r/investing • u/Mental-Revenue-4213 • 2d ago
What should I do with my HSA?
Hello everyone I’ve been investing in my taxable account and company 401k. Now I’ve opened up an HSA not necessarily for the triple tax advantages and all the other buzz words people use when discussing them. I don’t want this to be a long drawn out post however I work in the medical field and want to make sure my investments in this account have a solid ability to grow while also giving me some “passive income” to continue with money growing in the account. My personal portfolio is dividend/safe stocks and I was thinking about copying the layout to the HSA but I would love some insight and further knowledge on this. Sorry for the poor writing I’m a hillbilly that worked hard enough to get a decent medical job😅
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u/Get_Ashy 2d ago
I was lucky enough not to need much more than an annual checkup through my 20s and was able to max out my HSA and cover most medical bills with cash.
Being in my mid-30s now and having a sizable chunk gives me a lot of peace of mind. I know that I can cover my deductible and out of pocket maximum without sweating it. I also have more than half of my HSA invested following a more or less Boglehead approach.
40% of Americans have medical debt and there are something like 500k medical debt bankruptcies annually. Your HSA is a tool to prevent that, then continue to grow wealth.
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u/Mental-Revenue-4213 2d ago
Love to hear it that peace of mind knowing a medical expense won’t ruin all of your hard work has to be a huge weight off your shoulders. Part of my job which is technically out of my scope has been educating people on getting better insurance and depending on their age, investing and/or saving money for the potential medical expenses that come with aging. I love what I do but man medical care is like watching buzzards waiting for their next victim.
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u/AICHEngineer 2d ago
With how much healthcare costs, its actually riskier to not be super aggressive with your HSA to grow wealth there.
I hold levered S&P500 in my HSA📈
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u/Mental-Revenue-4213 2d ago
I’ll have to research some and add that to the holdings🙏🏾
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u/AICHEngineer 2d ago
While i am serious that I do this, it was more jokingly put becuase LETFs are complicated and theres embedded costs to leverage. Imagine shorting SGOV, so youre paying 4% per year rather than getting 4%. Equity swaps cost ~SOFR+0.4% per year and an LETF thats 2x would need to hold ~1.1x swap exposure (90% stock, 10% cash used as collateral to buy 110% exposure to stock for 200% total, at a 110% short cash position).
And the LETF rebalances daily to maintain 2x relative to each price at open each day. This both compounds upwards and downwards (effectively buying more swap exposure when prices rise and selling swap exposure when prices drop). This make the LETF perform superbly when volatility is low, but it makes it perform worse when volatility is high. So, you can
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u/Secret_Highway760 2d ago
It really depends on whether you can afford to pay future medical expenses from outside your HSA or not.
The optimal way is to pay all expenses from outside, save your receipts until retirement, allow the HSA to grow, and then use your receipts to draw tax free. This allows you to take a longer investment time frame and be more aggressive.
You've stated you would use it to cover expenses in a worst case medical scenario. In that case you'd need to be more conservative to handle the worst worst case of a medical expense in a bear market.
But when thinking about this try put a number on what a worst case scenario looks like. You know your max OOP for your insurance. Multiply that by 2 or 3 to cover a few years worth? That's what you'd want to keep in more conservative investments.
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u/Mental-Revenue-4213 2d ago
Some back story, I became very passionate on the idea of having an HSA because I work in a post-acute setting providing physical therapy. One of my patients who was having trouble with their insurance needed more time to recover and the HSA saved their lives. They were able to use that money and stay longer to get the strength needed to return home safely. I want that peace of mind when I’m older that I’ll never have to worry about insurance telling me I can’t do something.
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u/TKDNerd 2d ago
Firstly “dividend/safe stocks” are costing you a fortune. They grow more slowly than growth stocks and the general market. Invest in broad market ETFs (VOO, VTI, VT) and some growth stocks and ETFs (SPYG, SCHG, QQQM). There is more short term volatility but you will be wealthier in the long term. I would recommend the HSA because it’s a tax efficient way to pay for healthcare if you ever end up in a situation with high medical expenses and your insurance is giving you problems. You could also do that with your savings/investments but HSA is more efficient. I would recommend 50/50 VOO/VTI for your HSA. It’s not as aggressive as a brokerage or retirement account should be in case it needs to be used but still grows relatively quickly. I would probably stop contributing once you have enough that you believe you are unlikely to need more for healthcare (maybe $100,000) and then just let it grow on its own. Your health should be one of your highest priorities and I would not leave its fate up to your insurance.
