I’m curious to read the thoughts of Dopers with regards to investing with some portion of your HSA balance. This has been an option for several years with my current employer, but I haven’t yet done so.
For background, I have enough in my account, due to years of socking it away and minimal use of the funds (I’m young and relatively healthy, though I’m attempting to take additional steps to stay this way via exercise, healthier eating habits, etc), to cover the maximum out of pocket costs I can accrue in one year, not counting premiums, with my current health insurance plan if I were to go fully out of network, which also means I have several years worth of annual deductibles. I contribute the max I can each year to this account (largely for the tax perks) and my 401(k) (to get the maximum match from my employer). I’m tempted to start investing some of the balance as essentially all money I add this year will be otherwise sitting doing nothing but earning me the tax break for doing so, unless I get very sick of course.
Has anyone else invested with their HSA funds? What have your experiences been, if so?
Last year was the first year we had a HSA. We paid a lot of last year’s deductible out of pocket specifically to have a bit of a nest egg for this year, but we’re not quite up to the minimum balance to be able to actually invest - 5,000 dollars, I think. So it’s not yet an issue for us.
I’m thinking I’d want to hold off until we had enough squirreled away that we could leave most of a year’s deductible / out of pocket in cash, then invest the amounts over that. But I haven’t looked into the investment options yet since we’re at least a year away from being in that position.
I’m wondering if we’d need to maintain the 5K in cash to avoid the service fees, or if the combined cash + investment would be sufficient. The HSA provided charges 2-3 dollars a month on balances less than 5K (though right now the employer reimburses that).
HSA aside it’s time to start looking for a financial advisor. Many suggest now that you need to look at eventual retirement tax issues which means including traditional IRAs (pay tax now but not later). This is because the old saw about living on less later doesn’t necessarily hold true for people who save early and smartly. Tax rates are likely not going to be any lower than this so you might be shooting yourself in the foot with high taxes in retirement by going strictly tax deferred. You also need to look at savings that can be withdrawn without legal restrictions for things other than health care and retirement. Like I said… financial advisor time.
That said if you are already at the point where you in effect have an insurance policy against the absolute max saved for an annual out of pocket expense you might want to invest some of it. Higher return comes with greater risk but you likely won’t it all when you are young and healthy. Invest some and then limit new contributions to what you expect your annual real health spending will be. That way you in effect get the tax break on your real spending and there’s still the growing buffer sitting there in case things go bad.
The difference goes to other investments that don’t come with the current tax breaks.
Good advice. For a younger person, I’d definitely suggest going Roth versus traditional for retirement savings, for example.
Back to the HSA and legal restrictions: The nice thing is that you can put aside the money now, and use it for any valid medical expense later on - e.g. nursing home care, equipment, etc., which you’re more likely to need later on in life. If you get to the point where you think you’ve saved “enough” in the HSA (5 years deductible or whatever) you can always cut down on your contribution at that point.
Honestly, yeah, I probably should consult with a financial advisor. I was curious as to what other people who might be in a similar scenario to my own have done/are doing, because I’ve come across articles online, including in Forbes, suggesting that reasonable investing isn’t a bad idea.