Hi all! These questions are for those who contribute to an HSA and choose to invest it. I should start by saying I thankfully do not have any chronic illnesses and go to my primary once a year so I don’t typically have very large medical bills- I do understand that anything can happen though!
Hopefully this first question makes sense, how much cash do you keep liquid? I have $3826 total in my account and $2826 of that is invested and the remain $1000 is always set as aside as “liquid cash”. Should I keep that $1000 set aside or should I just invest it all since I don’t necessarily need access to that money? My goals are to be as aggressive as I can be with my investments but I also don’t want to be reckless or irresponsible. I’m 27 and want this money to grow!
My other question is what should I invest it in? Right now it’s 60.66% in 500 index FD and 39.34% us bond index FD. I know very little about investing. The extent of my knowledge is some awareness about the S&P 500.
Any book or video recommendations on learning more about investing is also welcome!
Thank you!!
Just to say huge thank you for the replies. They have all been really helpful
Question for people who max out an HSA and invest it
byu/Sad-Bodybuilder-3870 inpersonalfinance
Posted by Sad-Bodybuilder-3870
31 Comments
I used to keep $1,000 liquid in the HSA accounts…now I just invest it all.
Each year my spouse and I budget the full OOP (out of pocket max) for our health plan and assume we will use that for medical expenses. Since we don’t go over that, there’s no need to keep anything liquid in the HSA at all.
I have it all in a similar 3-fund portfolio I put my 401k, roth IRA, etc invested in.
You are 27 you don’t really need bonds. If you don’t think you will need the money soon put it in a index fund. s&p 500 fund is fine. I put mine in vanguard us total market since i have that available. My only advise it to check fees on the investment account. The maintenance fees on mine aren’t great. So just make sure to put enough in there so that on average the earnings make the fees worth it.
My HSA through my employer (HealthEquity) requires a minimum $1000 held in cash. I keep that, and invest the rest. As for what you invest in, assuming you plan to keep this invested until retirement, I would drastically reduce that bond fund given your long time horizon. The S&P500-tracking index fund is fine. HSAs are tax-advantaged accounts, so you can make any changes to your investments at any time without tax implications.
I keep as little as possible in cash. My old HSA provider required $1000 in cash, so I invested anything over that. My new one does not have a minimum cash requirement, so it will all be getting invested.
Ditch the bonds. You want 100% Equities. I’m not sure that you want 100% S&P 500, but you shouldn’t have bonds. Maybe look into more US exposure and some international
60/40 Stocks/bonds is very moderate and not aggressive at all
> how much cash do you keep liquid?
$0.
> Should I keep that $1000 set aside
Can you afford to not spent that $1000?
> or should I just invest it all since I don’t necessarily need access to that money?
If you don’t need access to that money, then why keep it in cash?
> My other question is what should I invest it in?
Same things you are invested in for your *other* retirement money.
If the money isn’t going to be used until decades later (like retirement), why would the portfolio be any different?
Why would the HSA be treated any differently?
See below.
—
For how to invest, consider reviewing the PF Wiki, section on Investing.
* https://www.reddit.com/r/personalfinance/wiki/index#wiki_investing
—
A very common mistake folks make is thinking of their retirement money on a *per account* basis.
As in:
* Rollover IRA has portfolio A.
* Brokerage has portfolio B.
* 401k has portfolio C.
If you change your thinking, you may find your retirement money much easier to manage.
Consider thinking of *all* your retirement money as *one giant* pile.
Decide on *one* portfolio that is commensurate with your risk appetite for *all* of that money.
Consider reviewing the PF Wiki, section on Investing for how to do that:
* https://www.reddit.com/r/personalfinance/wiki/index#wiki_investing
Then once you have your asset allocation determined, distribute that allocation across your various accounts according to tax efficiency principles.
* https://www.bogleheads.org/wiki/Tax-efficient_fund_placement
*TL;DR: All your retirement dollars should be integrated into your overall portfolio, rather than each account with it’s own separate thing.*
Mine makes me keep $1,000 liquid. It automatically invests over
I just invest all of it personally. I just pay all my medical expenses OOP and then when I need a little extra liquidity in my everyday finances, I just sell some of what’s invested in my HSA and reimburse myself. (I keep track of all my receipt totals and reimbursements to make sure Im still in line)
Sure, if you don’t anticipate actually using it for many years, no reason not to invest that extra $1,000.
You probably don’t need to be invested in bonds at all at your age. There will probably be a few market downturns during your working years. Just ride it out and wait for the eventual recovery.
You have some good advice here. I would budget in your savings account to have on hand your full Out of Pocket max expense for emergencies, then invest the entire HSA. The money in your HSA is triple tax advantaged, you are better off paying out of pocket (savings) for health related expenses. You can save your receipts and pay yourself back at a later date tax free.
My plan requires that I keep $1000 in cash in the HSA. I invest the rest. I would invest the $1000 if I was able.
I keep an emergency fund in a HYSA, so I have enough cash liquid if its needed.
Here’s a recent money guy video on HSAs if you’re interested. https://www.youtube.com/live/2hvqFEErYFY?si=CHlx5_f_7vllML8O
If you have a medical event, who’ll you need to withdraw from the HSA to afford it?
If no, then just invest everything, save your receipts, and treat this like another retirement account.
If yes, then you shouldn’t invest whatever amount you would need to withdraw (essentially, your OOP max minus whatever you would expect to be able to cash flow).
