Fidelity "Zero" index funds for HSA

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db55
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Fidelity "Zero" index funds for HSA

Post by db55 »

Hi,
I've been a Vanguard guy for my IRA and taxable investments for many years. But I'm moving my HSA to Fidelity. I was OK with HealthEquity although I thought their HSA fees were a bit too high. However Fidelity has no fees on their HSAs, plus they offer index funds with zero expense ratio. For a Boglehead, that sounds hard to beat. I'm paying a $25 HSA account closing fee to HealthEquity, but that will be made up in ~ 6 months. Plus Fidelity doesn't have a minimum for your cash balance, so I can invest it all.

Does anyone have experience with Fidelity's "Zero" index funds? If so, what do you think about them? I'm currently planing to invest in their Zero Total Market Index Fund and Zero International Fund. I may also invest in their US Bond Index Fund (.025% expense ratio).
000
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Re: Fidelity "Zero" index funds for HSA

Post by 000 »

Sound like good choices to me though the differences between the non-zero versions are probably trivial.
WhatsIRR
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Re: Fidelity "Zero" index funds for HSA

Post by WhatsIRR »

I use FZROX in my HSA
TropikThunder
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Re: Fidelity "Zero" index funds for HSA

Post by TropikThunder »

db55 wrote: Wed Oct 20, 2021 9:08 pm I'm currently planing to invest in their Zero Total Market Index Fund and Zero International Fund. I may also invest in their US Bond Index Fund (.025% expense ratio).
I don’t use Fidelity but your plan sounds fine to me. One legitimate concern with the Fido Zero funds is that you can’t hold them at other brokerages, meaning you’d have to sell to move the money (and generate capital gains taxes). But that’s only an issue in a taxable account, so holding them in an HSA is fine since you can sell with no tax consequences.

Some have expressed concern that these new funds (and their new indexes) might have performance issues vs total market funds with longer track records, but that’s not been the case so far (and I have no reason to think it will be in the future). Since inception in 2018, FZROX has matched VTSAX and FSKAX just fine (growth of $10,000 returns are $18,204; $18,226; and $18,202 for the three funds).
nguy44
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Re: Fidelity "Zero" index funds for HSA

Post by nguy44 »

WhatsIRR wrote: Wed Oct 20, 2021 9:16 pm I use FZROX in my HSA
I use it in my HSA as well.
pasadena
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Re: Fidelity "Zero" index funds for HSA

Post by pasadena »

My HSA is 80/20 with FZROX, FZILX and FXNAX. No problems, they're pretty good so far. I'm not sure what you're asking, really?
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dogagility
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Re: Fidelity "Zero" index funds for HSA

Post by dogagility »

FZROX for the win!
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anon_investor
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Re: Fidelity "Zero" index funds for HSA

Post by anon_investor »

My employer is moving our HSAs to Fidelity early next year, and I plan to invest 100% in FZROX (Fidelity ZERO Total Market Index Fund). My HSA is current at PayFlex and 100% invested in VITNX (Vanguard Institutional Total Stock Market Index Fund Institutional Shares).
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fizxman
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Re: Fidelity "Zero" index funds for HSA

Post by fizxman »

nguy44 wrote: Wed Oct 20, 2021 10:32 pm
WhatsIRR wrote: Wed Oct 20, 2021 9:16 pm I use FZROX in my HSA
I use it in my HSA as well.
As do I.
Jill07
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Re: Fidelity "Zero" index funds for HSA

Post by Jill07 »

The FIdelity HSA also has access to the Fidelity Freedom Index Institutional Premium funds with exp ratio of .08%, if you would rather not have to re-balance.
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camillus
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Re: Fidelity "Zero" index funds for HSA

Post by camillus »

Why do you need to maintain an AA in each of your accounts?

Maintain an AA across all of your accounts, with all of your bonds in a 401k.

