Fidelity HSA-how are you investing the funds?

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4nwestsaylng
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Fidelity HSA-how are you investing the funds?

Post by 4nwestsaylng » Fri Mar 22, 2019 3:50 pm

I made the easy transfer from HSA Bank to Fidelity, and the funds are sitting in Fidelity Cash Reserves. I know that the investment choice will vary depending on Boglehead age, but would appreciate any suggestions as to what you have done, especially if at or near retirement.

I am not going to swing for the fences with all equity. My outside overall AA is 50/50, so I think am more comfortable with a Vanguard Wellesley or Wellington approach, but within the Fidelity family to save fees.

This is probably duplicated in another thread, if so, I apologize.

I am hoping to get enough return to compensate for the IRMMA charges on my Medicare B. I don't want a lot ot downside risk on HSA funds.Yes, I know, I want it all :sharebeer

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vineviz
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Re: Fidelity HSA-how are you investing the funds?

Post by vineviz » Fri Mar 22, 2019 3:59 pm

4nwestsaylng wrote:
Fri Mar 22, 2019 3:50 pm
I made the easy transfer from HSA Bank to Fidelity, and the funds are sitting in Fidelity Cash Reserves. I know that the investment choice will vary depending on Boglehead age, but would appreciate any suggestions as to what you have done, especially if at or near retirement.

I am not going to swing for the fences with all equity. My outside overall AA is 50/50, so I think am more comfortable with a Vanguard Wellesley or Wellington approach, but within the Fidelity family to save fees.

This is probably duplicated in another thread, if so, I apologize.

I am hoping to get enough return to compensate for the IRMMA charges on my Medicare B. I don't want a lot ot downside risk on HSA funds.Yes, I know, I want it all :sharebeer
Something like Fidelity Freedom Index 2030 Fund (FFEGX) might be a good choice. It's about 50/50 stocks/bonds, no transaction fee, and low expense (0.08%).
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

gjlynch17
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Re: Fidelity HSA-how are you investing the funds?

Post by gjlynch17 » Fri Mar 22, 2019 4:14 pm

4nwestsaylng wrote:
Fri Mar 22, 2019 3:50 pm
I made the easy transfer from HSA Bank to Fidelity, and the funds are sitting in Fidelity Cash Reserves. I know that the investment choice will vary depending on Boglehead age, but would appreciate any suggestions as to what you have done, especially if at or near retirement.

I am not going to swing for the fences with all equity. My outside overall AA is 50/50, so I think am more comfortable with a Vanguard Wellesley or Wellington approach, but within the Fidelity family to save fees.

This is probably duplicated in another thread, if so, I apologize.

I am hoping to get enough return to compensate for the IRMMA charges on my Medicare B. I don't want a lot ot downside risk on HSA funds.Yes, I know, I want it all :sharebeer
I am 50 and hoping for an early retirement in 5 years. I recently moved by HSA from Optum Bank to Fidelity and I want a 60%/40% split so I invested as follows:

Fidelity Zero Total Market Index (FZROX) (40%)
Fidelity Zero International Index (FZILX) (20%)
Fidelity U.S. Bond Index (FXNAX) (20%)
iShares Investment Grade Corporate Bond ETF (USIG) (20%)

The reasons for USIG are that I want a higher corporate bond exposure than only FXNAX and it is my first foray with an ETF so I wanted to experiment with it.

The overall above allocation is very similar to Vanguard Wellington with a slight tilt towards growth and international but not that far off. Plus by expense ratio is 1.7 bp :)

tj
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Re: Fidelity HSA-how are you investing the funds?

Post by tj » Fri Mar 22, 2019 4:23 pm

If you're going to keep it in cash, you should at least use one of the Fidelity money market funds.

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FelixTheCat
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Re: Fidelity HSA-how are you investing the funds?

Post by FelixTheCat » Fri Mar 22, 2019 4:33 pm

gjlynch17 wrote:
Fri Mar 22, 2019 4:14 pm
I am 50 and hoping for an early retirement in 5 years. I recently moved by HSA from Optum Bank to Fidelity and I want a 60%/40% split so I invested as follows:

Fidelity Zero Total Market Index (FZROX) (40%)
Fidelity Zero International Index (FZILX) (20%)
Fidelity U.S. Bond Index (FXNAX) (20%)
iShares Investment Grade Corporate Bond ETF (USIG) (20%)
What occurs when you want to pay for an expense? Does Fidelity sell equal shares of your investments? Do you have to sell a fund and pay from cash?
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Chris K Jones
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Re: Fidelity HSA-how are you investing the funds?

