Where should I open my HSA? Fidelity?

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tomwood
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Where should I open my HSA? Fidelity?

Post by tomwood » Tue Jul 23, 2019 10:29 pm

This year will be the first time I have a high deductible health insurance plan and will be eligible for an HSA account. Searching online I’ve learned the insurance company themselves will act as the bank and hold the HSA money as will a list of other companies. Fidelity was the only company I was quite familiar with and I appreciate their 0% or nearly 0% fees on index funds I’d likely be using in my HSA account. Does vanguard offer an HSA account?

Can those with more HSA experience please help direct me as to the best place to open an HSA or at least places to avoid? Any other HSA tips are welcome

terran
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Re: Where should I open my HSA? Fidelity?

Post by terran » Tue Jul 23, 2019 10:37 pm

If your employer offers payroll deduction into an HSA then you should open an account with their chosen custodian as payroll deducted contributions often avoid not only income tax, but FICA tax as well. If this isn't an option, or if you'd like to open a second account to which you'll transfer money every so often to invest, then Fidelity is what I would go with.

Topic Author
tomwood
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Re: Where should I open my HSA? Fidelity?

Post by tomwood » Tue Jul 23, 2019 10:44 pm

terran wrote:
Tue Jul 23, 2019 10:37 pm
If your employer offers payroll deduction into an HSA then you should open an account with their chosen custodian as payroll deducted contributions often avoid not only income tax, but FICA tax as well. If this isn't an option, or if you'd like to open a second account to which you'll transfer money every so often to invest, then Fidelity is what I would go with.
Thank you.

I will be a federal employee soon. Do you know if they offer payroll deductions if I use their chosen custodian?

terran
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Re: Where should I open my HSA? Fidelity?

Post by terran » Tue Jul 23, 2019 11:02 pm

Sorry, I don't know anything about federal employee benefits. It looks like there are lots of different plans, and it's state dependent. You could start here: https://www.opm.gov/healthcare-insurance/healthcare/

Edit: from what I've gathered from a quick perusal of https://www.opm.gov/healthcare-insuranc ... questions/ each insurance company that you can pick has there own HSA custodian and "Many Federal employees who are enrolled in HDHPs are eligible to make pre-tax allotments to their HSAs through their payroll office." The easiest thing to do is probably wait until you start and then talk to payroll.
Last edited by terran on Tue Jul 23, 2019 11:08 pm, edited 1 time in total.

TravelforFun
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Re: Where should I open my HSA? Fidelity?

Post by TravelforFun » Tue Jul 23, 2019 11:06 pm

My HSA account is at Optum. Have had it there for quite a few years and I'm happy with it. I pick my own investment and the trading cost is low and there's no monthly fee.

TravelforFun

willyd123
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Re: Where should I open my HSA? Fidelity?

Post by willyd123 » Wed Jul 24, 2019 1:49 pm

I've used LivelyHSA for about two years and have been very pleased. They, just like Fidelity, do not charge fees. With Lively, you can also invest 100% of your HSA assets (they don't have a minimum cash holding requirement) and you invest through their partner TD Ameritrade who offers plenty of commission-free and low cost investments. I'm not as familiar with Fidelity so I can't give you a compare and contrast.

Good luck!

terran
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Re: Where should I open my HSA? Fidelity?

Post by terran » Wed Jul 24, 2019 1:56 pm

willyd123 wrote:
Wed Jul 24, 2019 1:49 pm
I've used LivelyHSA for about two years and have been very pleased. They, just like Fidelity, do not charge fees. With Lively, you can also invest 100% of your HSA assets (they don't have a minimum cash holding requirement) and you invest through their partner TD Ameritrade who offers plenty of commission-free and low cost investments. I'm not as familiar with Fidelity so I can't give you a compare and contrast.

Good luck!
I've had both. I switched as soon as Fidelity announced their HSA, and then a few days later Lively announced they were removing investing fees. I like Fidelity because you can invest right in the account (100% of assets can be invested with Fidelity too) without moving the invested amount to another account. I also have other accounts with Fidelity, so it's nice to have them in the same place. If Lively had been a little quicker with their announcement and I didn't have other accounts at Fidelity I probably wouldn't have moved the account, so either is a good option.

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sigmadave_2000
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Re: Where should I open my HSA? Fidelity?

Post by sigmadave_2000 » Wed Jul 24, 2019 2:14 pm

I am with HealthEquity. They charge 0.033%/month AUM (Assets under management) fee ==> that comes out to a bit over 0.40%/year. This is offset by the ultra low fee Vanguard Index funds I can invest in. There is no transaction fee to buy into the funds, and they the costs of the funds is very low because they can get you into the Admiral and Institutional Class shares. I am paying ~ 0.07%/year for those funds. They don't put your money in a third party brokerage account.

