Just rebalance?
I mean what is the time frame you need to use the funds? DH has cash to cover this year’s distributions, short term index bond fund, intermediate index bond fund (FXNAX), and just a smidge of equities because he’ll probably draw the rest of it down over the next 5 years.
I’m farther out and still contributing, but expect to start drawing in about 3 years. But I have the same funds, just different allocation, and I rebalance at the beginning of each year. It’ll probably take me 10 years to draw it down.
The timeframe is what drives the investment allocation.
Agree about rebalancing. If you actually hold multiple assets, then rebalancing is what you should do when any of your assets is out of whack.
Are there alternatives to FXNAX? Sure, but you're likely to be just as unhappy with performance there as well lately - for example some people including myself prefer treasuries so FUAMX at Fidelity is also an alternative in the intermediate bond space. Otherwise, shorter duration bond funds generally lose (and gain) more than bonds of longer duration except for those relatively short periods around recessions when the yield curve sometimes inverts.
For me, while contributing, I'm not drawing from my HSA at all. Because of its tax advantages I treat it like a Roth and keep it at 100% stock. Unfortunately, I came to the HSA party kind of late, so the account is unlikely to ever get that big anyway. And I do consider it as part of my overall portfolio for AA/Rebalancing purposes which also includes my taxable account and our IRA's and my current employer 401K. Across all accounts I'm 60/40.
Understand the concept of changing the AA based on timeframe the money is needed. Taking that all the way, then a liability matching portfolio (LMP) is one way to do that's generally done by using only bonds since they always have a fixed, known duration. You can use that feature to match the duration of future expenses, if you know what that duration is ahead of time. Problem is that such a portfolio is currently not likely to keep up with inflation, even if TIPs are used. And medical expenses generally outpace CPI-U anyway, so one is likely going to need some stock in there and even then, as always, no guarantees. Sounds like that's what you guys are doing audreyh1. It's a solid approach.
Anyhoo, while I've kept receipts for unreimbursed medical expenses, I'll likely just use it to reimburse medicare premiums when the time comes. Otherwise, I'm sure that there will be future medical expenses at some point down the road.
Cheers,
Big-Papa