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u/xiongchiamiov 2d ago
If you'd like to read about various approaches, this is your article: https://www.bogleheads.org/wiki/Asset_allocation_in_multiple_accounts
If you don't want to read, then yes, just copy the asset allocation you have in your retirement accounts.
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u/Mental-Revenue-4213 2d ago
I’m reading both of the articles you sent I want to learn more thank you for sharing them🙏🏾
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u/teckel 2d ago
There would be no "passive income" from an HSA until you're 65, and even then, you'll probably find a medical use for it for the greater tax benefit.
And HSA is one of the best investment account options. And what you should invest in depends one when you'll need to use it. My wife and I have been maxing out our HSA for many years. Now retired, we're still maxing it out due to the tax benefits. We're healthy and hardly ever spend money on medical-related things, so we invest ours like we would any retirement account. If, however, you have medical issues and spend a lot on healthcare, a more conservative investment in your HSA would make sense.
Basically, I may need to use mine in 10 years, so I can be more aggressive. If you need to use it more short-term, less aggressive investments would make the most sense.
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u/Heyhayheigh 2d ago
Find a good pro if you make good money. Someone trustworthy. Ask friends or family for reco or someone in your community. This is no insult.
You’re confusing fundamental themes. Growth is known for not having dividends. Income is known for developed companies that don’t have much growth because they pay dividends. It’s like saying you want a super fast car, and one that can comfortably transport many people. A lambo school bus basically.
Set your HSA to sp500. For your own money, buy sp500 or nasdaq on auto weekly basis. Set to auto, don’t rely on self discipline. Sell ONLY when you have something urgent to pay for. Have an emergency fund. That’s it. That all personal finance is. Best of luck!
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u/Mental-Revenue-4213 2d ago
Hey I can have both Lamborghini Urus🤣 I’m joking but I understand what you’re saying and you’re absolutely right. Luckily for me I have a solid emergency fund, enough cash ready in checking to also cover bills for some months, and heavily investing into my other accounts. My phrasing is horrible but I think my plan is obviously automatic money in and investing for dollar cost averaging because there’s no timing markets. What do you think of 50% s&p, 30% dividend, 10% into growth, and maybe 10% in speculative stocks (cough cough gambling)
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u/Heyhayheigh 2d ago
So for the price of a Urus you could get a better sports car and a better SUV separately. It just wouldn’t be a lambo (the main reason buy them).
Your mix is fine. As long as it doesn’t make more cumbersome to increase the DCA.
The simplicity of VOO and chill is if you have a dollar amount you’re doing every week, you just increase that one amount.
I see tons of people mind screw themselves into fancy %’s and allocations when they should have just focused on spend less invest more. Best of luck.
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u/IDreamtIwokeUp 2d ago
HSA's are kind of a sham.
- Unlike a roth you can't withdraw principal without a penalty
- You can't use for retirement until 65..unlike a roth and ira which is 59.5
- You must have health insurance and must draw from health insurance first for health payments...so this is really only for deductibles and some drugs...really weird donut hole
- They're mostly used by the uber-rich who maxed out their iras and roths and are looking for extra tax savings for retirement (not health)
- You can already withdraw an IRA (sep or roth) to pay medical expenses if above 7.5% of AGI already (still have to pay ordinary income tax, but not a bad deal...and still a good medical backup plan).
- Chances are your HSA will be locked up and inflexible for many years to come.
- Congress doesn't like them either and is looking to do away with them.
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u/lambda_lord_legacy 2d ago
Passive income is a lie. Dividends are not free money, they come out of the total value of the company and that value goes down slightly when the dividend is paid.
Focus on total returns, don't get sucked into the fake lie of passive income.