By Dr. James M. Dahle, WCI Founder
[Update December 2018: Fidelity came out with a new HSA this year, with no fees. Lively is also charging no fees starting January 2019. That puts those two HSAs at the top of my list.
Update: January 2019: I just opened a new HSA at Fidelity for my 2019 contribution and initiated a rollover from HSA Bank/TD Ameritrade. More details in an upcoming post.]
I get asked a lot for recommendations on things like individual 401(k)s, IRAs, financial advisors, crowdfunding firms, and Health Savings Account (HSA) providers. Every time I get one, I think to myself, “You really need to get around to doing the research so you can write that sort of a post.” But it's hard work to do research, especially when I'm perfectly happy with the providers I'm currently using and when I have zero affiliate relationships with any of the firms doing it. See the problem? If I can just pull it out of my brain and type it, great! If I actually have to do work, I want to be paid for it. Greedy capitalist!
[Update just prior to publication: Want to know how greedy? I actually checked to see if any of these companies had an affiliate program after finishing the article. None do, which isn't surprising given how cheap an HSA is. There just isn't much money there to pay an affiliate for a lead when your annual fees are under $100.]
However, I've overcome my greedy ways today and I'm going to write a review about which HSA you should be using. As I write this paragraph, I haven't done a lick of research. I have no idea who is going to come out on top in this little comparison. And it really doesn't matter much to me personally, since I won't make a dime from any of these companies and I probably won't switch from the one I have.
I'm NOT going to explain what an HSA is or why you should be using one. I've done that many times before and if you still don't know, click on that link and learn about the first investing account I fund each year.
In this post, we're going to discuss which HSA is best for those who use it as an investing account, a Stealth IRA if you will. [Yup, still using that term, despite being threatened with a painful death if I continue to use it.] Maybe a follow-up post will discuss which HSA is best if you're actually using it all year long to pay for health care expenses. Be aware that if your employer puts money into an HSA for you, or pulls it out of your paycheck and puts it in, then let them keep doing that. There is some free money there or at least a little savings on payroll taxes. But if your employer's chosen HSA stinks, you can do a rollover into a better one once a year.
Best HSAs for Investing
If you, like me, mostly just use your HSA as another IRA (although one mostly intended to pay for health care in retirement), you will have a laser focus on the investing features of the account. That means the lowest possible fees and the best possible investments. Good customer service and lack of hassle are important too, but honestly, I only touch my HSA once a year. I can deal with some minor hassles once a year so I don't put too much stock on that stuff. I just want someone to charge me nothing and let me buy Vanguard index funds. Is that too much to ask?
Okay, here we go. I looked through a few similar articles on the internet and then went to each company's site. I wrote up a little paragraph about each one, and then AFTER I had collected all the information, I put them in this rank order. Bear in mind this is all subject to change at the whims of these companies. As they change fees and offer new investments, this rank order could change.
# 1 Lively
The savings account only pays 0.05%-0.55%, but they have no investing threshold, so you can invest your first dollar. Lively allows you to invest at TD Ameritrade, with a $2.50 monthly ($30/year) investing fee. Adding in the once a year $6.95 trading fee I would pay for what I'm doing, that's only $36.95, which makes Lively the second cheapest on this list. The only downside? They're pretty new. But frankly, none of these companies are all that old. Even the concept of an HSA isn't very old. The Bogleheads had a big discussion about them if you want more details, but the first mention of this company there was only 6 months ago.
# 2 HSA Bank
I have had an HSA with HSA Bank for about 6 years, so I know it well. I think my HSA is pushing $60K, as I've maxed it out each year and never taken anything out of it. The entire thing is invested in the Vanguard Total Stock Market Index ETF. With HSA Bank, you basically split your money between two accounts- the savings account at HSA Bank (pays 0.05%-0.45% depending on balance) and a linked investing account at TD Ameritrade. You have two options with fees. You can either leave at least $5K in the savings account and pay no fees to HSA Bank, or you can pay $5.50 a month ($66/year) and invest the whole thing at TD Ameritrade. Once you get over to TD Ameritrade, they have a list of ETFs that you can trade commission-free. Unfortunately, they recently removed the Vanguard ETFs, including the one I was using, from the list. So that means every time I buy and sell, I've got to pay $6.95. There are similar ETFs (such as SPTM) that trade commission-free, but I'd rather pay $7 a year to get the real thing and a much more liquid ETF with thinner bid:ask spreads. Maybe that's right, maybe that's wrong, but I'm not going to argue about it for $7. So total annual fees for what I want to do? $72.95 and I get exactly the investment I want. HSA Bank offers one other investment option. Instead of going to the brokerage window at TD Ameritrade, you can also buy mutual funds from “Devenir,” whoever they are. The mutual funds include the usual assortment of high-priced, actively managed funds found in bad 401(k)s- Goldman Sachs, JP Morgan, American Funds etc. Don't do that.
# 3 HSA Authority
Update after publication: I had an appallingly bad customer service experience on the phone with these guys just trying to get information about the HSA, and ended up with some wrong information (i.e. I thought $1,000 had to be left in the savings account paying literally 0.01%, but it turn sout you just have to have $1,000 to start investing and can invest every dollar. So I've moved them up from # 8 to # 3 in this list.]
Devenir runs their investments, like the second option at HSA Bank. Unlike with HSA Bank, HSA Authority has apparently gotten Devenir to offer Vanguard Admiral Share Index fund, without commissions. You do have to have $1,000 in the account before you are allowed to invest anything, but that shouldn't be a significant hurdle for readers of this blog.
