No fees with HSA Bank...is it worth it?

[scott]

I recently transferred my health savings account to HSA Bank and was told if I maintain a $5000 daily balance there will be no fees on the banking side or the investment side with TD Ameritrade.  The monthly fees would be $5.50 if I kept the entire amount invested. Is it worth avoiding the fees, or would it be better to keep it all invested?

[retinadoc]

I have $5000 in cash and the rest in TD Ameritrade. Not a rational decision, I'll admit, as the opportunity cost of keeping that money on the sidelines is greater than the $5/mo... but I really don't like fees. I think about it like part of my "health care" emergency fund, which is exactly what it's supposed to be!

[scott]

I agree about not liking fees...but I also think there could be massive lost opportunity cost. If my investment only made 1%, the $6750 contribution would grow to a $6818 in one year thereby covering my $66 annual fee.

[retinadoc]

I will probably pay the fees when the balance of my HSA increases enough to make the overall expense ratio more palatable.

For example, suppose there I keep $100 in the cash account and the rest in TD Ameritrade index funds. Here are the overall account expense ratios for account totals:

cash	investment portion	total	annual fee	ER
100	6650	6750	60	0.89%
100	13400	13500	60	0.44%
100	20150	20250	60	0.30%
100	26900	27000	60	0.22%
100	33650	33750	60	0.18%

 

 

[The White Coat Investor]

I pay the fees and invest the money.

[The White Coat Investor]

retinadoc wrote:

I will probably pay the fees when the balance of my HSA increases enough to make the overall expense ratio more palatable.

For example, suppose there I keep $100 in the cash account and the rest in TD Ameritrade index funds. Here are the overall account expense ratios for account totals:

cash	investment portion	total	annual fee	ER
100	6650	6750	60	0.89%
100	13400	13500	60	0.44%
100	20150	20250	60	0.30%
100	26900	27000	60	0.22%
100	33650	33750	60	0.18%

 

 

Click to expand...

Wrong way to look at it. It's really just the first $5K you care about. So $5.50 a month x 12 months = $66 a year. So $66 out of $5000, or a little more than 1%. The account pays like 0.5%. So if your return is 2%+ investing, you're coming out ahead. Seems a pretty easy bet to make.

[retinadoc]

If you use your HSA debit card to pay for health expenses, do you need to have that amount available in cash or will it automatically draw down your investment account?

[The White Coat Investor]

retinadoc wrote:

If you use your HSA debit card to pay for health expenses, do you need to have that amount available in cash or will it automatically draw down your investment account?

Click to expand...

It needs to be in cash. They won't even pull the amount for the fees from TD Ameritrade. When I got behind on fees they sent me a letter about it so I had to transfer a few bucks to HSA Bank from TD Ameritrade.

[scott]

I'm looking at my HSA account as just another vehicle for retirement.  I'm not planning on actually using the money to pay for medical expenses - I'll pay those expenses out of pocket. It does seem that paying the annual expenses and keeping the majority of the money invested will provide for better long term returns.

[Zaphod]

I dont use it as an actual HSA, just a retirement vehicle. I think the fee is lame, but invest the whole thing and pay the fee.

[The White Coat Investor]

scott wrote:

I’m looking at my HSA account as just another vehicle for retirement.  I’m not planning on actually using the money to pay for medical expenses – I’ll pay those expenses out of pocket. It does seem that paying the annual expenses and keeping the majority of the money invested will provide for better long term returns.

Click to expand...

Not true. You are probably better off spending it on health care now than on a sailboat at age 65. It's only triple tax free if spent on health care.

[Zaphod]

Well as long as you have receipts for medical things you can offset those later no matter how you actually spent it. Im saving it until later, it will take a massive shift somewhere for there not to be enough HC dollar demand to use it after retirement.

 

[scott]

True. I meant to clarify - not to spend on CURRENT medical expenses - I'll pay those expenses out of pocket. I'm sure I'll have plenty of medical expenses in retirement to gain the triple tax free benefit. And like Zaphod said, I can always hold onto medical receipts as I near retirement.

[E5797]

Is it possible to pay for fees without using money in the account? Would it be better to let the money that is in the account grow tax free and write a check out for the fees from other funds?