setting up a health savings account

[simple girl]

We are still working, but DH's employer is making major changes to our healthcare. We will be paying a lot more before insurance kicks in. With the option we are choosing, we can set up a HSA. His employer says we can do this through them, or choose our own bank.

What do you look for in choosing where to set up your HSA?

Thanks all!

 

[REWahoo]

What do you look for in choosing where to set up your HSA?

Cost, convenience and investment/savings choices for the money in the account.

I went with Health Savings Administrators when I set up my HSA in 2006 and have been happy with them due primarily to the cost and availability of Vanguard funds.

Please let us know who you choose (and why) - I haven't looked at alternatives for a while and there may be better choices.

 

[KB]

I read all the info on this site (there was a FAQ a few years ago) and chose Patelco credit union since it is local to me. It was paying 5% at that time. The first year had no account fees, afterwards they charge $1 per month.

 

[REWahoo]

I read all the info on this site (there was a FAQ a few years ago)...

Here it is:

http://www.early-retirement.org/forums/f47/faq-archive-health-savings-accounts-hsa-30762.html

Scroll down for a list (maybe dated?) of custodians.

 

[simple girl]

Ah, looks like I've got quite a bit of research ahead of me on this one.

Thanks for the links...glad I have until the end of December to figure this out! I will provide an update after I muddle through all of this!

 

[Gotadimple]

I've just started my research as I move from an indemnity plan to an HSA. This year, my former employer finally offered HSA's to retirees. Here's what I'm looking for:

Low fee for opening an account
Low/no fee for closing the account
Waiver of monthly fees for a minimum balance in the money market account
Competitive interest rates on the amounts in the money market account
ACH capability
Access to wide variety of investments
Online access to check balances and make transactions

Here's my reasoning:
1. I hate paying monthly fees. While the bank has paper work to provide beyond the 1099, these fees eat into your investment. They get a fee for opening the account which should be sufficient to cover their costs.
2. I don't intend to draw on the funds until I reach Medicare age, leaving me time to accumulate enough money to deploy into other investments.
3. I don't care about the debit card feature, but do want to transfer dollars from my bank or brokerage account into the HSA. When I begin drawing on the HSA, I want to do that annually and prefer the dollars come to me rather than my provider.
4. Interest rates that are reasonably competitive for the amount of money I must leave on deposit to avoid monthly fees.

Current best candidate: HSA Bank

-- Rita

 

[simple girl]

I've just started my research as I move from an indemnity plan to an HSA. This year, my former employer finally offered HSA's to retirees. Here's what I'm looking for:

Low fee for opening an account
Low/no fee for closing the account
Waiver of monthly fees for a minimum balance in the money market account
Competitive interest rates on the amounts in the money market account
ACH capability
Access to wide variety of investments
Online access to check balances and make transactions

Here's my reasoning:
1. I hate paying monthly fees. While the bank has paper work to provide beyond the 1099, these fees eat into your investment. They get a fee for opening the account which should be sufficient to cover their costs.
2. I don't intend to draw on the funds until I reach Medicare age, leaving me time to accumulate enough money to deploy into other investments.
3. I don't care about the debit card feature, but do want to transfer dollars from my bank or brokerage account into the HSA. When I begin drawing on the HSA, I want to do that annually and prefer the dollars come to me rather than my provider.
4. Interest rates that are reasonably competitive for the amount of money I must leave on deposit to avoid monthly fees.

Current best candidate: HSA Bank

-- Rita

Good info - thank you.

So I looked at HSA Bank's website, and it looks like all they offer are money market accounts - is that correct? I would think one would want a variety of investment options to choose from. Maybe I just am overlooking a link?

 

[kaneohe]

I read all the info on this site (there was a FAQ a few years ago) and chose Patelco credit union since it is local to me. It was paying 5% at that time. The first year had no account fees, afterwards they charge $1 per month.

Patelco is much lower now......don't know the exact numbers since I left after they lowered the rate but it was tiered too (depending on balance) so I was getting < 1% vs the initial 5%. I went to Alliant Credit Union (3% % and no fees) but I see that folks are recommending Stanford Federal Credit Union (4%).

