Where should I park my HSA contributions (Employer vs Fidelity)?

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Topic Author
PStrider
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Joined: Sun Mar 22, 2015 6:31 am

Where should I park my HSA contributions (Employer vs Fidelity)?

Post by PStrider » Fri Nov 08, 2019 2:24 pm

My employer will help contribute $500 to HSA account through WageWorks starting next year, and I was wondering if I should contribute the remaining $3050 to WageWorks (deduct from each paycheck pre-tax) or to my current Fidelity HSA Account (post-tax).

WageWorks (BNY Mellon) requires $1000 to invest, but they're have good choices (ie. VFIAX, etc.). I won't reach $1000 until May 2020 to start investing, unless I rollover my Fidelity HSA account.

I read through wiki and this paragraph stood out to me:

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If your employer allows it, you can make your own contributions through pre-tax payroll deduction; this has the potential advantage that these contributions, like pre-tax insurance premiums, are not subject to Social Security and Medicare taxes, so long as the plan is classified as a Section 125 or "cafeteria" plan. Often, if you are below the Social Security wage base, it is only break-even or worse to use the payroll deduction because the reduced Social Security benefits cost more than the tax savings.

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My income is below Social Security wage base, so I'm not sure which is a better place to park the remaining $3050.

Any input would be appreciated.

Cheers.

Boglehead HSA Wiki Page: https://www.bogleheads.org/wiki/Health_ ... ite_note-1

Spirit Rider
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Re: Where should I park my HSA contributions (Employer vs Fidelity)?

Post by Spirit Rider » Fri Nov 08, 2019 2:54 pm

It is a little trickier that the Wiki implies.

It it does not matter whether your current year Social Security (SS) wages are below the second bend point. What matters, is will your average indexed monthly earnings (AIME) are <= the second bend point.

If you expect that your AIME when you collect SS will be <= the second bend point, then you are probably better off not making the HSA contributions by salary reduction. This would be true if you expect to be consistently below the median household income for 35 years or even if higher you do not have 35 years of substantial earnings.

If it is just a case where you are starting out or temporarily have reduced income and expect your AIME to be substantially > the the second bend point. You would be better off making the HSA contributions by salary reduction. However, when your SS wages are > the SS maximum taxable earnings (MTE) it only represents savings on 1/2 the Medicare tax.

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Klewles
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Re: Where should I park my HSA contributions (Employer vs Fidelity)?

Post by Klewles » Sat Nov 09, 2019 4:49 am

PStrider wrote:
Fri Nov 08, 2019 2:24 pm
WageWorks (BNY Mellon) requires $1000 to invest, but they're have good choices (ie. VFIAX, etc.).
Caveat that WageWorks has merged with HealthEquity. HealthEquity includes good choices like VFIAX, but it charges an additional 0.4% annual fee (0.033% monthly) on top of VFIAX's 0.05% expense ratio, for an effective expense ratio of 0.45%. If the merged company follows this policy, then Fidelity is the better choice, since it charges no fees.

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happymob
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Re: Where should I park my HSA contributions (Employer vs Fidelity)?

Post by happymob » Sat Nov 09, 2019 7:35 am

Any reason not to contribute to the employer plan and move the balance to Fidelity once every year?

Spirit Rider
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Re: Where should I park my HSA contributions (Employer vs Fidelity)?

Post by Spirit Rider » Sat Nov 09, 2019 10:26 am

Nope.

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1789
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Re: Where should I park my HSA contributions (Employer vs Fidelity)?

Post by 1789 » Sat Nov 09, 2019 12:02 pm

I would pick the one which requires less work from myself.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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Klewles
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Re: Where should I park my HSA contributions (Employer vs Fidelity)?

Post by Klewles » Sun Nov 10, 2019 3:38 am

happymob wrote:
Sat Nov 09, 2019 7:35 am
Any reason not to contribute to the employer plan and move the balance to Fidelity once every year?
In principle no, but it might be slow and keep you out of the market for a few weeks. According to HealthEquity's current instructions and form, you would need to (1) liquidate VFIAX (or whatever), then wait a week; (2) initiate the transfer on their web site; and then (3) HealthEquity would mail a check to Fidelity within 3 weeks. At Fidelity you'd need to purchase VFIAX.

So maybe once ever few years is better.

Topic Author
PStrider
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Re: Where should I park my HSA contributions (Employer vs Fidelity)?

Post by PStrider » Sun Nov 10, 2019 11:39 am

happymob wrote:
Sat Nov 09, 2019 7:35 am
Any reason not to contribute to the employer plan and move the balance to Fidelity once every year?
I believe there's a small fee of $16-17 or so to move money out of the account.

I've also decided to go all in with WageWorks to make use of that free $500 asap.

Thanks for all the inputs. :)

aristotelian
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Re: Where should I park my HSA contributions (Employer vs Fidelity)?

Post by aristotelian » Sun Nov 10, 2019 11:49 am

If you contribute through your payroll you should avoid FICA tax. Then transfer the funds to Fidelity direct or through manual rollover at the end of the year.

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