Post by Chris K Jones » Fri Mar 22, 2019 4:38 pm

I am probably within 5 years of retiring. I have limited space for bonds in tax sheltered funds so I just look at this as additional space for my bonds. It is iin Fidelity's US Bond Index Fund which is basically the same as Vanguard's Total Bond fund with 2.5 basis points ER. I intend to use it in retirement to pay medicare premiums.

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Re: Fidelity HSA-how are you investing the funds?

Post by gjlynch17 » Fri Mar 22, 2019 4:41 pm

FelixTheCat wrote:
Fri Mar 22, 2019 4:33 pm
gjlynch17 wrote:
Fri Mar 22, 2019 4:14 pm
I am 50 and hoping for an early retirement in 5 years. I recently moved by HSA from Optum Bank to Fidelity and I want a 60%/40% split so I invested as follows:

Fidelity Zero Total Market Index (FZROX) (40%)
Fidelity Zero International Index (FZILX) (20%)
Fidelity U.S. Bond Index (FXNAX) (20%)
iShares Investment Grade Corporate Bond ETF (USIG) (20%)
What occurs when you want to pay for an expense? Does Fidelity sell equal shares of your investments? Do you have to sell a fund and pay from cash?
Until I retire, I am paying for medical expenses outside the HSA with the goal of continuting to contribute the HSA and then use the HSA to pay for medical expenses once I retire. When I reach that point, I will likely keep one year of my out-of-pocket cap in a money market fund and the remainder of the Bond portion (~40%) in short-term bonds.

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FIREchief
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Re: Fidelity HSA-how are you investing the funds?

Post by FIREchief » Fri Mar 22, 2019 5:02 pm

Mini 10 year TIPS ladder to cover Medicare premiums plus copays and estimated dental and vision. Rest in TMI fund.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: Fidelity HSA-how are you investing the funds?

Post by jhfenton » Fri Mar 22, 2019 7:35 pm

My entire Fidelity HSA (~$50K) is invested in FPADX/Fidelity Emerging Markets at 8 bp. It's just one piece of my overall asset allocation, and since the cost is lower than VWO (12 bp) or VEMAX (14 bp) at Vanguard, I'm taking advantage of having an account at Fidelity. I believe that it's the biggest cost advantage of any asset class at Fidelity vs Vanguard, certainly of those asset classes I want to own.

My wife is 49, and I will be 49 next week. We probably have +/-13 years to retirement, so we're not looking at touching the balance anytime soon.

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Re: Fidelity HSA-how are you investing the funds?

Post by theplayer11 » Fri Mar 22, 2019 7:37 pm

100% ITOT

Eno Deb
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Re: Fidelity HSA-how are you investing the funds?

Post by Eno Deb » Fri Mar 22, 2019 8:11 pm

I live in California which doesn't recognize HSAs (i.e. you have to pay state tax on dividends and capital gains). To keep my life simple I have invested everything in one of Fidelity's treasury bond index funds (state tax exempt). It's a rather small amount anyway (it's only the third year that I'm eligible for HSA contributions), so I don't sweat it too much.

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Re: Fidelity HSA-how are you investing the funds?

Post by pasadena » Fri Mar 22, 2019 8:39 pm

The AA is the same as my 401(k) - also at Fidelity - but since it's a small-ish amount, I decided to play with the new Zero funds and see what happens:

Fidelity Zero Total Market Index (FZROX) (64%)
Fidelity Zero International Index (FZILX) (16%)
Fidelity U.S. Bond Index (FXNAX) (20%)

Whereas I use FSKAX (Total Market Index) and FTIHX (Total International Market Index) along with FXNAX in my 401(k).

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4nwestsaylng
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Re: Fidelity HSA-how are you investing the funds?