Play the medical game
Lilly and Novo
Intuitive
United healthcare
Of costs keep going up then companies will be profitable
I have my HSA 100% in VTI . This is your most tax advantaged account so it should also be your most aggressive. I only keep bonds in my 401k. I also keep $1000 in cash as that’s the minimum requirement for ours. It If I needed to pay a big medical bill I’d use my emergency fund. I keep a good drive of all my medical bills and can submit them to withdraw from HSA at any time.
My account requires a minimum of $2000 before you can invest so that’s what I keep as cash. They do have an option to invest that minimum cash in a *slightly* higher rate at the expense of it not being FDIC insured.
My HSA (Optum) requires $1,000 in cash.
I invest the rest in stock index funds.
I invest it all and just save my receipts for costs + a spreadsheet. There’s no timeline to pay yourself back, so I can let my expenditures grow for decades, and then pay myself back the $10 for aspirin while earning the compound growth.
I think mine requires $2000 in cash and every time I have $1000 available I invest it. Right now I do not touch the cash for expenses and I’m working on uploading all my old receipts to my computer.
I also don’t know hat I’m doing so I just read Reddit advice a lot and invested 100 percent in VSMPX. I am trying to learn how to diversify though.
Mine’s setup where it auto-sweeps everything over some defined amount into investments. I don’t use my HSA, but set that threshold up as $4K because that felt like a good number just in case I’m laid off and sick and the markets are down.
The invested bit goes into an S&P 500 fund, and I generally try to think of it like just a random IRA that I otherwise ignore and won’t have access to until I retire.
So if you had a medical issue and hit your OOP maximum this year, you’d have no problem paying the bill from other sources? If you are sure you will not need the cash from the HSA to pay for current medical expenses, there’s no need for that cash cushion; you can treat it like any other retirement account. Personally, at 27, 60/40 is probably more conservative than you need to be, unless you are very risk averse and can’t stomach additional market risk. At that age it would be appropriate to be 100% in equities IF you can tolerate the increased volatility and occasional bear market declines. It can be scary as hell to see a 30-50% drop, so know yourself first. Going 100% stocks only works if you have the stomach to not panic and sell in a sharply down market. You say you want to be as aggressive as possible, which is great at your age provided that if we have another 2002-02 or 2008-09 market, you don’t head for the exit.
If someone *does* use the HSA to fund medical expenses as they go (not everyone is fortunate enough be in a financial position to max it out and pay for medical expenses out of pocket, which I think many people seem to forget in their advice), it’s not a bad idea to keep up to one year’s OOP or combined deductible as cash for reimbursement, and invest the rest. But if you’re sure you won’t need to tap it, yeah, it’s just more tax-preferred investing space.
Depends on the servicer…I had a Wealthcare Saver account through Anthem and the requirement was to have $1k in accessible cash reserves before I could invest any. When my company switched to Cigna, I had to liquidate my investments, transfer the money out (and pay $25 for that privilege), and roll it into another fund. Cigna would let me roll my money over but I wanted to invest it all…so I rolled it into a Fidelity HSA account and invested it all in FXAIX (S&P 500 Index Fund).
We have a teenager who plays lacrosse, so I keep 5K minimum and invest the rest.
I keep zero dollars in cash.* This is an option for me because I transfer all my funds from my employer’s designated HSA provider to my HSA at Fidelity where I have the freedom to invest in whatever I want with no required cash balance.
I have my HSA funds invested in 80% FNDX (US large cap value) and 20% FNDF (international value).
Personally I would not have bonds in an HSA — I treat my HSA like my Roth space. This is space for aggressively growing assets, not wealth preservation/incremental growth like bonds. But YMMV.
*technically not true, I do leave $50 behind in cash in the employer-sponsored account so that they don’t close it. Also, I can afford to cover anything up to my MOOP out of my own pocket and not reimburse myself, so no point in leaving anything uninvested in my HSA. This is another YMMV situation.
Personally I’m paying for braces and some other medical costs this year. I’m using this year as a baseline and will invest accordingly next year
Invest it all. I keep all my Health receipts in a yearly envelope tallied. They count forever for withdrawals if needed. I never use my HSA for medical expenses
I do $1000 in cash, the rest in investments. I max every year. I do not use my HSA for anything. I pay out of pocket for any medical expenses. It’s just another savings account to me.
Our plan requires we keep $2,000 cash. We max out our contribution each year and invest all of it (since our required $2k is already there). We also budget a sinking fund (kept in HYSA) to cover our annual max OOP for our family plus nominal extras like glasses, OTC meds, etc.
I am somewhat risk adverse so I keep the max out of pocket in cash and invest the rest in a low-cost SP500 index fund. Probably looking to invest that in a safer index fund as well though going forward.
If you don’t have ideal options at your HSA provider, create an HSA at Fidelity and initiate the transfer of your HSA funds to Fidelity from the brokerage. Also, at your age, I would only keep 5-10% in a US Bond Index fund. Head over to r/Bogleheads to see examples of set and forget portfolios.
I use Fidelity for my HSA and does not have a cash requirement. I invest it all and pay out of pocket for expenses. It’s invest in a few of the Fidelity funds and has done pretty well. I’m holding it to pay for medical care when I retire.
$1000. It was default and I saw no reason to change it.
And you didn’t ask, but I’m invested in a TDF.
My husband and are retired and are just letting the HSA money grow. We have a personal (not company sponsored) HSA through Health Equity and we have all of it invested in an S&P Index fund. We’ll probably be moving it to a Fidelity HSA because they don’t charge the fees Health Equity charges.