Your first 2,000$ goes into a cash account that pays 0% interest. Customer service has been okay, but I would suggest funding electronically rather than mailing in checks because they lost one of my checks. I don't know if Fidelity charges an AUM fee, but they have a lot of low cost Fidelity ETF's and iShares that you can buy with no transaction fees. So if they don't charge an AUM fee, Fidelity might be a better option.

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FIREchief
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Re: Where should I open my HSA? Fidelity?

Post by FIREchief » Wed Jul 24, 2019 3:03 pm

During my days at Megacorp and after FIRE, I had the "pleasure" of dealing with three or four different HSA providers. It was a truly happy day when Megacorp decided to switch to Fidelity as HSA provider (this was before Fido offered them to the public). As others have suggested, you may benefit from (or be required to) use another provider for your payroll contributions, but it still may be beneficial to open a Fidelity HSA for investing any surpluses.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

lassevirensghost
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Re: Where should I open my HSA? Fidelity?

Post by lassevirensghost » Wed Jul 24, 2019 3:17 pm

If you have a less than ideal one that your employer uses, put the money into that to get the employer contributions and tax benefits, then once a year roll it over into the vendor of your choice.
“Groucho, how do you invest your money?” | “All in bonds.” | “But Groucho, they don’t pay much return.” | “They do when you have a lot of em!”

Topic Author
tomwood
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Re: Where should I open my HSA? Fidelity?

Post by tomwood » Wed Jul 24, 2019 3:32 pm

lassevirensghost wrote:
Wed Jul 24, 2019 3:17 pm
If you have a less than ideal one that your employer uses, put the money into that to get the employer contributions and tax benefits, then once a year roll it over into the vendor of your choice.
If the fed doesn’t use fidelity, I can’t use them directly either? I just move the money Annually? Am I understanding you correctly?

MotoTrojan
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Re: Where should I open my HSA? Fidelity?

Post by MotoTrojan » Wed Jul 24, 2019 3:34 pm

Unless your admin has poor choices/fees it’s much easier to stick with if.

megabad
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Re: Where should I open my HSA? Fidelity?

Post by megabad » Wed Jul 24, 2019 3:42 pm

tomwood wrote:
Wed Jul 24, 2019 3:32 pm
lassevirensghost wrote:
Wed Jul 24, 2019 3:17 pm
If you have a less than ideal one that your employer uses, put the money into that to get the employer contributions and tax benefits, then once a year roll it over into the vendor of your choice.
If the fed doesn’t use fidelity, I can’t use them directly either? I just move the money Annually? Am I understanding you correctly?
You can use any HSA provider. Prior posters were simply stating that you would be giving up any potential FICA tax savings if you did. One way to get the FICA tax savings but also use a low cost provider would be to use employer plan with direct paycheck deductions and then rollover to another plan as indicated.

In general, barring FICA tax considerations, I would select either Lively or Fidelity.

TropikThunder
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Re: Where should I open my HSA? Fidelity?

Post by TropikThunder » Wed Jul 24, 2019 5:09 pm

sigmadave_2000 wrote:
Wed Jul 24, 2019 2:14 pm
I am with HealthEquity. They charge 0.033%/month AUM (Assets under management) fee ==> that comes out to a bit over 0.40%/year. This is offset by the ultra low fee Vanguard Index funds I can invest in. There is no transaction fee to buy into the funds, and they the costs of the funds is very low because they can get you into the Admiral and Institutional Class shares. I am paying ~ 0.07%/year for those funds. They don't put your money in a third party brokerage account.

Your first 2,000$ goes into a cash account that pays 0% interest. Customer service has been okay, but I would suggest funding electronically rather than mailing in checks because they lost one of my checks. I don't know if Fidelity charges an AUM fee, but they have a lot of low cost Fidelity ETF's and iShares that you can buy with no transaction fees. So if they don't charge an AUM fee, Fidelity might be a better option.
Stated differently, you’re paying almost 50 bp for institutional Vanguard funds, and the $2,000 hostage account is a deal-breaker for many.

eer_no_evil
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Re: Where should I open my HSA? Fidelity?

Post by eer_no_evil » Wed Jul 24, 2019 5:27 pm

I have the same Health Equity "hostage" $2000 situation- hate it. Looking into the annual rollover into my old HSA at Fidelity- so much better from a fee and consolidation standpoint.

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FIREchief
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Re: Where should I open my HSA? Fidelity?

Post by FIREchief » Wed Jul 24, 2019 5:39 pm

megabad wrote:
Wed Jul 24, 2019 3:42 pm
One way to get the FICA tax savings but also use a low cost provider would be to use employer plan with direct paycheck deductions and then rollover to another plan as indicated.
While true rollovers are allowed, a direct trustee to trustee transfer is likely easier and safer. That's probably what you meant...… 8-)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

megabad
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Re: Where should I open my HSA? Fidelity?

