Worth incorporating an Health Savings Account (hsa) as part of your IRA planning if you qualify...here's a good informational link.
bogleheads.org/wiki/Health_savings_accountOlder, but still revelant info (i.e. contribution numbers are old):
Using Your Health Savings Account as a "Super Roth" Investment Vehiclefreemoneyfinance.com/2008/08/using-your-heal.htmlWhy I Think the Health Savings Account Trumps the IRA"Most people don’t think about an hsa, or Health Savings Accounts, as an alternative to an IRA or 401k plan, but it should be considered. Here’s why.
An hsa account is like an IRA on steroids. With a traditional IRA or 401k, if you are eligible, you take a deduction when you put money in. The money grows tax-deferred, and then you pay taxes when you withdraw it.
With an hsa, you take the same deduction when you contribute money, but when you use the money in your hsa for medical expenses and qualified health insurance premiums, it comes out tax-free. "Why-Fund-An-Hsa-Instead-Of-An-Ira-Or-401kWhat does the IRS consider Medical Expenses?irs pub
Comments
Just because an expense is listed in Pub 502 (see bee's link) doesn't automatically mean that you can pay for it out of the HSA. Specifically, most health insurance premiums outside of Medicare are not qualified expenses for the FSA, even though Pub 502 includes them. See Pub 569, which is specific to HSAs (and FSAs, etc.)
You can use the HSA for COBRA premiums, and for insurance premiums when collecting unemployment insurance.
Even though Medicare is generally considered a qualified medical expense for HSA purposes, you still have to be careful. It's only qualified if you're over age 65. That means that if your spouse is over 65 and on Medicare, but you're younger, you can't use your HSA to pay for your spouse's premiums. And though Medicare Part B and Part D are considered qualified, as is Part C (Medicare Advantage), Medicare Supplemental Insurance (medigap) premiums are not.
Many if not most providers of HSAs charge a maintenance fee for the accounts (and may also charge setup and closeout fees). Many offer only savings accounts, which these days pay little interest and that can be consumed by maintenance fees. Some offer a limited set of investment options (not the cheapest funds available) and often with an additional fee to have the investment option. Some offer brokerage accounts, again with additional maintenance fees.
My impression is that it takes a few thousand dollars in an HSA to justify the expense of an investment account (in part because providers often require you to keep a significant savings account balance or pay higher fees).
If you are just using the savings account (and not an investment account), given current low interest rates the main benefit is tax savings, not growth. That's still real and worth doing. About the highest rate you'll find for an account under five figures is 1% APY.
May not be worth using it for saving, but one still gets tax benefits from using it as a spending account. If one's got $1,000 in out-of-pocket expenses, one can shovel $1K through the account and immediately withdraw it. No interest, but also no cost, and one gets the benefit of reducing AGI by $1K.
(Note: by immediately, I mean that one opens an HSA with a minimal balance; then as expenses are incurred, or at the end of the year, contribute whatever one spent during the year, and withdraw it immediately. You can't pay for expenses incurred before you have an HSA, which is why it's necessary to prime the account up front.)
From Bruce's (we're on a first name basis) HSA application: Please note that a $15.00 annual maintenance/custodian fee will be charged.
Nevertheless, nice option. I didn't realize that there were any funds that offered HSAs directly. Though I should have remembered. We've had this dance before.
http://www.mutualfundobserver.com/discuss/index.php?p=/discussion/6824/health-savings-accounts-hsa-and-mutual-funds/p1
By the way might Bannedfromboggleheads have renamed him/herself here at MFO? Haven't heard from him/her in awhile...any thoughts cman?
Their mutual fund plan (the one you are referring to) offers a choice of nine house funds.
AMANX - Large Cap Blend, 1.18% ER
AMAGX - Large Cap Gr, 1.11% ER
AMDWX - EM, 1.51% ER
SSGFX - Large Cap Gr, 1.10%
SSIFX - Foreign Large Bl, 1.10%
SCORX - Mod Alloc, 1.32%
SGHIX - Tactical Alloc, 0.90% - a new fund with fee waiver in place until 3/31/14
STBFX - Short Term Bond, 0.75%
SBIFX - Long Term Bond, 0.90% - a tiny ($7.1M) older fund with fee waiver in place until 3/31/14
(Their brochure says they offer three bond funds; I can only find the two bond funds above on the application.)
One of the best choices for small accounts if you want to invest the money. Okay funds, slightly above average cost, and lacks a place to put cash. So its use seems to be best suited for investing, and not for drawing cash for current medical expenses.
The other plan is a brokerage account. Okay, not the lowest fees for stocks ($15 for up to 1,000 shares). They list the NTF fund families, but not specific fund/tickers:
http://www.saturna.com/sbs/pdf/sbs-archipelago.pdf
(NTF min's are $2500 for those on the Pershing list on that page; $10K initial, $5K additional for the Archipelago list.)
Also has transfer out fee ($35), fee for dividend reinvestment ($1; might apply to ETFs too), inactivity fee (e.g. if you're not eligible to contribute to the HSA and don't make withdrawals) of $25/year ($12.50 if you've only got mutual funds).
Again, pretty good, and one of the lowest cost options. The individual fees still add up to less than total cost of other HSA providers.
Glad to hear they are easy to deal with. Comments like that are important for lesser known providers.
Here's the list of investment options.
https://www.smart-hsa.com/fundlist.asp?clientOrg=PN001&employerId=&branchId=PN001
It's a small (16) but nice list of funds. With funds like two D&C funds, and a Vanguard fund, one can't say they're all expensive. (Many of the others are at or below average cost as well.) And it does seem it's giving you "free" (NTF) access to some funds not normally on NTF lists.
I can't tell whether the plan gives you a back door into the closed Artisan fund, or whether only existing shareholders can buy it. Hope you can.