The zero funds are just fine. FZROX = FSKAX = VTSAX, doesn't matter.
51% US / 34% ex-US / 15% “bond”
ohme
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Re: Fidelity "Zero" index funds for HSA

Post by ohme »

My HSA is at Fidelity and I was doing a 3-Fund with FZROX/FZILX/FXNAX. I have recently switched to new funds going to FSKAX/FTIHX/FXNAX. Essentially the ZEROs, so far, are a gimmick and have somewhat underperformed (we are talking a few bps) their non-ZERO counterparts. My decision to move was to simplify the amount of funds I have spread across all my accounts, not performance related.

So, those funds will work just fine.
ohme
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Re: Fidelity "Zero" index funds for HSA

Post by ohme »

camillus wrote: Thu Oct 21, 2021 7:29 am Why do you need to maintain an AA in each of your accounts?

Maintain an AA across all of your accounts, with all of your bonds in a 401k.

The zero funds are just fine. FZROX = FSKAX = VTSAX, doesn't matter.
Personally I keep HSA separate from retirement accounts because they are for different things. They have the same allocation but if I have health emergency and need to draw down, I only have to balance one account and not my entire portfolio. Also the taxability of the HSA is dependent on the reason for withdrawal so it is hard to know if i should treat as pre-tax or post-tax.
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anon_investor
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Re: Fidelity "Zero" index funds for HSA

Post by anon_investor »

ohme wrote: Thu Oct 21, 2021 7:50 am
camillus wrote: Thu Oct 21, 2021 7:29 am Why do you need to maintain an AA in each of your accounts?

Maintain an AA across all of your accounts, with all of your bonds in a 401k.

The zero funds are just fine. FZROX = FSKAX = VTSAX, doesn't matter.
Personally I keep HSA separate from retirement accounts because they are for different things. They have the same allocation but if I have health emergency and need to draw down, I only have to balance one account and not my entire portfolio. Also the taxability of the HSA is dependent on the reason for withdrawal so it is hard to know if i should treat as pre-tax or post-tax.
How close are you to retirement? I don't plan to pull from the HSA until age 65+ (20+ years from now), there for I am keeping it at 100% equities for the time being. I may hold a separate AA for my HSA as I approach age 65, but that is years off
ohme
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Re: Fidelity "Zero" index funds for HSA

Post by ohme »

anon_investor wrote: Thu Oct 21, 2021 8:12 am
ohme wrote: Thu Oct 21, 2021 7:50 am
camillus wrote: Thu Oct 21, 2021 7:29 am Why do you need to maintain an AA in each of your accounts?

Maintain an AA across all of your accounts, with all of your bonds in a 401k.

The zero funds are just fine. FZROX = FSKAX = VTSAX, doesn't matter.
Personally I keep HSA separate from retirement accounts because they are for different things. They have the same allocation but if I have health emergency and need to draw down, I only have to balance one account and not my entire portfolio. Also the taxability of the HSA is dependent on the reason for withdrawal so it is hard to know if i should treat as pre-tax or post-tax.
How close are you to retirement? I don't plan to pull from the HSA until age 65+ (20+ years from now), there for I am keeping it at 100% equities for the time being. I may hold a separate AA for my HSA as I approach age 65, but that is years off
If all goes to plan, then 22 years until retirement at 55 so not very close. It is at 90/10 Equities/Bonds. I have thought about going more aggressive but I use it as a last resort on top of my EF (have about $7k I could pull out today tax-free, yes I keep all the receipts/invoices) so I would drop bonds in that event.

I foresee me having a substantial HSA relative to my actual health care costs at 65 and therefore I can't drain it completely tax-free even if I do use it for medicare premiums.
nguy44
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Re: Fidelity "Zero" index funds for HSA

Post by nguy44 »

ohme wrote: Thu Oct 21, 2021 10:38 am
I foresee me having a substantial HSA relative to my actual health care costs at 65 and therefore I can't drain it completely tax-free even if I do use it for medicare premiums.
Keep in mind you can draw on it tax free against most types of medical costs that occur after the HSA was opened. Draw down does not have to be just against costs that start at 65. At lot can happen in 22 years (one can choose when to to draw, just keep good records should the IRS come a knocking).

