HSA Three-fund portfolio simplification

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Goldilocks
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HSA Three-fund portfolio simplification

Post by Goldilocks »

We have good health :sharebeer and would like to simplify our HSA Boglehead style with emergency cash and a Three-Fund portfolio mix of stock funds investments. Our account is with HealthEquity through her employer. We’re maxing it out through employer and payroll contributions to $7,200 this year. The strategy we are considering is to:
  1. Maintain a $7k balance in the account portion of the HSA for emergency cash covering the high deductible of our family medical insurance.
  2. Invest the rest, currently $30k, using these three stock funds. In addition to their expense ratios (ERs) HealthEquity charges an annual 0.396% (0.033% per month times 12 months) fee on their combined balance. Our desired equity asset allocation is 75% US and 25% International. HealthEquity manages quarterly re-balancing and we’re thinking of setting this up with a mix to the following Vanguard Index Institutional Plus funds that are available in this HSA:
    • 60% Institutional (VIIIX) (0.02%) an S&P500fund
    • 15% Equity Market (VEMPX) (0.04%) a US completion fund.
    • 25% Total International (VTPSX) (0.07%)
    What do you think?
The 1st mix was too volatile, and the 2nd was too idle. But the 3rd allocation was just right!
fabdog
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Re: HSA Three-fund portfolio simplification

Post by fabdog »

Is the HSA your only investment account? If so this is fine...

But if you have other accounts you can just use the HSA for one of the legs of the three fund for simplicity.. rather than try and replicate 3 fund in each account you own

Mike
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retired@50
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Re: HSA Three-fund portfolio simplification

Post by retired@50 »

Goldilocks wrote: Sat Jun 12, 2021 8:34 am What do you think?
The mix of funds looks fine.

I wonder if you read the fine print related to the rules about the HSA plan, if you might be able to sidestep the ongoing AUM fee. I seem to recall people rolling money out of an "expensive" HSA, and moving it to a no-fee HSA at Fidelity. As I understand it, you'd continue to use the plan through payroll deduction, but then every once in a while, you'd transfer some of the balance to the Fidelity HSA. Leaving behind enough money in the employer HSA to stay in the good graces of the rules, etc.

Regards,
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bgf
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Re: HSA Three-fund portfolio simplification

Post by bgf »

I think that's a fine plan. I also have healthequity through my employer and just invest 100% into Vanguard Target Date Fund.
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anon_investor
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Re: HSA Three-fund portfolio simplification

Post by anon_investor »

fabdog wrote: Sat Jun 12, 2021 8:42 am Is the HSA your only investment account? If so this is fine...

But if you have other accounts you can just use the HSA for one of the legs of the three fund for simplicity.. rather than try and replicate 3 fund in each account you own

Mike
+1.

Also +1 to the idea of rolling the HSA funds periodically to a no fee Fidelity account and investing there to save on the AUM.
WhatsIRR
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Re: HSA Three-fund portfolio simplification

Post by WhatsIRR »

I have a Fidelity HSA, I keep $10,000 cash (150% of max out of pocket) and everything thing else is invested in FZROX. It’s a small part of my portfolio so I’m not concerned with a slight skew from my desired allocations by not having 3 funds.
TropikThunder
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Re: HSA Three-fund portfolio simplification

Post by TropikThunder »

Goldilocks wrote: Sat Jun 12, 2021 8:34 am What do you think?
I don’t think I’d pay the 40 bp add-on investing fee to invest through Health Equity. They are my employer-selected HSA so money goes in from paychecks but I then move it right out to Lively (Fidelity is probably a little better but they didn’t have HSA’s when I opened my Lively account). VTI at 0.03% is so much better than VIIIX at 0.42%.

I also only leave $25 in the HealthEquity account so they don’t close it, and I only use one fund for what I invest since I just count it as part of my total portfolio.
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Goldilocks
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Re: HSA Three-fund portfolio simplification

Post by Goldilocks »

fabdog wrote: Sat Jun 12, 2021 8:42 am Is the HSA your only investment account? If so this is fine...

But if you have other accounts you can just use the HSA for one of the legs of the three fund for simplicity.. rather than try and replicate 3 fund in each account you own

Mike
Yes, Mike, I do have other accounts and this advice gave me the idea to use just the one (VIIIX) (0.02%) an S&P500 fund in the HSA because:
  • I can balance with a similar Index US completion fund (0.04%) through my Roth 401k with a longer time horizon. Shifting the volatility of smaller Co stocks there and keeping the HSA more stable should be advantageous
  • I can balance the tax efficient International Index stock allocation with more(VTPSX) (0.07%) in a taxable account
The 1st mix was too volatile, and the 2nd was too idle. But the 3rd allocation was just right!
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Goldilocks
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Re: HSA Three-fund portfolio simplification

Post by Goldilocks »

TropikThunder wrote: Sat Jun 12, 2021 5:19 pm
Goldilocks wrote: Sat Jun 12, 2021 8:34 am What do you think?
I don’t think I’d pay the 40 bp add-on investing fee to invest through Health Equity. They are my employer-selected HSA so money goes in from paychecks but I then move it right out to Lively (Fidelity is probably a little better but they didn’t have HSA’s when I opened my Lively account). VTI at 0.03% is so much better than VIIIX at 0.42%.

I also only leave $25 in the HealthEquity account so they don’t close it, and I only use one fund for what I invest since I just count it as part of my total portfolio.
Sweetness on minimizing fees :beer One item I am noticing is that the expensive AUM fees cap at $120 a year with Health Equity. So if we're successful and the account grows to reach the cap, we will have to compare that with Fidelity's fees to know how much we would with the rollovers.
The 1st mix was too volatile, and the 2nd was too idle. But the 3rd allocation was just right!
stimulacra
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Re: HSA Three-fund portfolio simplification

Post by stimulacra »

I do something similar on my end. I like it.
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anon_investor
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Re: HSA Three-fund portfolio simplification

Post by anon_investor »

Goldilocks wrote: Sun Jun 13, 2021 12:28 am
TropikThunder wrote: Sat Jun 12, 2021 5:19 pm
Goldilocks wrote: Sat Jun 12, 2021 8:34 am What do you think?
I don’t think I’d pay the 40 bp add-on investing fee to invest through Health Equity. They are my employer-selected HSA so money goes in from paychecks but I then move it right out to Lively (Fidelity is probably a little better but they didn’t have HSA’s when I opened my Lively account). VTI at 0.03% is so much better than VIIIX at 0.42%.

I also only leave $25 in the HealthEquity account so they don’t close it, and I only use one fund for what I invest since I just count it as part of my total portfolio.
Sweetness on minimizing fees :beer One item I am noticing is that the expensive AUM fees cap at $120 a year with Health Equity. So if we're successful and the account grows to reach the cap, we will have to compare that with Fidelity's fees to know how much we would with the rollovers.
Fidelity has no fees and 0 expense ratio funds. So wouldn't Fidelity be cheaper by default?
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