Post by megabad » Wed Jul 24, 2019 5:45 pm

FIREchief wrote:
Wed Jul 24, 2019 5:39 pm
megabad wrote:
Wed Jul 24, 2019 3:42 pm
One way to get the FICA tax savings but also use a low cost provider would be to use employer plan with direct paycheck deductions and then rollover to another plan as indicated.
While true rollovers are allowed, a direct trustee to trustee transfer is likely easier and safer. That's probably what you meant...… 8-)
I would prefer this personally, but many folks have indicated transfers can be difficult depending on custodian. Theoretically, a rollover can be completed in a few days and requires essentially no action from your HSA provider. With a transfer, you are at the whim of the HSA provider so this may work well or it may not.

terran
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Re: Where should I open my HSA? Fidelity?

Post by terran » Wed Jul 24, 2019 5:49 pm

megabad wrote:
Wed Jul 24, 2019 5:45 pm
FIREchief wrote:
Wed Jul 24, 2019 5:39 pm
megabad wrote:
Wed Jul 24, 2019 3:42 pm
One way to get the FICA tax savings but also use a low cost provider would be to use employer plan with direct paycheck deductions and then rollover to another plan as indicated.
While true rollovers are allowed, a direct trustee to trustee transfer is likely easier and safer. That's probably what you meant...… 8-)
I would prefer this personally, but many folks have indicated transfers can be difficult depending on custodian. Theoretically, a rollover can be completed in a few days and requires essentially no action from your HSA provider. With a transfer, you are at the whim of the HSA provider so this may work well or it may not.
Trustee to trustee transfers also sometimes have fees, which can be another reason to do an indirect rollover.

mpsz
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Re: Where should I open my HSA? Fidelity?

Post by mpsz » Wed Jul 24, 2019 5:52 pm

I contribute to my employer's HSA provider, whoever that may be at any given time (seems to change annually) solely for the cafeteria plan tax breaks (not subject to income or FICA taxes)... and then roll over annually to Fidelity to invest the funds.
TravelforFun wrote:
Tue Jul 23, 2019 11:06 pm
My HSA account is at Optum. Have had it there for quite a few years and I'm happy with it. I pick my own investment and the trading cost is low and there's no monthly fee.

TravelforFun
That's employer-specific, so YMMV. You're getting a sweet deal.

I also have Optum and only the very most basic account is free. No investments, pays 0.00%. I could "upgrade" to 0.05% yield for $3/mo. The breakeven on that is >$72,000 sitting in cash. Investments are either $3/mo or $5.50/mo but require $2,100 or $600 in cash drag respectively. $35 fee for trustee-to-trustee transfer.

No thanks, I'll sit in cash at 0.00% and do an indirect roll over annually.

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FIREchief
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Re: Where should I open my HSA? Fidelity?

Post by FIREchief » Wed Jul 24, 2019 5:57 pm

megabad wrote:
Wed Jul 24, 2019 5:45 pm
FIREchief wrote:
Wed Jul 24, 2019 5:39 pm
megabad wrote:
Wed Jul 24, 2019 3:42 pm
One way to get the FICA tax savings but also use a low cost provider would be to use employer plan with direct paycheck deductions and then rollover to another plan as indicated.
While true rollovers are allowed, a direct trustee to trustee transfer is likely easier and safer. That's probably what you meant...… 8-)
I would prefer this personally, but many folks have indicated transfers can be difficult depending on custodian. Theoretically, a rollover can be completed in a few days and requires essentially no action from your HSA provider. With a transfer, you are at the whim of the HSA provider so this may work well or it may not.
I've always had success with having Fidelity go get the funds (i.e. pull the funds instead of having the other custodian push them). IIRC, one time I found that sending a completed VG transfer form to Fidelity worked great (i.e. a paper form that VG "required" in order to relinquish my $$$). Fidelity has a dedicated team for this and they are really, really good at what they do (including cutting through the "whims" of cumbersome custodians).
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

michaeljc70
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Re: Where should I open my HSA? Fidelity?

Post by michaeljc70 » Wed Jul 24, 2019 9:50 pm

TravelforFun wrote:
Tue Jul 23, 2019 11:06 pm
My HSA account is at Optum. Have had it there for quite a few years and I'm happy with it. I pick my own investment and the trading cost is low and there's no monthly fee.

TravelforFun
That's who I have. It was bought from Wells Fargo, so I am not sure if I am grandfathered in, but I pay no monthly fees. There are a lot of investment options (the first $1k needs to be held back though). This is an individual HSA and not an employer one though.

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