Health Savings Account (HSA) investments

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Topic Author
Brit
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Joined: Wed Oct 10, 2012 6:33 am

Health Savings Account (HSA) investments

Post by Brit » Sat May 23, 2020 7:47 am

Looking for a little guidance with my HSA investments.

  • Current balance is about $13k invested 100% in SPRXX at Fidelity.
  • I am planning to max out HSA annual contributions through my employer
  • My goal (fingers crossed) is to save enough money to be a medical insurance bridge between 62 when I retire (7 years from now) and Medicare/Medicaid

The money market fund SPRXX is safe, but its growth is limited. Is there any reason that I wouldn't use a TBM fund instead like?

Any other suggestions?

Many thanks!

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grabiner
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Re: Health Savings Account (HSA) investments

Post by grabiner » Sat May 23, 2020 10:31 am

If you are paying current medical expenses from the HSA (the best strategy if you aren't maxing out your retirement accounts), then keeping at least one year's deductible in cash makes sense, as this is money you are likely to spend.

But beyond that, or for the whole thing if you are maxing out retirement accounts and thus not paying out of the HSA, your money is being saved for retirement expenses, so it should be invested as if it were part of your IRA. Since you have a Fidelity HSA, you can invest in low-cost stock or bond funds as appropriate.

If you have the choice, it is probably slightly better to hold bonds in your HSA and stocks in your IRA or 401(k), because a booming stock market with stocks in the HSA might leave you with more in the HSA than you need for medical expenses. Thus holding Fidelity US Bond Index in the HSA makes sense if that fund should be part of your portfolio.

If you live in CA or NJ, which don't recognize HSAs, Treasury bonds in the HSA are the best investment because they are exempt from state tax.
Wiki David Grabiner

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Flobes
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Re: Health Savings Account (HSA) investments

Post by Flobes » Sat May 23, 2020 10:43 am

Brit wrote:
Sat May 23, 2020 7:47 am
Looking for a little guidance with my HSA investments.
  • My goal (fingers crossed) is to save enough money to be a medical insurance bridge between 62 when I retire (7 years from now) and Medicare/Medicaid
Does "medical insurance bridge" mean that you're hoping to use your HSA to pay for health insurance when you retire?

HSA cannot be used to pay health insurance premiums. Note: There is exception if you are collecting state or federal unemployment benefits or utilizing COBRA coverage.

At 65, HSA can cover some Medicare premiums (but not Medigap supplemental), if you are not collecting Social Security.

Medicaid with Medicare only covers the low-income medically-qualified for long-term care.

j0nnyg1984
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Re: Health Savings Account (HSA) investments

Post by j0nnyg1984 » Sat May 23, 2020 4:00 pm

Mine is invested 100% VTI. Everything in this account will be used for qualified medical expenses, so why not take the most risk?

Topic Author
Brit
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Re: Health Savings Account (HSA) investments

Post by Brit » Mon May 25, 2020 6:34 am

Thank you to all for your responses. @Flobes
Does "medical insurance bridge" mean that you're hoping to use your HSA to pay for health insurance when you retire?
Yes that was my intent. We're both healthy and the biggest cost is going to be the monthly healthcare premiums once I live BigCorp.
HSA cannot be used to pay health insurance premiums. Note: There is exception if you are collecting state or federal unemployment benefits or utilizing COBRA coverage.
Got it, clearly I wasn't aware of that. So assuming that I take COBRA when I leave BigCorp, I'll be able to use the HSA to pay for that as long as it lasts right?
At 65, HSA can cover some Medicare premiums (but not Medigap supplemental), if you are not collecting Social Security.
That's great to know, I don't plan on collecting SS until I'm 67.
Medicaid with Medicare only covers the low-income medically-qualified for long-term care.
Clearly I need to educate myself on Medicaid and Medicare. Any suggested good resources where I can educate myself?

Again, thanks very much this is super helpful!