Post by 4nwestsaylng » Fri Mar 22, 2019 8:40 pm

vineviz wrote:
Fri Mar 22, 2019 3:59 pm
4nwestsaylng wrote:
Fri Mar 22, 2019 3:50 pm
I made the easy transfer from HSA Bank to Fidelity, and the funds are sitting in Fidelity Cash Reserves. I know that the investment choice will vary depending on Boglehead age, but would appreciate any suggestions as to what you have done, especially if at or near retirement.

I am not going to swing for the fences with all equity. My outside overall AA is 50/50, so I think am more comfortable with a Vanguard Wellesley or Wellington approach, but within the Fidelity family to save fees.

This is probably duplicated in another thread, if so, I apologize.

I am hoping to get enough return to compensate for the IRMMA charges on my Medicare B. I don't want a lot ot downside risk on HSA funds.Yes, I know, I want it all :sharebeer
Something like Fidelity Freedom Index 2030 Fund (FFEGX) might be a good choice. It's about 50/50 stocks/bonds, no transaction fee, and low expense (0.08%).
Thanks, I will look at FFEGX and also the suggestions below, try to stay about 50/50 with a low ER. I misstated, my cash right now is in a Fidelity MMF, not cash reserves. I can see that for someone a number of years away from Medicare, a tilt toward more equities makes sense, but I don't want surprises, I may even go lower equities in this account, say, 30/70.In my case that would put only $15k at equity risk, $35k at bond risk.

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Vulcan
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Re: Fidelity HSA-how are you investing the funds?

Post by Vulcan » Fri Mar 22, 2019 9:05 pm

We use it as part of our fixed income allocation (100% FXNAX).
If you torture the data long enough, it will confess to anything. ~Ronald Coase

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camillus
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Re: Fidelity HSA-how are you investing the funds?

Post by camillus » Fri Mar 22, 2019 9:21 pm

An alternative is to view the HSA as only one component of your larger portfolio with a singular AA, and instead to maximize the tax advantages of the HSA. For this reason, it would actually be prudent to hold 100% equities in your HSA. You have to hold your equities somewhere, Roth IRAs and HSAs are the best place to do that.

Example:
(Many retirees will have these accounts in the same relative sizes)

Relatively small HSA - 100% equities
Relatively small Roth IRA - 100% equities
Taxable - tax efficient equities and bonds as allowed
Huuge Traditional IRA - All of your bonds, remainder of equities

TOTAL AA: 50/50

Another advantage to this approach is that you might be able to rebalance to your chosen asset allocation with 1 transaction in your traditional IRA.

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Re: Fidelity HSA-how are you investing the funds?

Post by bargainhuntingking » Fri Mar 22, 2019 11:26 pm

My Fidelity HSA contributions are 100% FZROX - Fidelity ZERO total stock market index fund.

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Re: Fidelity HSA-how are you investing the funds?

Post by Traveler » Fri Mar 22, 2019 11:48 pm

camillus wrote:
Fri Mar 22, 2019 9:21 pm
An alternative is to view the HSA as only one component of your larger portfolio with a singular AA, and instead to maximize the tax advantages of the HSA. For this reason, it would actually be prudent to hold 100% equities in your HSA. You have to hold your equities somewhere, Roth IRAs and HSAs are the best place to do that.

Example:
(Many retirees will have these accounts in the same relative sizes)

Relatively small HSA - 100% equities
Relatively small Roth IRA - 100% equities
Taxable - tax efficient equities and bonds as allowed
Huuge Traditional IRA - All of your bonds, remainder of equities

TOTAL AA: 50/50

Another advantage to this approach is that you might be able to rebalance to your chosen asset allocation with 1 transaction in your traditional IRA.
Pretty much this although I don't have an overall 50/50 AA. I only wish I could contribute tens of thousands to my HSA each year.

Big Dog
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Re: Fidelity HSA-how are you investing the funds?

Post by Big Dog » Sat Mar 23, 2019 12:02 am

California resident, so invested 100% in FUAMX, Treasury Bond.

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Re: Fidelity HSA-how are you investing the funds?