 

[Gotadimple]

Good info - thank you.

So I looked at HSA Bank's website, and it looks like all they offer are money market accounts - is that correct? I would think one would want a variety of investment options to choose from. Maybe I just am overlooking a link?

They offer money market and expensive mutual funds. In addition, you can link to an account at TD Ameritrade to buy stocks and bonds. See Here:

HSA Bank

 

[simple girl]

They offer money market and expensive mutual funds. In addition, you can link to an account at TD Ameritrade to buy stocks and bonds. See Here:

HSA Bank

Thank you. Accessing that info from their site was not intuitive to me...I see now the link to investments is at the bottom of the page...good detective work.

 

[travelover]

I related this in another thread, but my former employer had a PITA HSA administrator that was very demanding for documentation and receipts and very slow to correct their frequent errors. When I retired, I opened up a HSA account at Patelco credit union and I believe I pay just a dollar a month, first year was free. They don't pay a lot on investments, but I just save my receipts in a folder and once a year I transfer money to them, then write a check to myself to cover out of pocket expenses. So, my investments are really elsewhere, but I get to take the HSA deduction on my taxes for the amount that I cycle through Patelco. And I do all the documentation myself on a spread sheet.

If you want to sock away a bunch of money for a long time, this would be a poor choice, but for the way I use it, it is great.

 

[dgoldenz]

I use First AM Bank. Their basic account has no monthly fees and no minimums required. They also have a separate investment account option which has a $4 per month maintenance fee, but still no setup fees or minimums.

First American Bank - Health Savings Account

 

[FUEGO]

We use our employer provided HSA through Chase. No fee for us, otherwise I think it is $30 a year. Crappy fund selection - I'm in a SP500 index fund with roughly 0.5% expense ratio. But there is no fee otherwise and the employer automatically deducts pre-tax each paycheck and deposits into the acct (so we save income tax and SS/medicare payroll taxes on the $6000 or so per year deposit).

My goal is to eventually move all these funds elsewhere with better investment options. Health Savings Administrators was the front runner based on my previous research from a couple years ago. Vanguard also mentioned they may start an HSA or affiliate with an HSA provider. I'll be interested to see what you find out, since I think my ~$17000 in HSA is large enough to justify moving to a better custodian.

 

[easysurfer]

I'm rethinking my strategy with my HSA. When I started my HSA, I still had a paycheck, I originally was thinking just of letting my HSA contributions grow -- Let it grow, let it grow.

But now since I've FIRE'd, I'm thinking maybe it would be better for me to reimburse myself for my medical expenses and invest anything left over.

 

[simple girl]

HSA investing strategy?

OK, so I am revisiting this thread and doing lots of research...my head hurts.

It seems like people take two approaches to how they invest their HSA's. Some just keep the money in money market accounts, and use the HSA for medical expenses as needed, taking the tax-free benefit immediately.

Others invest the $ in mutual funds, treating the HSA like an IRA. It sounds like some of these people don't actually withdraw from their HSA for medical expenses. They just let the fund grow untouched.

Seems to me that the type of HSA you choose is directed by how you plan to use/withdraw the money.

I am trying to figure out which approach is the best. Anyone care to share your HSA investing strategy and your reasoning behind it?

 

[Gotadimple]

SG,
My plan is to use the money market account as my investing 'vehicle' -- for now. My health plan has no vision benefit, so I'll tap the account for the vision benefit costs, but not for other medical expenses. My budget includes the cost of other medical expenses. Plus, the HSA interest rate is much better than what I could earn in a brokerage account.

To invest means establishing a minimum in the HSA money market, and a minimum in the broker's money market. That said, it could be several years (for a single person) before one had accumulated enough to begin to make investments.

In addition, I wasn't planning on investing the money as I won't be eligible all that long for the HSA. I view it as a way to pay for medical expenses once I move onto Medicare.

-- Rita

 

[ziggy29]

I'm using a "buckets of money" type of approach in my HSA.

Our insurance has an out of pocket maximum of $4000 a year. I've decided to put three years of "safe stuff" (basically cash) in "Bucket 1" and then I plan to put the rest in a balanced fund option (roughly 50/50) for "Bucket 2."

