Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

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silverskates
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Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by silverskates » Thu Nov 07, 2019 8:02 pm

I'm currently holding $5000 in cash through Optum to avoid the $36 annual fee ($3/month) and over time I'm realizing the gains I am forgoing by doing this.

Investing that $5000 in Vanguard Total Stock Market Fund for 25 years at 7% interest ends up being around $27,000 while the $3 monthly fee during those 25 years would only be $900.

Should I just invest the $5000 and pay the $36 annual fee?

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willthrill81
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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by willthrill81 » Thu Nov 07, 2019 8:06 pm

I would recommend that you strongly consider transferring as much of your HSA funds to Fidelity, which now offers a truly $0 fee HSA. I did so earlier this year and can't say enough good things about how easy the transfer process was and how easy Fidelity has been to work with.
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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by abuss368 » Thu Nov 07, 2019 8:08 pm

I had Optum at a previous employer. They are huge in the HSA realm. I would not worry about $36 a year fee.
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Makefile
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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by Makefile » Thu Nov 07, 2019 8:08 pm

Are you stuck at Optum? i.e., do you work at a company who does HSA contributions through payroll deduction and that is their designated provider?

If so, yes it probably makes sense to invest the $5000. Even a CD would easily generate 36/year. In the meantime, hopefully competition will push down that monthly fee over time, similar to the race to $0 commission stock trades that wrapped up about a month ago.

If not, transfer to Lively or Fidelity, who offer no-fee HSAs with investments.

illumination
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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by illumination » Thu Nov 07, 2019 8:52 pm

I left Optum for Lively as a result of this. And they had terrible customer service, I couldn't even get a customer service rep on the phone. So zero fees at Lively to invest every penny. I plan though to eventually move to Fidelity,

But on just the math if you have to stay with Optum:

$5,000 in the S&P500 currently yields 1.95% in dividends.

So $5000 x .0195 = $97.50 per year

Which is almost 3 times more than $36 per year (and assumes zero growth of the fund itself over time which will likely be several times that if history is any guide)

So it's definitely "worth it" in my view if it's money for a long term investment and you don't plan to withdraw from the HSA. To avoid the $36 in fees will probably cost you several hundreds every year in growth if you keep it in cash to avoid the fee.

Chrono Triggered
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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by Chrono Triggered » Thu Nov 07, 2019 9:30 pm

For $3 a month, I'd definitely invest $5,000.

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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by mervinj7 » Thu Nov 07, 2019 9:34 pm

silverskates wrote:
Thu Nov 07, 2019 8:02 pm
I'm currently holding $5000 in cash through Optum to avoid the $36 annual fee ($3/month) and over time I'm realizing the gains I am forgoing by doing this.

Investing that $5000 in Vanguard Total Stock Market Fund for 25 years at 7% interest ends up being around $27,000 while the $3 monthly fee during those 25 years would only be $900.

Should I just invest the $5000 and pay the $36 annual fee?
Transfer to Fidelity or Lively and invest to your hearts content.

MotoTrojan
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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by MotoTrojan » Thu Nov 07, 2019 9:44 pm

willthrill81 wrote:
Thu Nov 07, 2019 8:06 pm
I would recommend that you strongly consider transferring as much of your HSA funds to Fidelity, which now offers a truly $0 fee HSA. I did so earlier this year and can't say enough good things about how easy the transfer process was and how easy Fidelity has been to work with.
Are you taking the contribution from work 1st? Any good sources on the restrictions for transfer? I get a small contribution through employer and also thought it saved some additional taxes, but would love to move the funds to Fidelity ultimately for more investment options.

They charge $2.5/month though if you keep less than $3K in cash (even worse than the OP) which comes out to a 1% expense ratio... not a big fan of that but I could maintain the cash balance and then transfer additional funds.

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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by MotoTrojan » Thu Nov 07, 2019 9:48 pm

illumination wrote:
Thu Nov 07, 2019 8:52 pm
I left Optum for Lively as a result of this. And they had terrible customer service, I couldn't even get a customer service rep on the phone. So zero fees at Lively to invest every penny. I plan though to eventually move to Fidelity,

But on just the math if you have to stay with Optum:

$5,000 in the S&P500 currently yields 1.95% in dividends.

So $5000 x .0195 = $97.50 per year

Which is almost 3 times more than $36 per year (and assumes zero growth of the fund itself over time which will likely be several times that if history is any guide)

So it's definitely "worth it" in my view if it's money for a long term investment and you don't plan to withdraw from the HSA. To avoid the $36 in fees will probably cost you several hundreds every year in growth if you keep it in cash to avoid the fee.
It is basically a 0.72% expense ratio which is pretty egregious for the S&P500, but if it earns almost no interest in cash then this sure wins in the long-run all things considered.

anil686
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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by anil686 » Thu Nov 07, 2019 10:01 pm

Agree with others Re: Fidelity. I have everything else at Vanguard and love the HSA at Fidelity...

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Cubicle
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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by Cubicle » Thu Nov 07, 2019 10:07 pm

Pay the $36 or move to Fidelity. I wouldn't hold up $5,000 per year to save $36.

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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by MotoTrojan » Thu Nov 07, 2019 10:44 pm

After some digging into my particular setup (Avidia bank) the $2.50/month fee is only when using investments and is waived with over $3000 in cash. Outgoing transfers are $25.

Perhaps an annual transfer of $3500 is the way to go, with it sitting in the cash account (saving the $2.50/month) in the meantime.

Seems the transfer to Fidelity will require a Medallion Signature so I wouldn't want to do this much more than annually anyways.

