HSA and GNMA Investment Option

[stephenandrew]

Hi--
I have an HSA that I have been contributing to for two+ years now--I have about $10,000 in the account. I plan to continue contributing (assuming HSA's still exist after healthcare "reform"). I do not anticipate having to withdraw money from the HSA to cover medical expenses---I am fortunate in that I can cover medical expenses from current income. While I don't anticpate needing to access the money for 10+ years, I am reluctant to invest in equities--I feel some compulsion to protect principal on the event I do need the money for some medical emergency. Currently my money in the HSA is in a MMA paying (I am embarrassed to say this) .19%. I can move the money to a GNMA Fund with Vanguard. I am not really familair with GNMA securities, but from the fund prospectus it looks like the risk of principal lost is minimal, and the return is significantly higher than my 0.19%. Would the GNMA fund be a relatively safe place to bank my HSA money in this low interest rate evironment? Thanks.

 

[LOL!]

Maybe. Maybe not. Read this:
Bogleheads :: View topic - Vanguard GNMA
Would a drop of 10% bother you?

 

[jdw_fire]

Hi--
I have an HSA that I have been contributing to for two+ years now--I have about $10,000 in the account. I plan to continue contributing (assuming HSA's still exist after healthcare "reform"). I do not anticipate having to withdraw money from the HSA to cover medical expenses---I am fortunate in that I can cover medical expenses from current income. While I don't anticpate needing to access the money for 10+ years, I am reluctant to invest in equities--I feel some compulsion to protect principal on the event I do need the money for some medical emergency. Currently my money in the HSA is in a MMA paying (I am embarrassed to say this) .19%. I can move the money to a GNMA Fund with Vanguard. I am not really familair with GNMA securities, but from the fund prospectus it looks like the risk of principal lost is minimal, and the return is significantly higher than my 0.19%. Would the GNMA fund be a relatively safe place to bank my HSA money in this low interest rate evironment? Thanks.

i think you should think of the HSA like you would an IRA. you must have a high deductable health insurance policy to be able to have an HSA and that policy probably has a max that you are responsible for in any given year. check out that max and see if you can cover it and that would assure you that you can treat tha HSA like an IRA. keep all your reciepts so that when u start WDing u can make the WDs as tax free as possible

 

[stephenandrew]

i think you should think of the HSA like you would an IRA. you must have a high deductable health insurance policy to be able to have an HSA and that policy probably has a max that you are responsible for in any given year. check out that max and see if you can cover it and that would assure you that you can treat tha HSA like an IRA. keep all your reciepts so that when u start WDing u can make the WDs as tax free as possible

Yes, this was exactly my plan---and with my "real" IRA's I am investing more for the long term (e.g. money is in equity mutual funds) as I am willing to tolerate short term fluctuations in value for long term appreciation. With my policy, I am responsible for the first $3000 of medical expenses before the plan starts proviiding any coverage, and for now I am able to cover that without touching the HSA. For some reason, though, I have it in my head that I should be more conservative in my investing as this is money for health care, but your point is well taken. Thank you.

 

[easysurfer]

I've had a HSA since the beginning of 2008. Since after I FIRE'd, that's the only tax favored investment that I make contributions to. For the long haul I have my HSA 100% in equities, and though tempting, haven't had the need to reimburse myself for medical expenses which I've paid for from my own pocketbook. I'm still some time away from 65 years old, and my plan is to contribute to it like an IRA until then.

 

[jdw_fire]

... For the long haul I have my HSA 100% in equities, and though tempting, haven't had the need to reimburse myself for medical expenses which I've paid for from my own pocketbook...

remember to keep all your medical receipts since starting your HSA as you can use them to make TAX FREE WDs from your HSA!

 

[easysurfer]

Thanks for the reminder.

Oh yes, I do make sure to keep all the receipts. I have a couple of filing cabinet drawers dedidcated for HSA material (receipts, statements, deposit slips, reimbursement request slips, etc). Plus I keep a log (spreadsheet) of any HSA activity that I do and assign the receipts a reference number so I can back track in the future and in case should there be a tax audit. System seems to work for me, thus far.

 

[Dennis]

Well, I don't any problem putting it in a GNMA, Tot Bond Fund might be better but what's the Down vs Upside? looks to me all upside..
vs what comes in 2nd....avail. to you..

I've owned TGLMX and VFIIX..for many yrs now..