Best place for a small HSA

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finetuning
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Best place for a small HSA

Post by finetuning » Thu Sep 13, 2018 6:54 pm

DW started a new job and we signed up for her HDHP with HSA. I am now self employed, but will likely be getting a new "regular" job in the next few months. The rates on her health insurance are pretty high, so I predict that we will switch to my future employer's plan once I do get a new job. As I was contributing to an HSA throughout the year, she will only contribute ~$2,000 for the remainder of 2018. Her employer does not have a designated HSA, and we need to set up our own, and direct them to deposit into it through payroll deduction.

Our strategy has been to save the HSA money for retirement. I have a large balance with HSA bank, but that doesn't help us since HSAs aren't joint accounts. So I'm trying to figure out where it makes the most sense to set up an HSA with a tiny balance that may cease contributions in a few months.

Most recommended options seem to charge $30-40 per year, which is high for $2,000. Saturna (one option recommended by the finance buff) looked appealing as only charging a fee to trade, but they have an account inactivity fee if you don't trade once per year.

So the best I can come up with is either:

1. Saturna and pay the inactivity fee
2. "The HSA Authority" at $36/yr fully invested
3. OR just find the cheapest place to park the cash (is there a free option if you don't invest?), wait and see what happens insurance wise, and if we really do end up with $2K stranded, just cash it out on qualified medical expenses and throw it in a taxable investment account.

What do you think?

AerialP
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Re: Best place for a small HSA

Post by AerialP » Thu Sep 13, 2018 6:58 pm

Lively it. Excellent transfer customer service, almost seamless. Park it with them and enjoy cruising with it out out sight out of mind for a while.

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indexfundfan
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Re: Best place for a small HSA

Post by indexfundfan » Thu Sep 13, 2018 7:10 pm

You can save the money with Lively. There are no fees for a basic HSA (interest bearing) account. When you ready to invest, add the investing option for $2.50 a month. This links to TDAM which gives you access to commission-free ETFs.

https://livelyme.com/pricing/

Here's the original thread on Lively

viewtopic.php?f=2&t=228522
Last edited by indexfundfan on Thu Sep 13, 2018 7:13 pm, edited 1 time in total.
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finetuning
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Re: Best place for a small HSA

Post by finetuning » Thu Sep 13, 2018 7:12 pm

AerialP wrote:
Thu Sep 13, 2018 6:58 pm
Lively it. Excellent transfer customer service, almost seamless. Park it with them and enjoy cruising with it out out sight out of mind for a while.
That looks like a good option. If I'm understanding it right, it's free, and $2.50/mo with investing with TD Ameritrade? If so, then can anyone tell me why is HSA Bank ever recommended? I believe I'm paying them $2.50 + $3.00 in fees per month and TD Ameritrade is their investment platform as well.

Maybe I should just move everything to Lively. Pain in the butt, but I'd save $36 per year for the rest of my life!

SpideyIndexer
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Re: Best place for a small HSA

Post by SpideyIndexer » Thu Sep 13, 2018 7:16 pm

You can make contributions for 2018 up to your tax filing deadline, so your wife's 2018 contribution can be delayed until April 15 2019. Not sure of your ages, if over 50 your wife could also make a catchup contribution for both years (and future years) which will help ramp up the HSA balance.

Otherwise, yes, cashing out a small balance via qualified expenses is a valid strategy. I doubt you'll find s custodian with expenses much lower than about $2.50/month. Perhaps if your wife is almost 50 it might make sense to suffer through a couple years of a small balance until catchups can start. Run the numbers.

finetuning
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Re: Best place for a small HSA

Post by finetuning » Thu Sep 13, 2018 7:29 pm

SpideyIndexer wrote:
Thu Sep 13, 2018 7:16 pm
You can make contributions for 2018 up to your tax filing deadline, so your wife's 2018 contribution can be delayed until April 15 2019. Not sure of your ages, if over 50 your wife could also make a catchup contribution for both years (and future years) which will help ramp up the HSA balance.

Otherwise, yes, cashing out a small balance via qualified expenses is a valid strategy. I doubt you'll find s custodian with expenses much lower than about $2.50/month. Perhaps if your wife is almost 50 it might make sense to suffer through a couple years of a small balance until catchups can start. Run the numbers.
Thanks for the tip. I'd rather do payroll deductions to shield against FICA tax as well vs a lump sum prior year in 2019, but that's a good point. Not over 50, so won't have any catchup, but probably going with Lively as recommended above and then decide whether to cash it out.

Seems like it's slightly better to cash out, plus simplier to just lump in with other taxable investments... am I doing this math right?

I'm weighing $30 annual cost in the Lively invested HSA vs Assuming ~6% annual returns on $2,000, that's $120 of growth taxed at some combination of dividend and capital gains tax rate (eventually) of around 15% or $18 per year (in the end, once I sell).

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SevenBridgesRoad
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Re: Best place for a small HSA

Post by SevenBridgesRoad » Thu Sep 13, 2018 11:17 pm

I'll add my vote for Lively.com. Have moved one old HSA there and once I retire end of this month, I'll transfer the current employer one as well. Very easy process.
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jadedfalcons
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Re: Best place for a small HSA

Post by jadedfalcons » Sun Sep 16, 2018 6:19 am

At Saturna, the inactivity fee is only $12.50/yr if you hold mutual funds. That's still quite a bit cheaper than Lively. You can also reinvest your dividends for free with mutual funds, whereas stocks cost $1 to reinvest dividends. Since you can buy Admiral class funds anyways, not sure why you'd want to bother with the ETFs.

Having said all that, I probably would've gone with Lively if they'd existed when I did mine. Saturna is very old school, filling out a lot of paperwork and mailing it in. They're cheaper, but convenience is worth something too, as you even have to contact them via phone or email just to transfer money to them.

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indexfundfan
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Re: Best place for a small HSA

Post by indexfundfan » Sun Sep 16, 2018 11:00 am

jadedfalcons wrote:
Sun Sep 16, 2018 6:19 am
At Saturna, the inactivity fee is only $12.50/yr if you hold mutual funds. That's still quite a bit cheaper than Lively. You can also reinvest your dividends for free with mutual funds, whereas stocks cost $1 to reinvest dividends. Since you can buy Admiral class funds anyways, not sure why you'd want to bother with the ETFs.

Having said all that, I probably would've gone with Lively if they'd existed when I did mine. Saturna is very old school, filling out a lot of paperwork and mailing it in. They're cheaper, but convenience is worth something too, as you even have to contact them via phone or email just to transfer money to them.
I moved my HSA from Saturna to Lively. The disadvantage with Saturna is when you have regular contributions. The fee to purchase a Vanguard or Fidelity mutual fund is $25. I guess if you purchase only once a year, you are still ahead by $5 compared to Lively's 12 x $2.50 = $30 a year. Also, as mentioned previously, the fee for Lively comes out from your linked bank account and does not eat into your HSA contribution.
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finetuning
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Re: Best place for a small HSA

Post by finetuning » Thu Sep 20, 2018 2:31 pm

Thanks everyone! Lot's of good advice here and I appreciate it.

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