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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by TropikThunder » Thu Nov 07, 2019 10:55 pm

silverskates wrote:
Thu Nov 07, 2019 8:02 pm
I'm currently holding $5000 in cash through Optum to avoid the $36 annual fee ($3/month) and over time I'm realizing the gains I am forgoing by doing this.

Investing that $5000 in Vanguard Total Stock Market Fund for 25 years at 7% interest ends up being around $27,000 while the $3 monthly fee during those 25 years would only be $900.

Should I just invest the $5000 and pay the $36 annual fee?
Not to nit pick, but just making sure you understand that stock funds don't pay interest, and that "25 years at 7%" isn't guaranteed. That said, yes, find a way to invest it rather than leaving the $5,000 in a hostage account at Optum.

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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by TropikThunder » Thu Nov 07, 2019 10:56 pm

MotoTrojan wrote:
Thu Nov 07, 2019 10:44 pm
Seems the transfer to Fidelity will require a Medallion Signature so I wouldn't want to do this much more than annually anyways.
Is that a requirement from the Fidelity side? Never heard of needing a medallion sig for an HSA transfer.

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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by MotoTrojan » Thu Nov 07, 2019 11:27 pm

TropikThunder wrote:
Thu Nov 07, 2019 10:56 pm
MotoTrojan wrote:
Thu Nov 07, 2019 10:44 pm
Seems the transfer to Fidelity will require a Medallion Signature so I wouldn't want to do this much more than annually anyways.
Is that a requirement from the Fidelity side? Never heard of needing a medallion sig for an HSA transfer.
I sent them a message and will follow up. When I transferred my Vanguard taxable account over last month it was solely online. It looked like the HSA would be the same thing, but instead of asking me to attach my statement digitally they gave me a print-out of the form and requested I mail it in along with my statement... their form included a spot for a medallion sig.

Really hoping something is off and I can just do this all online after all.

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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by tj » Fri Nov 08, 2019 12:39 am

I transferred HSA from HealthEquity to Fidelity. NO medallion neeed. There was printed paperwork, I dropped it off at a Fidelity branch.

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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by willthrill81 » Fri Nov 08, 2019 8:45 am

MotoTrojan wrote:
Thu Nov 07, 2019 9:44 pm
willthrill81 wrote:
Thu Nov 07, 2019 8:06 pm
I would recommend that you strongly consider transferring as much of your HSA funds to Fidelity, which now offers a truly $0 fee HSA. I did so earlier this year and can't say enough good things about how easy the transfer process was and how easy Fidelity has been to work with.
Are you taking the contribution from work 1st? Any good sources on the restrictions for transfer? I get a small contribution through employer and also thought it saved some additional taxes, but would love to move the funds to Fidelity ultimately for more investment options.

They charge $2.5/month though if you keep less than $3K in cash (even worse than the OP) which comes out to a 1% expense ratio... not a big fan of that but I could maintain the cash balance and then transfer additional funds.
Yes, my employer-sponsored HSA is with Health Equity, but their fees are far too high. Every few months, I transfer the funds built up in the HE HSA to Fidelity. There are no fees on either side of the transfer.
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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by KingRiggs » Fri Nov 08, 2019 8:50 am

tj wrote:
Fri Nov 08, 2019 12:39 am
I transferred HSA from HealthEquity to Fidelity. NO medallion neeed. There was printed paperwork, I dropped it off at a Fidelity branch.
+1 to this. Was happy with my HSA through HSA Authority until I heard about no-fee Fidelity HSA. Transfer was easy, although it took about a week due to slowness on HSA Authority's part. Now I have a no fee HSA invested in no-fee mutual funds...sweet.
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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by Dottie57 » Fri Nov 08, 2019 9:14 am

abuss368 wrote:
Thu Nov 07, 2019 8:08 pm
I had Optum at a previous employer. They are huge in the HSA realm. I would not worry about $36 a year fee.
I had optum HSA too.. web site is not great. Fund selection was ok too. This year I transferred HSA to FIDELITY.

The fee at Optum is ok. It is not the reason I moved to Fidelity.

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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by WanderingPothos » Fri Nov 08, 2019 9:39 am

[/quote]
The fee at Optum is ok. It is not the reason I moved to Fidelity.
[/quote]

Great question! I also have $5k sitting in cash in Optum to avoid fees but it had never occurred that I could be doing something more productive by transferring elsewhere...Fidelity site says no fees to transfer and they initiate, but can anyone comment on the process and if there were any fees on Optum side?

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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by stoptothink » Fri Nov 08, 2019 10:34 am

KingRiggs wrote:
Fri Nov 08, 2019 8:50 am
tj wrote:
Fri Nov 08, 2019 12:39 am
I transferred HSA from HealthEquity to Fidelity. NO medallion neeed. There was printed paperwork, I dropped it off at a Fidelity branch.
+1 to this. Was happy with my HSA through HSA Authority until I heard about no-fee Fidelity HSA. Transfer was easy, although it took about a week due to slowness on HSA Authority's part. Now I have a no fee HSA invested in no-fee mutual funds...sweet.
I've been perfectly happy with healthequity, but I hate fees so I am starting the process to transfer to fidelity right now. Thanks.

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Re: Is a $36 fee per year worth paying on my HSA so that money can grow in the market?

Post by bigjeff » Fri Nov 08, 2019 10:35 am

I have an Optum HSA. Once I got over $6,000 in the HSA, all monthly fees were waived. This might be specific to your plan, but I would ask if the fees are waived after reaching a certain threshold. My HR dept. didn't even know this was a thing, so I might reach out directly to Optum to ask this question. I have Vanguard mutual fund choices inside of my Optum HSA, so I see no reason to move it from my employer's current plan.

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