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Which fund would you choose (if any) for your HSA?
Old 02-04-2015, 03:10 PM   #1
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Which fund would you choose (if any) for your HSA?

We have an account with HSA Administrators. They have 20-some Vanguard funds we can choose from to invest in.

Our tenative plan (still investigating) is to use our HSA as needed when retired to cover any medical expenses that put us beyond our yearly budget. If we have a healthy year, no draw downs. If we have a year with large medical expenses, we utilize the HSA as needed.

Given this projected use of our HSA, what type of fund do you think is appropriate to invest in? I would like the fund to grow, of course, but I don't want it to be so volatile that we end up drawing on it during a year when it is down significantly. We have our HSA slotted to be part of our bond allocation in our portfolio right now...

I could just keep it in the money market, but the 10 yr return on that (VMMXX) is only 1.61%.

Other choices, per Morninstar Category:

Intermediate Govt:

VFIJX - GNMA Fund Admiral (10 yr return 4.92%, ER .11)

Conservative Allocation

VSCGX - Life Strategy Conservative Growth Fund (10 yr return 5.52%, ER .15)

VASIX - Life Strategy Income (10 yr return 4.42%, ER .14)

Moderate Allocation

VSMGX - Life Strategy Moderate Growth (10 yr return 6.15%, ER .16)

VGSTX - STAR Fund (10 yr return 7.02%, ER .34)


Aggressive Allocation

VASGX - Life Strategy Growth Fund (10 yr return 6.47%, ER .17)


I am leaning towards the GNMA fund b/c of wanting stability, since we may draw from this account for medical expenses. It looks like the only fund I see that did not have a huge down year over the past 10 years.

Any feedback? Other points to consider?
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(49, married; DH 53. I am fully retired as of 2015 (well ok, I still work part-time but only because I love the job and have complete freedom to call off if I want to travel with hubby for work), DH hopes to fully retire 2018 when he turns 55 to access 401K penalty-free...although he may decide to do part-time consulting)
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Old 02-04-2015, 03:17 PM   #2
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If there is a chance that you'll use the funds in the first year (or 2 or 3), I would suggest a money market fund. Later on, you could keep some amount in a money market fund based on your historical draws from the HSA and place the rest in a fund that would complement the AA in your overall portfolio.

That's my plan.
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Old 02-04-2015, 03:24 PM   #3
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We keep our HSA in Total Stock and consider it as part of our overall AA because it makes things simple for me, but of the ones you listed, I like Star.
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Old 02-04-2015, 03:43 PM   #4
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not sure why you down selected to the choices that you did. I'm setting up a similar plan, but you I think ended up a little more conservative that me . I'm ER at the end of the month @ 53. I know in the next 10 years I will have at least one really expensive medical expense year (pacemaker replacement). My plan is to let the HSA ride and grow and cover medical expenses out of pocket and use the HSA for retirement healthcare/LTC.

I'm likely will try to use one fund to limit expenses... and pay the annual fee with after tax $.

If you are counting on the dollars short term to cover health care expenses.... keep it really safe. If like me ... not expecting to touch it for 11 or more years... then look where to invest it.
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Old 02-04-2015, 04:17 PM   #5
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I think the reason I am leaning towards more conservative for the HSA is I feel a higher risk of meeting my max out of pocket (hx of cancer) and needing to draw from it.

I don't know. Maybe I should just keep a bucket of money in a money market outside the HSA and use that if needed.

Now I'm getting really confused on what is the best approach for us. Do I use the HSA as an investment vehicle only? Uggh.

The learning curve on this is really steep. My brain hurts!
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(49, married; DH 53. I am fully retired as of 2015 (well ok, I still work part-time but only because I love the job and have complete freedom to call off if I want to travel with hubby for work), DH hopes to fully retire 2018 when he turns 55 to access 401K penalty-free...although he may decide to do part-time consulting)
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Old 02-04-2015, 05:16 PM   #6
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We just started with HSA Admins in 2014 and started with Wellington Admiral shares. We plan to continue with that fund in 2015.
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Old 02-04-2015, 05:23 PM   #7
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Quote:
Originally Posted by pb4uski View Post
We keep our HSA in Total Stock and consider it as part of our overall AA because it makes things simple for me, but of the ones you listed, I like Star.
+1 It is appreciating tax free and I have no deadline to spend it, so Total Stock works for me.
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Old 02-04-2015, 06:29 PM   #8
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Quote:
Originally Posted by walkinwood View Post
If there is a chance that you'll use the funds in the first year (or 2 or 3), I would suggest a money market fund. Later on, you could keep some amount in a money market fund based on your historical draws from the HSA and place the rest in a fund that would complement the AA in your overall portfolio.