Post by BionicBillWalsh » Sat Mar 23, 2019 3:58 am

Mine is in their balanced fund. It is actively managed and has a ER of .53 but I like its composition and really plan to only use it for health care related expenses in the future. My other retirement funds are all in the 3 fund portfolio, with the exception of a Sep IRA with Vanguard’s Balanced Fund.
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Re: Fidelity HSA-how are you investing the funds?

Post by TheOscarGuy » Sat Mar 23, 2019 5:30 am

4nwestsaylng wrote:
Fri Mar 22, 2019 3:50 pm
I made the easy transfer from HSA Bank to Fidelity, and the funds are sitting in Fidelity Cash Reserves. I know that the investment choice will vary depending on Boglehead age, but would appreciate any suggestions as to what you have done, especially if at or near retirement.

I am not going to swing for the fences with all equity. My outside overall AA is 50/50, so I think am more comfortable with a Vanguard Wellesley or Wellington approach, but within the Fidelity family to save fees.

This is probably duplicated in another thread, if so, I apologize.

I am hoping to get enough return to compensate for the IRMMA charges on my Medicare B. I don't want a lot ot downside risk on HSA funds.Yes, I know, I want it all :sharebeer
I know I am not going to use this money until at least 30 more years, maybe more. I am therefore 'swinging for the fences' as you say :D

Olemiss540
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Re: Fidelity HSA-how are you investing the funds?

Post by Olemiss540 » Sat Mar 23, 2019 6:57 am

I am in the new fidelity zero equity funds. Max growth please!
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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Re: Fidelity HSA-how are you investing the funds?

Post by harvestbook » Sat Mar 23, 2019 8:04 am

We have about 80 percent in the Zero Total Stock Market fund and 20 percent in the Zero international fund.
However, we use an HSA at our local credit union for out-of-pocket reimbursement paying 2.5 percent, and we put in about our expected health spending for the year in there. We're not wealthy enough to afford a separate backdoor retirement fund so this will all be used for health care sooner or later. If we were, I'd have about 20 percent in bonds.
I'm not smart enough to know, and I can't afford to guess.

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4nwestsaylng
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Re: Fidelity HSA-how are you investing the funds?

Post by 4nwestsaylng » Sun Mar 24, 2019 12:11 am

camillus wrote:
Fri Mar 22, 2019 9:21 pm
An alternative is to view the HSA as only one component of your larger portfolio with a singular AA, and instead to maximize the tax advantages of the HSA. For this reason, it would actually be prudent to hold 100% equities in your HSA. You have to hold your equities somewhere, Roth IRAs and HSAs are the best place to do that.

Example:
(Many retirees will have these accounts in the same relative sizes)

Relatively small HSA - 100% equities
Relatively small Roth IRA - 100% equities
Taxable - tax efficient equities and bonds as allowed
Huuge Traditional IRA - All of your bonds, remainder of equities

TOTAL AA: 50/50

Another advantage to this approach is that you might be able to rebalance to your chosen asset allocation with 1 transaction in your traditional IRA.
Good points,I will probably up the equity portion in the HSA, but still keep some bonds in it, as I want to have liquidity if the funds are needed for medical expenses when the equity market is down.

MikeMak27
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Re: Fidelity HSA-how are you investing the funds?

Post by MikeMak27 » Sun Mar 24, 2019 12:39 am

I moved from Optum bank where i was invested in the Dreyfus Small Cap S&P 600 fund. I am now invested in IJR Small Cap S&P 600 etf and have gone from an expense ratio of around 0.5% to 0.07%. I LOVE FIDELITY!!!
Mac 4 fund portfolio: 45% US small cap value (IJS, VBR), 40% Emerging Markets (IEMG, VWO, FPMAX), 10% long term US treasuries (TLT), 5% US REITS (VNQ)

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Re: Fidelity HSA-how are you investing the funds?

Post by pasadena » Sun Mar 24, 2019 12:45 am

camillus wrote:
Fri Mar 22, 2019 9:21 pm
An alternative is to view the HSA as only one component of your larger portfolio with a singular AA, and instead to maximize the tax advantages of the HSA. For this reason, it would actually be prudent to hold 100% equities in your HSA. You have to hold your equities somewhere, Roth IRAs and HSAs are the best place to do that.

