Investing my HSA

[cozmopak]

I have HSA money deposited into a savings account at a local bank and would love to start investing it.  I have total control over that money and can self-direct it as I wish, but want to make sure I invest in tax-advantaged funds.  Does anyone have experience with this?

My wife also has an HSA through HealthEquity, and I believe they make it easy to invest with Vanguard.

 

[G]

I am 100% in total market.  Not planning on using the money for a few decades.

[Lithium]

I also use HealthEquity, but they charge a hefty wrap fee (0.4% a year) on the Vanguard funds.  My HSA has grown to the point that this is getting difficult to justify.  I am probably going to take the plunge and move that over to Saturna brokerage, which as far as I can tell is the only custodian that lets you invest the entire balance of your HSA and doesn't charge asset-based fees.  There is a long thread on Bogleheads discussing Saturna.  Not sure what I'll invest it in over there (their commission schedule seems to be confusing), but I'll plan to post updates.

[jfoxcpacfp]

Go to HSA Search to compare custodians and find the one that is right for your specific goals.

[Zaphod]

What do you mean tax advantaged investing within your HSA?

[cozmopak]

I just want to make sure that if I invest these, I can still redeem them tax free for medical expenses. What's the process for doing that?

[Zaphod]

I dont know of any restrictions for anything within your HSA, its what you use it for that matters. Could be wrong so if anyone else knows they will surely say.

[jfoxcpacfp]

Zaphod is correct. The only limitations imposed on what happens within the HSA are those imposed by the custodian. If you are planning to use your HSA for medical expenses within the next 5 years, don't invest and keep your funds liquid.

[The White Coat Investor]

cozmopak wrote:

I have HSA money deposited into a savings account at a local bank and would love to start investing it.  I have total control over that money and can self-direct it as I wish, but want to make sure I invest in tax-advantaged funds.  Does anyone have experience with this?

My wife also has an HSA through HealthEquity, and I believe they make it easy to invest with Vanguard.

 

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You'll need to transfer your HSA to somewhere that allows you to invest it. I use HSA Bank, which allows you to invest at TD Ameritrade, which allows you to buy Vanguard ETFs commission free.

Johanna mentions don't invest money in an HSA that you may spend in the next five years. I'm much more flexible on that. Most high income professionals have enough money in their paychecks to pay cash for their health care deductibles and co-insurance. So if the market is down when you want to spend HSA money, you just use taxable money and then in a few years when the market recovers you take the money out of the HSA. If you don't have enough money in your e-fund/earnings you may not want to do this strategy.

[cozmopak]

So I can withdraw the HSA money that is currently in my local bank, and deposit it into HSA bank?

[Hank]

Don't withdraw the money, transfer it to a new HSA at HSA Bank (or elsewhere).

Pay for routine healthcare expenses out of pocket (don't raid the HSA), but keep the receipts.  You want the money to grow tax free as long as possible.  You also want to make sure the money in your HSA is true triple tax free.  No taxes putting the money in, no taxes on growth, no taxes when taking the money out if you have qualified healthcare receipts for the money you withdraw (even years later).

[adventure]

Hank wrote:

Don’t withdraw the money, transfer it to a new HSA at HSA Bank (or elsewhere).

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Similiar to a 401k -> IRA, there is essentially a rollover process:

http://www.hsabank.com/hsabank/members/transfer-rollover-hsa-funds

and (example) form here:

http://www.hsabank.com/~/media/Files/Custom/sentinel_trans_roll

 

Set up the new HSA, call/email/login/etc, get the form, fill it out, then they'll pull the money form the old one. Conversely, you can sometimes have the old one send the money to the new one. Up to you. I usually let the new on do the pulling. Better aligns incentives to make sure it gets done in a timely manner.

[Panscan]

How do you take the money out of the hsa I thought you could only do that to pay health care expenses or when 59 1/2?