I would not let the "oh no, I might pay too much taxes in the future" hold you back, it means you will still have a relatively large amount after taxes. As the saying goes, "don't let the tax tail wag the investment dog".
DoctorPhysics
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Re: Fidelity "Zero" index funds for HSA

Post by DoctorPhysics »

I am in CA - which does not recognize HSA... regardless, I use FZROX also.
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rterickson
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Re: Fidelity "Zero" index funds for HSA

Post by rterickson »

DoctorPhysics wrote: Thu Oct 21, 2021 4:16 pm I am in CA - which does not recognize HSA... regardless, I use FZROX also.
Ditto for me.
mikep
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Re: Fidelity "Zero" index funds for HSA

Post by mikep »

DoctorPhysics wrote: Thu Oct 21, 2021 4:16 pm I am in CA - which does not recognize HSA... regardless, I use FZROX also.
I use the Fidelity TIPS fund in my HSA in CA. They are the best from a tax treatment perspective. If you hold TIPS at all the HSA should have them due to their state tax free dividends.
nalor511
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Re: Fidelity "Zero" index funds for HSA

Post by nalor511 »

rterickson wrote: Thu Oct 21, 2021 5:13 pm
DoctorPhysics wrote: Thu Oct 21, 2021 4:16 pm I am in CA - which does not recognize HSA... regardless, I use FZROX also.
Ditto for me.
You could use Vanguard ETFs and preclude the possibility of capital gains distributions, but Fidelity funds are mostly fine too
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whodidntante
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Re: Fidelity "Zero" index funds for HSA

Post by whodidntante »

db55 wrote: Wed Oct 20, 2021 9:08 pm I'm paying a $25 HSA account closing fee to HealthEquity, but that will be made up in ~ 6 months.
If you want to save $25, don't involve your current custodian in the transfer. Instead, use your once per 12 months 60-day rollover for this. I have posted detailed instructions before. Search my post history if this interests you.
ohme
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Re: Fidelity "Zero" index funds for HSA

Post by ohme »

nguy44 wrote: Thu Oct 21, 2021 3:47 pm
ohme wrote: Thu Oct 21, 2021 10:38 am
I foresee me having a substantial HSA relative to my actual health care costs at 65 and therefore I can't drain it completely tax-free even if I do use it for medicare premiums.
Keep in mind you can draw on it tax free against most types of medical costs that occur after the HSA was opened. Draw down does not have to be just against costs that start at 65. At lot can happen in 22 years (one can choose when to to draw, just keep good records should the IRS come a knocking).

I would not let the "oh no, I might pay too much taxes in the future" hold you back, it means you will still have a relatively large amount after taxes. As the saying goes, "don't let the tax tail wag the investment dog".
My HSA might be approaching seven figures by 65, and based on average health expenses of individuals, I don't see me paying out anywhere near $1M in our lifetimes between me and my wife. I have $7.5k in my HSA that I could draw out tax free today from past health expenses and I keep an HSA Journal, keeping paper copies along with scanning the documents. I just don't need that money now, so I will let it grow in the hope that it will one day also be tax free.

I am not afraid of paying the ordinary taxes on non-qualified withdrawals at 65, I just think I will get to the point that I will have to do it due to a large account. For me the tax savings today (10.15%, FICA/Local) make it a no brainer.
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Re: Fidelity "Zero" index funds for HSA

Post by willthrill81 »

000 wrote: Wed Oct 20, 2021 9:15 pm Sound like good choices to me though the differences between the non-zero versions are probably trivial.
Indeed. So far, Vanguard's VTSAX has actually outperformed Fidelity's FZROX despite the latter having no expenses.
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GeMoney
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Re: Fidelity "Zero" index funds for HSA

Post by GeMoney »

I also use FZROX in my HSA. The only thing slightly different about it is that it distributes dividends annually rather than quarterly.
newpup
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Re: Fidelity "Zero" index funds for HSA

Post by newpup »

FZROX and FZILX for my HSA.
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