First year HSA question

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marstaton4
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First year HSA question

Post by marstaton4 » Mon Jan 09, 2012 8:49 am

This is my first year with an HSA and I'm just looking for confirmation that what I'm doing is correct. I was originally going to open up a HSA Administrators account but with fees being approximately 60-70 for the first year and only being able to put in $2800 (employer gives me $250) of money that isn't deducted from paycheck ie paying SS tax, looks like I may have a hard time getting a decent return. Seems I may be better putting the whole year of money in my work sponsored account while not getting any significant interest, but getting a guaranteed tax savings. Any thoughts?

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grabiner
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Re: First year HSA question

Post by grabiner » Mon Jan 09, 2012 11:41 pm

marstaton4 wrote:This is my first year with an HSA and I'm just looking for confirmation that what I'm doing is correct. I was originally going to open up a HSA Administrators account but with fees being approximately 60-70 for the first year and only being able to put in $2800 (employer gives me $250) of money that isn't deducted from paycheck ie paying SS tax, looks like I may have a hard time getting a decent return. Seems I may be better putting the whole year of money in my work sponsored account while not getting any significant interest, but getting a guaranteed tax savings. Any thoughts?
This is likely to be a good idea. If your employer's account has no fees, and the alternative account has $62 in fees, you would need to earn 2% more interest on the $3100 to make it up. Probably the best thing to do is to accumulate money in your employer's account for several years, then transfer it all at once.
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stlutz
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Re: First year HSA question

Post by stlutz » Tue Jan 10, 2012 1:10 am

This is my first year with an HSA and I'm doing the same thing--accumulate money in the crappy bank that the company uses and the roll it over to either Alliant or HSA Administrators later once I have enough of a balance to make it worth worrying about.

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White Coat Investor
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Re: First year HSA question

Post by White Coat Investor » Tue Jan 10, 2012 2:10 am

What are you planning to do with the HSA? Invest it or spend it on healthcare. If you're going to spend it, leave it with the employer option. If you're planning to invest it, might as well get started at HSA administrators. It's such a pain to move things around, I'd just start where you want to end up in the beginning. It only takes a 2.3% return to make up for the fees even at your low balances. After 2-3 years, they'll hardly be noticeable.
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wlpotts
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Re: First year HSA question

Post by wlpotts » Tue Jan 10, 2012 4:04 am

EmergDoc wrote:What are you planning to do with the HSA? Invest it or spend it on healthcare. If you're going to spend it, leave it with the employer option. If you're planning to invest it, might as well get started at HSA administrators. It's such a pain to move things around, I'd just start where you want to end up in the beginning. It only takes a 2.3% return to make up for the fees even at your low balances. After 2-3 years, they'll hardly be noticeable.

I agree with EmergDoc. The hidden maintenance fees with many default HSA banks are frustrating. Please do not forget the fee for eventually transferring the funds is absurd.

I too would recommend you just start with the providor that offers you the best options and fee structure that you want. One or two years of contributions is a drop in the bucket for establishing your future.

Five+ years ago, when I first started my HSA account with my default bank, I could only invest in a saving account vehicle at a fixed APR% unless I had X dollars accumulated. After a few quarters of seeing my balances be fee adjusted to the downside, I went with HSAadministrators early on and invested what little I had into the VG Wellington Admiral Fund(65% equity/35% bond which has a hefty yield).

While the fund selection is completely up you, the balanced VG Wellington fund has provided a positive outcome for me. I note this for you as the fund presently has a 2.81% yield and an expense ratio of only .22%. This may offset any low balance account maintenance fees you may be subjected to whether you stay at your default bank or decide to switch to an alternative HSA providor.

You'll come out ahead soon enough if you look at the big picture and not focus on the myopic view.

Good Luck,

wlpotts
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