I have an HDHP with an HSA Account with my employer.
I'd like to employ a hybrid approach of using the HSA account as both a long term investment account and a savings account for current medical expenses.
The goal is achieve a happy medium between spending a moderate amount out of pocket while also trying to grow the HSA.
Please let me know what you think of the approach.
Health Insurance Details:
Co-pay: 25/75 (me/insurance)
Out of Pocket Maximum: $6500
HSA Contribution (Maximized):
Current Balance: $7500
1. Spend, out of cashflow/pocket, no more than $3000 per year (2% of gross annual income) for the initial expenses of the deductible.
2. Withdraw the remaining $3500 of deductible per year from the HSA account (at which point we would hit the OOP Max).
3. As a result of 1 and 2, the HSA would grow by contributions in a year by a minimum net amount of $3600 and a max, if no expenses, of $7100.
4. Maximum Annual Withdrawal from HSA account would be $3500.
1. $1500 in cash account per the requirements of the plan.
2. Invest 3 years worth of maximum with withdrawals ($3500 x 3) in a 50/50 mix of Vanguard ST Bond Index & Vanguard Short Term TIPS
3. Invest next 4 years worth of maximum withdrawals ($3500 x 4) in a 50/50 mix of Vanguard Total Bond Index & Vanguard Intermediate TIPS
4. Invest any additional funds in Vanguard Total World Index (Stocks)
Is that for more simplicity? The approach I have is a bit complicated.
Maybe instead, after I hit about 6 to 7 years worth of potential withdrawals maybe I just switch from Short Term to Total Bond and then any money thereafter mix in some stock.
Thus it is reasonable to have the entire HSA in one fund if it is a relatively small part of your portfolio; which one fund you use may depend on the options offered by the HSA provider (or on state taxes; use a Treasury or TIPS fund in CA or NJ to avoid state tax).
My own HSA is only 4% of my portfolio, so I have it in one fund (Vanguard Factor Value ETF), and I also hold that fund in my Roth IRA because my target holding in that fund is 20% of my portfolio.