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HSA funds Investment

290 93 December 14, 2022 at 11:54 AM in Finance (4)
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I have a decent balance accumulated in my HSA over the years and I have the option to invest in ETFs. My HSA is with Optum financial and they work with a firm called Betterment which is an independent online investor. I am wondering if any of you have gone down this path and what are some of the things I need to consider apart from fees that I will have to pay. Looks like they will charge me 0.5% on the amount I invest.

The other option I have is invest it myself from about 25 leading mutual funds.

One thing I was wondering about was to how much I should leave behind uninvested to cover medical expenses? Anything else I should take into account?
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slicbrat
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Guiles
12-15-2022 at 08:37 PM.
12-15-2022 at 08:37 PM.
It depends on how likely it is you'll need to access those funds for medical expenses immediately, and your appetite for risk. If you have relatively few regular expenses and could afford to cover your entire deductible and OOP max on your own without those funds, then you can invest more of your HSA with the idea of letting it grow tax-free and reimbursing yourself at a later date. If having to pay for a big medical expense would put you in a bind, you should leave enough in your HSA cash account to cover that, and consider investing the rest.

I have been investing much of my HSA for several years, with good years letting me pay for my medical expenses entirely while still increasing the amount in the account. Unfortunately this year they have not done well, and I haven't wanted to lock in those losses, so I've been paying for my medical expenses with cash and holding onto the receipts with the plan to reimburse myself sometime in the future.
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slicbrat
12-16-2022 at 09:55 AM.
12-16-2022 at 09:55 AM.
That helps! How do you invest your funds? Do you invest it yourself or go with your HSA investment firm?
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komondor
12-16-2022 at 10:30 AM.
12-16-2022 at 10:30 AM.
I would look to invest in any kind of medical mutual fund. Healthcare cost and options will be going up from artificial hips to things like wheelchairs and gloves!
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Guiles
12-17-2022 at 09:49 AM.
12-17-2022 at 09:49 AM.
Quote from slicbrat :
That helps! How do you invest your funds? Do you invest it yourself or go with your HSA investment firm?
My HSA provider offers a couple dozen funds to choose from and I have mine in a Vanguard index fund right now, and keep about $1K in the cash account for small expenses.

They also offer an Health Savings Brokerage Account (HSBA) through Charles Schwabb, but I stick to the more basic options because I don't really have the time/interest in actively managing it.
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kcobra
12-19-2022 at 11:15 PM.
12-19-2022 at 11:15 PM.
Skip Betterment. They are a robo investor with one main claim to fame. Automatic tax loss harvesting (TLH). TLH via a robo advisor is questionable at best in a taxable account. In a non-taxable account like a HSA, there is no benefit. That 0.5% assets under management fee adds up quick.

Review the mutual fund list and see if any are low fee ones that track the S&P 500 or US total market. If so, invest in one of those. Note that low fees mean 1/10th of a percent or less.

Above advise is for US citizens planning on staying in the US. No advise given for non-US people.
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