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JonnyDVM
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Re: Health Savings Account (HSA) investments

Post by JonnyDVM » Mon May 25, 2020 6:45 am

I treat it as the most tax advantaged space and thus invest those funds into the more volatile/ least tax efficient holdings. Current funds in there are small and microcap (rough year). Regardless, I would just treat it like another retirement account.
I’d trade it all for a little more | -C Montgomery Burns

neilpilot
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Re: Health Savings Account (HSA) investments

Post by neilpilot » Mon May 25, 2020 9:00 am

Brit wrote:
Mon May 25, 2020 6:34 am
Thank you to all for your responses. @Flobes
HSA cannot be used to pay health insurance premiums. Note: There is exception if you are collecting state or federal unemployment benefits or utilizing COBRA coverage.
Got it, clearly I wasn't aware of that. So assuming that I take COBRA when I leave BigCorp, I'll be able to use the HSA to pay for that as long as it lasts right?
At 65, HSA can cover some Medicare premiums (but not Medigap supplemental), if you are not collecting Social Security.
That's great to know, I don't plan on collecting SS until I'm 67.
Actually, HSA withdrawals can be used to pay health insurance premiums, or anything else (even a new car) so long as you have records and/or receipts from qualified medical expenses that you paid out of pocket in all the years since you starting funding your HSA to offset your HSA withdrawal.

Also, even though your Medicare Parts B & D premiums typically come out of your SS, that doesn't stop you from withdrawing funds from your HSA to reimburse your for those expenses. Payment via SS deductions is equivalent to if you had paid those bills directly.

02nz
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Re: Health Savings Account (HSA) investments

Post by 02nz » Mon May 25, 2020 9:06 am

neilpilot wrote:
Mon May 25, 2020 9:00 am
Actually, HSA withdrawals can be used to pay health insurance premiums, or anything else (even a new car) so long as you have records and/or receipts from qualified medical expenses that you paid out of pocket in all the years since you starting funding your HSA to offset your HSA withdrawal.
This is misleadingly worded. Flobes' post above is correct. Of course money is fungible, so you could see an HSA withdrawal (to reimburse for a qualified medical expense) as "paying" for a new car, but that's not what most people mean when they say talk about whether an HSA can "pay for" something.

retired@50
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Re: Health Savings Account (HSA) investments

Post by retired@50 » Mon May 25, 2020 9:16 am

Brit wrote:
Mon May 25, 2020 6:34 am
So assuming that I take COBRA when I leave BigCorp,
This may or may not be the best deal with regard to health insurance when you're no longer an employee.

Assuming the Affordable Care Act is still in force, you should certainly compare plans from healthcare.gov

Since your income will be low(er) after leaving BigCorp, you may qualify for a subsidy.

Regards,
This is one person's opinion. Nothing more.

neilpilot
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Re: Health Savings Account (HSA) investments

Post by neilpilot » Mon May 25, 2020 9:19 am

02nz wrote:
Mon May 25, 2020 9:06 am
neilpilot wrote:
Mon May 25, 2020 9:00 am
Actually, HSA withdrawals can be used to pay health insurance premiums, or anything else (even a new car) so long as you have records and/or receipts from qualified medical expenses that you paid out of pocket in all the years since you starting funding your HSA to offset your HSA withdrawal.
This is misleadingly worded. Flobes' post above is correct. Of course money is fungible, so you could see an HSA withdrawal (to reimburse for a qualified medical expense) as "paying" for a new car, but that's not what most people mean when they say talk about whether an HSA can "pay for" something.
You are correct....my wording could have been better. I was simply pointing out to the OP that his prior medical expenses, paid out of pocket during the HSA accumulation years, could be used to offset his early retirement. Based on Brit's posts, I wasn't certain that he was aware of that option.

BruinBones
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Re: Health Savings Account (HSA) investments

Post by BruinBones » Mon May 25, 2020 9:43 am

I have earmarked my HSA solely for Medicare payments in the future. Therefore I have chosen a Target Date Retirement Fund for the year I turn 65.

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