Example:
(Many retirees will have these accounts in the same relative sizes)

Relatively small HSA - 100% equities
Relatively small Roth IRA - 100% equities
Taxable - tax efficient equities and bonds as allowed
Huuge Traditional IRA - All of your bonds, remainder of equities

TOTAL AA: 50/50

Another advantage to this approach is that you might be able to rebalance to your chosen asset allocation with 1 transaction in your traditional IRA.
This is OT for this post, but I'm thinking about reviewing my asset locations in this manner. However I'm blocked by the fact that my contributions to each account are unequal, both in amount and time-wise.

For example, if I front-load my 401(k) over a few months, then back-load my (mega backdoor) Roth IRA over the rest of the year, I end up having to basically rebalance after each contribution, vs. maintaining an easy mirrored allocation. Any advice?

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Re: Fidelity HSA-how are you investing the funds?

Post by camillus » Sun Mar 24, 2019 1:21 am

pasadena wrote:
Sun Mar 24, 2019 12:45 am
Any advice?
I suppose you could do a few things:
1) Contribute as you are now and just rebalance once, twice, or a few times a year. Over time the size of your yearly contributions will become smaller relative to your total balance, so your AA will be less out of whack. This is more or less what I do. I just allow for larger "bands" for rebalancing.
2) If it's easy to set up, you could have all of your contributions going in split to your asset allocation, ie, your 1000 contribution goes in as 500 domestic, 300 international, 200 bonds. Once a year you rebalance/relocate everything for tax efficiency.

I find that contributing for a few months to one account vs another (and one component of my AA vs another) doesn't actually - surprisingly - move the needle on my AA very much.

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Re: Fidelity HSA-how are you investing the funds?

Post by Rob1 » Sun Mar 24, 2019 1:30 am

Eno Deb wrote:
Fri Mar 22, 2019 8:11 pm
I live in California which doesn't recognize HSAs (i.e. you have to pay state tax on dividends and capital gains). To keep my life simple I have invested everything in one of Fidelity's treasury bond index funds (state tax exempt). It's a rather small amount anyway (it's only the third year that I'm eligible for HSA contributions), so I don't sweat it too much.
Big Dog wrote:
Sat Mar 23, 2019 12:02 am
California resident, so invested 100% in FUAMX, Treasury Bond.
Even with California not recognizing HSAs, isn’t it still best to hold some sort of stock fund in an HSA? Wouldn’t the expected overall financial benefit outweigh the state tax issue?

Of course I can see not wanting to do so given it’s more complicated (having to track and report on CA tax returns).

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Re: Fidelity HSA-how are you investing the funds?

Post by DonIce » Sun Mar 24, 2019 1:45 am

Right now 100% ITOT

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Re: Fidelity HSA-how are you investing the funds?

Post by Eno Deb » Sun Mar 24, 2019 12:45 pm

Rob1 wrote:
Sun Mar 24, 2019 1:30 am
Even with California not recognizing HSAs, isn’t it still best to hold some sort of stock fund in an HSA? Wouldn’t the expected overall financial benefit outweigh the state tax issue?

Of course I can see not wanting to do so given it’s more complicated (having to track and report on CA tax returns).
Right now the amount in my HSA is just too small for me to bother. For tax-free growth I much prefer my Roth IRA, which is (and will remain) much bigger than the HSA due to backdoor and mega-backdoor Roth contributions (and is not restricted to medical expenses for tax-free withdrawals).

Another thing to consider is that CA taxes capital gains as regular income, i.e. depending on your income situation selling the stocks in an HSA later may incur a very significant amount of taxes.

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Re: Fidelity HSA-how are you investing the funds?

Post by dogagility » Sun Mar 24, 2019 1:52 pm

Maximizing growth potential because of no taxes (ever). 100% FZILX (zero intl index)
Taking "risk" since 1995.

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Re: Fidelity HSA-how are you investing the funds?

Post by Rob1 » Sun Mar 24, 2019 3:11 pm

Eno Deb wrote:
Sun Mar 24, 2019 12:45 pm
Rob1 wrote:
Sun Mar 24, 2019 1:30 am
Even with California not recognizing HSAs, isn’t it still best to hold some sort of stock fund in an HSA? Wouldn’t the expected overall financial benefit outweigh the state tax issue?