That's my plan.
I like that plan and will think more about that option. Thanks! HSA Admin charges a fee every quarter for any fund that has less than $20K in it. So I will have to keep that fee in mind when considering a two fund option.
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simple girl
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(49, married; DH 53. I am fully retired as of 2015 (well ok, I still work part-time but only because I love the job and have complete freedom to call off if I want to travel with hubby for work), DH hopes to fully retire 2018 when he turns 55 to access 401K penalty-free...although he may decide to do part-time consulting)
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Old 02-04-2015, 06:30 PM   #9
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Originally Posted by pb4uski View Post
We keep our HSA in Total Stock and consider it as part of our overall AA because it makes things simple for me, but of the ones you listed, I like Star.

I liked the Star fund best as well, if I weren't contemplating withdrawing funds if needed for expenses...but considering all options currently - thank you!
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simple girl
less stuff, more time

(49, married; DH 53. I am fully retired as of 2015 (well ok, I still work part-time but only because I love the job and have complete freedom to call off if I want to travel with hubby for work), DH hopes to fully retire 2018 when he turns 55 to access 401K penalty-free...although he may decide to do part-time consulting)
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Old 02-04-2015, 06:33 PM   #10
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Originally Posted by Accidental Retiree View Post
We just started with HSA Admins in 2014 and started with Wellington Admiral shares. We plan to continue with that fund in 2015.
I didn't see that option in the drop down box....hmmmm....need to look again - thanks - I've heard Wellington is a great fund.
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simple girl
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(49, married; DH 53. I am fully retired as of 2015 (well ok, I still work part-time but only because I love the job and have complete freedom to call off if I want to travel with hubby for work), DH hopes to fully retire 2018 when he turns 55 to access 401K penalty-free...although he may decide to do part-time consulting)
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Old 02-04-2015, 08:32 PM   #11
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Originally Posted by simple girl View Post
I think the reason I am leaning towards more conservative for the HSA is I feel a higher risk of meeting my max out of pocket (hx of cancer) and needing to draw from it.

I don't know. Maybe I should just keep a bucket of money in a money market outside the HSA and use that if needed.

Now I'm getting really confused on what is the best approach for us. Do I use the HSA as an investment vehicle only? Uggh.

The learning curve on this is really steep. My brain hurts!
Sorry if my comments sent you spinning... what you do depends on much more than the HSA account. I expect a withdraw rate of 1.5% (including HI and max out of pocket for both of us). Assets are approx 1%/44%/55% Roth/IRA/after tax. For me I take the HSA as a bucket for later in life health care expenses that has little downside if I have to spend it on living after 65.

you need to decide how you want to operate the HSA based on your total situation. If you are using it to pay for medical expenses as they come... invest very conservatively if you likely will need the money in a couple years. But look at your total situation.
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Old 02-05-2015, 05:12 AM   #12
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Sorry if my comments sent you spinning... what you do depends on much more than the HSA account. I expect a withdraw rate of 1.5% (including HI and max out of pocket for both of us). Assets are approx 1%/44%/55% Roth/IRA/after tax. For me I take the HSA as a bucket for later in life health care expenses that has little downside if I have to spend it on living after 65.

you need to decide how you want to operate the HSA based on your total situation. If you are using it to pay for medical expenses as they come... invest very conservatively if you likely will need the money in a couple years. But look at your total situation.

No worries - I need to see all angles of this and your comments were very helpful to me! I realize I have quite a bit more research to do than I thought. That was a bit overwhelming to me yesterday after a long day of research, that's all. I'm rested and ready to dig in and learn more again today. Thank you so much for your perspective and thoughtfulness!
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