ERs Too Bad to Invest?

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archbish99
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ERs Too Bad to Invest?

Post by archbish99 »

My HSA offers an investment option. I haven't used it, both because I'm building up enough of a cushion to cover our expenses for the coming year and because of the investment fee on top of whatever the fund itself charges. However, I'm reaching the point where we have enough heading into next year, so I'm reassessing my options.

There are some Vanguard funds in the mix with their otherwise-good ERs:
  • VIIIX (S&P 500) at 0.02%
  • VBMPX (Total Bond) at 0.03%
  • VIGIX (Large Growth) at 0.04%
  • VSMAX (Small Cap) at 0.05%
  • VVIAX (Large Value) at 0.05%
  • VEMPX (Extended Market) at 0.05%
  • VSIAX (Small Value) at 0.07%
  • VTPSX (Total International) at 0.07%
  • VBIRX (Short Bonds) at 0.07%
  • VMVAX (Mid-Cap) at 0.07%
  • VEMIX (Emerging Markets) at 0.10%
  • VTABX (Total Int'l Bond) at 0.11%
(Plus the 0.396% investment fee no matter what fund I choose.)

On the other hand, if I keep the whole balance in cash, I'll soon get into a higher tier that raises me from 0.25% to 1% interest with no investing fee, which seems valuable. (That probably won't last once next year's deductible starts hitting, though.) I also have an option that doubles the interest rate until I've received $25 in extra interest; if I stay with my current job indefinitely, I'll get that no matter what, but if I were to leave, the faster I accrue interest the more I will have gotten. $25 isn't going to cause dancing or weeping either way, however.

Right now, I'm inclined to keep the cash balance in hopes that I'll cross the threshold for higher interest. However, the basic question is still there -- is there a level of expense ratio where it's better to just sit in cash? Or should I be investing everything beyond what's needed for upcoming expenses and grit my teeth about the fee?
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scubadiver
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Re: ERs Too Bad to Invest?

Post by scubadiver »

So basically you're looking at aggregate fees in the neighborhood of 0.4 to 0.5%. Not great, but you could do a lot worse too.
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White Coat Investor
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Re: ERs Too Bad to Invest?

Post by White Coat Investor »

You know you're not stuck with your employer's chosen HSA right? You can roll it into your own HSA once a year or so I believe. Those in the know are using Fidelity or Lively these days. Super low costs and great investment options.
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Hector
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Re: ERs Too Bad to Invest?

Post by Hector »

I rolled over current employer's HSA to Fidelity HSA.
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archbish99
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Re: ERs Too Bad to Invest?

Post by archbish99 »

White Coat Investor wrote: Thu Sep 05, 2019 11:30 am You know you're not stuck with your employer's chosen HSA right? You can roll it into your own HSA once a year or so I believe. Those in the know are using Fidelity or Lively these days. Super low costs and great investment options.
That's a good point. The last time I explored that option, I couldn't find anyone who didn't have either a monthly fee or a substantial cash balance requirement before accessing investments. The landscape seems to have changed since then.

I don't want to leave entirely, of course; they integrate somewhat nicely with my insurance company and it's where my payroll contributions go. But I could easily roll out the funds I would be investing. I'll have to check if they have a fee to do a partial roll-out.

Edit: There's no limit on the number of custodian-to-custodian transfers, but they charge $25 per partial roll-out. That might or might not be worth it.
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Re: ERs Too Bad to Invest?

Post by Vanguard Fan 1367 »

I don't think your S & P 500 fund is too bad. I did that in a situation where they added .5 percent to the S & P 500 fund and it helped tremendously in building retirement assets.
John Bogle: "It's amazing how difficult it is for a man to understand something if he's paid a small fortune not to understand it."
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