Of course I can see not wanting to do so given it’s more complicated (having to track and report on CA tax returns).
Right now the amount in my HSA is just too small for me to bother. For tax-free growth I much prefer my Roth IRA, which is (and will remain) much bigger than the HSA due to backdoor and mega-backdoor Roth contributions (and is not restricted to medical expenses for tax-free withdrawals).

Another thing to consider is that CA taxes capital gains as regular income, i.e. depending on your income situation selling the stocks in an HSA later may incur a very significant amount of taxes.
Good point regarding CA tax on capital gains.

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Re: Fidelity HSA-how are you investing the funds?

Post by Big Dog » Sun Mar 24, 2019 3:25 pm

Even with California not recognizing HSAs, isn’t it still best to hold some sort of stock fund in an HSA? Wouldn’t the expected overall financial benefit outweigh the state tax issue?
Tough call. I only have a couple of years in an HSA, and just count it as part of my bond allocation. The annual record keeping and tax reporting is just not worth it to me. With a Treasury fund, its no-fuss, no muss.

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Re: Fidelity HSA-how are you investing the funds?

Post by whodidntante » Sun Mar 24, 2019 3:38 pm

dogagility wrote:
Sun Mar 24, 2019 1:52 pm
Maximizing growth potential because of no taxes (ever). 100% FZILX (zero intl index)
Same here.

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Re: Fidelity HSA-how are you investing the funds?

Post by Eno Deb » Sun Mar 24, 2019 4:09 pm

Big Dog wrote:
Sun Mar 24, 2019 3:25 pm
Tough call. I only have a couple of years in an HSA, and just count it as part of my bond allocation. The annual record keeping and tax reporting is just not worth it to me. With a Treasury fund, its no-fuss, no muss.
Yup, same situation for me. Although, based on my very limited experience with the Fidelity HSA so far it seems there is really no need for record keeping, since Fidelity do record the tax lots in their HSA. I have also set things up to keep the number of tax lots for the bond fund small by directing the monthly dividends to a state tax exempt MM fund with a fixed NAV (FDLXX), rather than having them reinvested. Once a year I sweep it all back into the bond fund together with my annual contribution. That should minimize the headaches when I eventually sell shares.
Last edited by Eno Deb on Sun Mar 24, 2019 4:11 pm, edited 1 time in total.

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Re: Fidelity HSA-how are you investing the funds?

Post by Rob1 » Sun Mar 24, 2019 4:11 pm

Eno Deb wrote:
Sun Mar 24, 2019 4:09 pm
Big Dog wrote:
Sun Mar 24, 2019 3:25 pm
Tough call. I only have a couple of years in an HSA, and just count it as part of my bond allocation. The annual record keeping and tax reporting is just not worth it to me. With a Treasury fund, its no-fuss, no muss.
Yup, same situation for me. Although, based on my very limited experience with the Fidelity HSA so far it seems there is really no need for record keeping, since Fidelity do record the tax lots in their HSA. I have also set things up to keep the number of tax lots for the bond fund small by directing the monthly dividends to a state tax exempt MM fund (FDLXX), rather than having them reinvested. Once a year I sweep it all back into the bond fund together with my annual contribution. That should minimize the headaches when I eventually sell shares.
This is helpful. Thanks!

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Re: Fidelity HSA-how are you investing the funds?

Post by veggivet » Sun Mar 24, 2019 4:33 pm

I remember reading somewhere, (maybe in the Wiki) that bonds are the favored investment in an HSA. Is that correct?
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Re: Fidelity HSA-how are you investing the funds?

Post by dogagility » Sun Mar 24, 2019 4:59 pm

veggivet wrote:
Sun Mar 24, 2019 4:33 pm
I remember reading somewhere, (maybe in the Wiki) that bonds are the favored investment in an HSA. Is that correct?
It depends on the time horizon for when you expect to spend the HSA. If you spend it each year, then it should be in a fixed income asset like a bond fund, CD, etc.

If you treat your HSA as a retirement asset and you're in the accumulation phase, then investing in a stock fund is fine. If you go this route, then investing it aggressively may be preferred since you won't pay federal income tax on any of the growth (paying for a qualified expense).
Taking "risk" since 1995.

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