (My husband is on retirement disability and is on Medicare, and his income is pretty low.) Should I just stick with the basic total market, total bond, S&P 500 and total international Vanguard etfs or are there more targeted investments that anyone can suggest? Thanks!
Your name would imply that you're in LA so you should know that HSAs are not recognized as tax-advantaged accounts by the state.

If you're at HSA Bank, you probably have access to Vanguard's Balanced Fund Admiral Shares. This would give you a 60/40 split and it's relatively tax-efficient (the state incomes taxes really won't be much). The LifeStrategy funds are also available but then you'll be getting into more state taxes because of distributions. You can invest in a more complicated way but the HSA balances are generally such a small percentage of your total portfolio that it's not worth it, and you'll want to pay attention to fees, ERs, and state taxes.

JayinLA
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Re: Investments for HSA

Post by JayinLA » Wed Oct 17, 2018 8:29 pm

Yes I am in LA. That’s something I didn’t realiz until I started skimming this board, I’ll have to ask our tax preparer about it.

I’ll look into the balanced fund, though the trading fees for Vanguard funds in TD Ameritrade are fairly steep. But it’s something I was looking at. Thanks!

JayinLA
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Re: Investments for HSA

Post by JayinLA » Wed Oct 17, 2018 8:30 pm

Thanks to all for your suggestions!

mervinj7
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Re: Investments for HSA

Post by mervinj7 » Thu Oct 18, 2018 10:31 am

JayinLA wrote:
Wed Oct 17, 2018 8:30 pm
Thanks to all for your suggestions!
Welcome to the forum, Jay. You came to the right place for advice. Speaking of which, I suggest editing your title to clarify that this HSA will be held in CA. Since CA treats an HSA as an taxable account, the recommendations you will receive will be far different than other states.
At the very least, keep the number of funds in your account to a minimum. Otherwise, the distributions will start complicating your yearly tax returns. Also, the HSA account will not issue 1099-B and 1099-DIVs as these are federal tax forms. You will need to keep track of your capital gains and distributions for the purposes of CA taxes. Your brokerage should still help keep track of your cost basis, though.

Generally, the advice is to hold treasuries in your HSA account since these have no state taxes on distributions. However, another school of thought is to hold a single Total Market ETF with dividend reinvestment turned off.

Check the site for other HSA in CA threads for more info:
https://www.google.com/search?sitesearc ... g&q=HSA+ca
Last edited by mervinj7 on Thu Oct 18, 2018 11:08 am, edited 1 time in total.

JayinLA
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Re: Investments for HSA

Post by JayinLA » Thu Oct 18, 2018 10:52 am

Not sure how to edit the thread title, but thanks for the info!

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Duckie
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Re: Investments for HSA

Post by Duckie » Thu Oct 18, 2018 7:25 pm

JayinLA wrote:Not sure how to edit the thread title, but thanks for the info!
To edit any post you click on the little pencil icon to the left of your name on that post. To edit the thread title you click on your first post and change the "Subject".

JayinLA
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Re: Investments for HSA - California

Post by JayinLA » Fri Oct 19, 2018 1:23 pm

Got it - Thanks!

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