Is It Just Me or Do HSAs Suck?

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slowtraveler
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Is It Just Me or Do HSAs Suck?

Post by slowtraveler » Tue Jan 30, 2018 7:57 pm

I have one and unless I met xyz balance, I have fees. If I invest, fees. If I use abroad, fees. Investment options are restrictive. I research rollover options and... Every single choice has both more fees and more restrictive investment options than a taxable account.

With a small sum, this only makes sense if I can use the medical expenses soon and use it for the tax deduction, not for investing. Hopefully, I have a large sum of expenses at once to avoid the balance fee when my balance falls below xyz. If I have travel insurance, the benefit is even more limited as these tend to come with smaller deductibles.

I can still file for excess contributions but then my taxes go up and there's a small extra tax on the $5-20 of interest earned in the year.

I got lured in by the triple tax advantage without seeing all the restrictions and fees first...

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Chris
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Re: Is It Just Me or Do HSAs Suck?

Post by Chris » Wed Jan 31, 2018 12:03 am

Yup, they kinda suck. It'd be a lot better if it was just another account at my discount broker, but no. Instead there's an HSA administrator (who doesn't hold the money) and a bank (where the money is). Want to invest outside the bank? Another company enters the mix. And they all get a slice.

But they're still popular because of employer contributions and the tax advantages. AFAIK, it's the only way to avoid FICA tax on earnings.

Once I quit working (and the employer contributions cease), I'll probably move it to a local credit union so I'm not whacked with fees.

Scott 2
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Re: Is It Just Me or Do HSAs Suck?

Post by Scott 2 » Wed Jan 31, 2018 1:17 am

The vendors definitely vary. HSA bank was among the more completive last time I looked.

The tax advantages alone make the fees worth it for me. I think of it as a supplement to my 401k / IRA. I can see if you get into a low enough tax bracket that this might not be the case.

My employer kicks in $1000 for each the primary and spouse, if you choose the high deductible insurance plan. I think that's getting more common.

RealPerson
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Re: Is It Just Me or Do HSAs Suck?

Post by RealPerson » Wed Jan 31, 2018 1:33 am

Chris wrote:
Wed Jan 31, 2018 12:03 am
YOnce I quit working (and the employer contributions cease), I'll probably move it to a local credit union so I'm not whacked with fees.
Are you saying that, once retired, you can move your HSA to a bank or brokerage like Vanguard?

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Chris
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Re: Is It Just Me or Do HSAs Suck?

Post by Chris » Wed Jan 31, 2018 2:11 am

RealPerson wrote:
Wed Jan 31, 2018 1:33 am
Are you saying that, once retired, you can move your HSA to a bank or brokerage like Vanguard?
I'm saying that I would move it to an HSA account administered by a credit union. It's possible to move it now, but since weekly payroll contributions will continue going to the bank designated by my employer, it doesn't make sense to move it yet.

IlliniDave
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Re: Is It Just Me or Do HSAs Suck?

Post by IlliniDave » Wed Jan 31, 2018 7:40 am

It's not HSAs, it's your specific account that is not so good. Mine is a simple brokerage account at Fidelity set up by my employer (401k is administered by Fidelity too).

The Old Man
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Re: Is It Just Me or Do HSAs Suck?

Post by The Old Man » Wed Jan 31, 2018 9:09 am

HSA have more fees than others; however, it appears it is mostly your specific account.

I suggest Health Savings Administrators (www.healthsavings.com).

suomalainen
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Re: Is It Just Me or Do HSAs Suck?

Post by suomalainen » Wed Jan 31, 2018 2:33 pm

Depends on what you're comparing. HSAs compared to other managed accounts (like 401ks) tend to have fewer choices and higher fees. Both HSAs and 401ks are more expensive and have crappier options than a regular old brokerage account.

But, the HSA tax advantage makes it the best account out there, regardless of how shitty the fees are. Regardless of your tax bracket, fees as a percentage of assets are not going to approach your marginal tax rate if you're a working stiff. Hell, even if your net return is zero due to super high fees, even in a 10% rising market, it would take you 2.5 years to make up the difference in a regular after-tax, taxable account (assuming for ease of calculation a 20% marginal rate).

I think HSAs are great. I load up my HSA and never touch it. It's a terrible account to use to pay your medical bills, but an incredible investment account.

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Kriegsspiel
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Re: Is It Just Me or Do HSAs Suck?

Post by Kriegsspiel » Wed Jan 31, 2018 8:53 pm

As far as I can see:

Health Savings Administrators ($45 + 25bps/year).

HSA Bank ($5.50/mo + $6.95 commission).

At about $11,000 or so, due to Health Savings Administrators charging basis points, HSA Bank becomes the lower cost HSA if you dump the maximum amount in at once to save on commissions. The commission can be avoided if you want to use a commission-free ETF.

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cmonkey
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Re: Is It Just Me or Do HSAs Suck?

Post by cmonkey » Fri Feb 02, 2018 12:01 pm

At Fidelity the HSA fee is a flat 12/quarter which I find reasonable. A lot of employers will pay the fee for you at Fidelity as well.