So when I reach $12,000 cash -- three years of worst-case medical expenses assuming we still have this insurance -- the plan is to start investing the amount that exceeds a $12,000 balance. The theory is similar to the Buckets of Money approach in that we're trying to make sure we won't have to tap the HSA by selling securities into a bear market.

We're expecting to get up to $12K in my HSA some time next year, so right now it's still all in cash. If the balance gets high enough I may wind up with a full-blown three-bucket system, but that's a ways down the road.

 

[CoolChange]

For what it's worth, I view my HSA as just another tax deferred account to use for my asset allocation. I max it out, don't touch it, etc. just as I do with my 401(k).

Currently, I am blessed with both an income that is high enough that I do not qualify for Roth contributions and good health. So, I pay for any medical expenses out of pocket. I do also have access to a Dental/Vision flex spending account, the use it or loose it variety, which I use every other year for eye exams, glasses, contacts, dental work, etc.

 

[DblDoc]

OK, so I am revisiting this thread and doing lots of research...my head hurts.

It seems like people take two approaches to how they invest their HSA's. Some just keep the money in money market accounts, and use the HSA for medical expenses as needed, taking the tax-free benefit immediately.

Others invest the $ in mutual funds, treating the HSA like an IRA. It sounds like some of these people don't actually withdraw from their HSA for medical expenses. They just let the fund grow untouched.

Seems to me that the type of HSA you choose is directed by how you plan to use/withdraw the money.

I am trying to figure out which approach is the best. Anyone care to share your HSA investing strategy and your reasoning behind it?

I use ours as an alternative to a TIRA. For those of us with high taxable incomes and limited tax deferred space the HSA is one alternative. Mine is invested in a Vanguard total bond fund and I don't use it for expenses. It remains to be seen whether HSA's will survive health care reform.

DD

 

[REWahoo]

My approach is simlar to ziggy's. I'll hit Mecidare soon after reaching three year's deductible in cash, so I'll probably keep the HSA funds there rather than investing a portion of it elsewhere.

 

[simple girl]

For what it's worth, I view my HSA as just another tax deferred account to use for my asset allocation. I max it out, don't touch it, etc. just as I do with my 401(k).

Currently, I am blessed with both an income that is high enough that I do not qualify for Roth contributions and good health. So, I pay for any medical expenses out of pocket. I do also have access to a Dental/Vision flex spending account, the use it or loose it variety, which I use every other year for eye exams, glasses, contacts, dental work, etc.

But why not use the HSA money at all, even for small expenses? I'm having a hard time understanding the reasoning behind this.

 

[ziggy29]

But why not use the HSA money at all, even for small expenses? I'm having a hard time understanding the reasoning behind this.

Some people look at it as another retirement income account, or at least a way to compound it tax-free before using it for medical expenses down the road.

My fear about many people not using the HSA for current medical expenses is that it fuels the argument that it's just another tax break for the rich who don't need it, and that they may want to take it away for that reason.

We wind up paying for nickel-and-dime stuff out of pocket for the most part, but if we have a bill into the hundreds or more, we use the HSA. We've been fortunate to have few of these large expenses.

 

[ksr]

Those of you who are keeping your HSA funds as an investment and paying for medical expenses out of pocket, I have a question for you. Have you run into any issue with the bank trying to declare your account inactive?

My initial plan was to not touch the HSA money, and keep it invested (in money market currently). But last year I received a notice from the bank where I keep the HSA acct warning me that my account might be considered inactive if I didn't return some paperwork. I called and asked about this, since I had been continuing to make contributions to that acct. Turns out the contributions don't "count" towards an active status - if I don't make withdrawals they view my account inactive after a certain amount of time.

So slight change of plan for me. Now I make sure I pay for just one medical expense each year from the HSA. It's easier for me than worrying about paperwork and red tape if I don't. Anyone else hit this problem?

 

[REWahoo]

Have you run into any issue with the bank trying to declare your account inactive?

Anyone else hit this problem?

No. What bank is doing this to you?

 

[ksr]

No. What bank is doing this to you?

The Bancorp Bank -set up through eHealthInsurance. They don't offer a lot of investment options, so I might think about moving this account.