I only make 1 to 2 transactions per year so add another $10 to that, so I pay about $60 annually which means a fee of .2% and dropping.

The fee is waived if you have 250K in total assets with Fidelity, which is easily doable for anyone on these forums. You can also invest in almost anything. I run REITS in mine since the income is tax free.

Lucky C
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Re: Is It Just Me or Do HSAs Suck?

Post by Lucky C » Sat Feb 03, 2018 6:27 am

My Fidelity HSA is fee-free and I invest in iShares ETFs which are low cost and commission-free through Fidelity. So having an HSA that's as cheap as a Vanguard account is possible.

My employer contributes $600 of free HSA money every January, which would be $1200 if my wife was on my plan too. This HSA really can't be beat unless I was needing medical care up to the deductible year after year.

Scott 2
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Re: Is It Just Me or Do HSAs Suck?

Post by Scott 2 » Sat Feb 03, 2018 9:38 am

HSA bank waives the monthly fee if you keep $5000 in cash. It is $2.50 a month otherwise. They do charge $25 to buy a vanguard mutual fund. I think the Vanguard ETFs are 6.95. The commission-free ETFs seem to have mixed reviews.

I'm not an expert, and the account doesn't hold enough money to warrant the research, so I make fewer transactions and pay to keep my vanguard strategy going.

I like paying for medical expenses out of the HSA. It feels like a discount. Since my investing strategy is sub-optimal, I'm not convinced getting the tax advantaged dollars now vs. later is substantially different.

OTCW
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Re: Is It Just Me or Do HSAs Suck?

Post by OTCW » Sat Feb 03, 2018 9:54 am

I opened mine with Optum. No fees if you keep about $4500(?) in cash. $2.50 a month otherwise. They don't even allow investment unless you have that much in your account. I invest the excess in a REIT fund. They have a variety of funds, maybe 20 total, to choose from, including some low fee vanguard IIRC.

I don't use it for medical expenses, but 'bank' any receipts to let the money grow tax free for future tax free withdrawals.

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Re: Is It Just Me or Do HSAs Suck?

Post by jacob » Sat Feb 03, 2018 10:04 am

It seems common for HSA administrators to 50x("nickel and dime") accounts with less than ~2 years of contributions. My guess is that ordinary consumers only leave a smidgen using most of the contributions up like it was a personal FSA ... whereas those who contribute a lot are all to happy to do the math and relocate if the fee-pain is too high. IOW, it's a juicy income scheme for banks

Kinda goes with the political strategy of selling it as a way to save on health costs for the "folks" whereas in reality it's used as a tax-shelter for the upper-income segment.

OTCW
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Re: Is It Just Me or Do HSAs Suck?

Post by OTCW » Sat Feb 03, 2018 10:36 am

I think the mechanism is good even if they are used as FSAs by most. "Folks" can at least realize some tax savings. I think you are right though, banks have figured out to bleed real profits from the accounts through the fees, and most "folks" would be better off with just an FSA account while forgetting the investing and long term aspects of the HSA.

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Kriegsspiel
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Re: Is It Just Me or Do HSAs Suck?

Post by Kriegsspiel » Sat Feb 03, 2018 10:46 am

Scott 2 wrote:
Sat Feb 03, 2018 9:38 am
Keeping $5,000 in the cash account to avoid the fees is missing the forest for the shrub. You can just pay the fees with some dividends and reinvest the rest, quickly outstripping any savings you get from avoiding the fee.

Although I guess if you are using the HSA to pay for medical expenses instead of as a long term tax shield you may have a point.

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Re: Is It Just Me or Do HSAs Suck?

Post by jacob » Sat Feb 03, 2018 10:50 am

I just think of the cash [to avoid the fee] as "deep cash" ... similar to how some permanent portfolio has deep gold in the form of coins and surface gold in the form of an ETF for rebalancing purposes.

Of course this is irrelevant for investment strategies that are "all in".

OTCW
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Re: Is It Just Me or Do HSAs Suck?

Post by OTCW » Sat Feb 03, 2018 11:16 am

Kriegsspiel wrote:
Sat Feb 03, 2018 10:46 am
Good point.

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Kriegsspiel
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Re: Is It Just Me or Do HSAs Suck?

Post by Kriegsspiel » Sat Feb 03, 2018 12:09 pm

Maybe. I consider I-bonds my "deep cash," since the taxes are deferred until redemption. I think it's smarter because I can use the tax benefits of the HSA for assets that I expect to grow more than I-bonds. If interest rates go up appreciably during my lifetime (or tax law changes) I would reconsider the way I organize things, but right now I use tax shelters for non-cash.

Scott 2
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Re: Is It Just Me or Do HSAs Suck?

Post by Scott 2 » Sun Feb 04, 2018 10:49 am

I think there's a balance between optimal returns and minimal hassle to be considered. My insurance deductible is $2800, max out of pocket per person is $3500. I have $9k setup as the cash ceiling in my account. Now that I finally sorted investing via Ameritrade, I might lower it, but it's not a rush. We're talking the earnings on a few thousand dollars.

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