# 4 Elements Financial
The savings account pays 0.25-1%, but once you have $2,500 in it, you can invest at TD Ameritrade like with HSA Bank where you could buy Vanguard ETFs inexpensively. Fees are $4/month ($48/year) if you have less than $2,500 in the savings account. Not a bad deal, right? However, they charge $24 to wire money from the HSA to TD Ameritrade. What's that about? Why would they need to wire it when everyone else does an ACH transfer? So if I want to invest it all like at HSA Bank and buy the Vanguard ETF once a year, my annual fees would be $48 + 24 + $6.95, for a total of $78.95, just slightly more than HSA Bank. That gets them third on my list.
# 5 Saturna
Saturna could be the cheapest option on the list for what I want to do. Saturna doesn't charge an annual fee, but I did notice they have a $75 fee to close the account, which is higher than the usual $20-25 I see. The problem I have with Saturna is their investments. They offer their own selection of funds, none of which I recognized including some random Idaho tax-exempt bond fund, as well as their own brokerage window, with $14.95 commissions. Actually, that's not entirely true. I have heard of some of their funds, the Amana ones. These are funds that invest in accordance with the principles of Islam. I've had a reader or two ask about them in the past, so if you want an HSA where you can invest in Islamic-compliant mutual funds, maybe Saturna is for you. The brokerage also charges you $25 a year if you haven't made any trades in 365 days. I wonder if I could get hit with that given my once a year trading frequency, but I think I could work around it with one trade per calendar year. I couldn't find anywhere that they pay any sort of interest on uninvested money other than some Dreyfus money market funds in the brokerage area. Potentially, I could buy that Vanguard ETF through Saturna brokerage once a year for $14.95, making this perhaps the cheapest possible option out there for me. Still hard to feel comfortable recommending this one to readers though. I guess I just don't like that there isn't a household name involved here anywhere. Idaho tax-exempt fund. Proprietary mutual funds. A little-known brokerage. Why won't Vanguard just start offering HSAs? It would make things so much easier.
# 6 Bank of Cashton
The Bank of Cashton offers relatively high interest rates on cash, ranging from 0.4%-1.65%. Their fees are also low at $25/year. There is no threshhold to invest, but investments seem to only be done through a “Cetera” brokerage account, which charges $14.95 commission. Adding the $25 annual fee to the $14.95 commission, gets me to $39.95, one of the cheapest options on the page. That said, I prefer a big household name brokerage (i.e. TD Ameritrade) to one I've never heard of before this review and if for some reason you needed to do more than one transaction a year, the commisions could add up quickly at $14.95. Similar issues to Saturna, but with an extra $25/year fee, puts them at # 6 on the list. That said, Saturna and Bank of Cashton became more attractive when TD Ameritrade took Vanguard ETFs off their commission-free list.
# 7 Select Account
The Select Account HSA charges anywhere from $0-4/month in fees, but the more you earn and the more you have in the account, the higher the interest rate. The interest rate ranges from 0-2%. It's like a choose your own adventure book or something. There are literally 45 combinations of fees/interest rates. You can't make this stuff up. If you want to invest the money, the fee for that is $18 a year but you have to leave $1000 in the regular account (earning 0-1.05% depending on how you solve the fee matrix.) Their mutual fund investments are also managed by Devenir. There are some Vanguard funds, but not even Total Stock Market Index fund. Could you make do with the 500 index fund admiral shares? Probably. Once you get $10K in there, you can go to a brokerage window at Charles Schwab where you could buy Vanguard ETFs or anything else you want with the usual $5 commissions. Bottom line, I think I could do my once a year ETF buy for $18 + $4.95 commission for a total annual cost of $22.95, minus whatever the cash drag on $1,000 would be. On a mutual fund earning 8%, that's another $80, so perhaps $102.95 total.
# 8 BenefitWallet
These guys have a $1,000 threshhold to invest, and offer a handful of good Institutional (even lower expense ratio than Admiral) Vanguard index funds. The checking account only pays 0.05%, and there is a $2.90/month ($35.80/year) fee to invest. There is also a $3.50/month fee for balances under $1,000, but that is relatively easily avoided for readers of this blog. So all in, perhaps $80 of cash drag + $35.80 = $115.80/year in fees. Not bad, but that cash drag is the biggest “fee” for many of these HSAs.
# 9 Optum Bank
There is some sort of monthly maintenance fee, but they won't tell me what it is without opening an account. They do pay some interest on the account, but they won't tell me what it is unless I open an account. There is an investing threshhold, but I can't seem to find it on their website. They do offer Vanguard index funds. I finally broke down and called them. It was an intricate phone tree, but I fought my way through by using a fake social security number to get to a real person. She wasn't able to answer any of my questions and wanted me to give her my insurance policy number. I didn't get the impression they get a lot of business like what mine would be- i.e somebody who just wants to open an HSA and invest the proceeds. The representative finally came back. My monthly maintenance fee would be $1 per month, the account pays no interest, there is a $2,000 threshold before you can invest, and there are no additional investing fees. $12 a year sounds great, but the cash drag on $2K is not insignificant. At 8%, that's $160 a year, quite a bit more than I'm paying now.
# 10 HSA Administrators
I love how HSA Administrators is always open about fees and investments. It was a hard decision between HSA Bank and HSA Administrators years ago when I had to decide. Back then, the fees at HSA Administrators were slightly higher, and that's why I'm at HSA Bank. Currently, their fees are $45 plus a 0.25% AUM fee. That's it. But in my case, with a $60K balance, that AUM fee is $150 and growing. So a grand total of $205 per year, almost three times the price of HSA Bank. Hard to get excited about that. The investments, however, are easy to get excited about. Vanguard admiral share index mutual funds plus some DFA funds for those who are into that sort of thing. But overall, it's cheaper for me to just buy the Vanguard ETFs at HSA Bank than pay the HSA Administrators AUM fee. However, if you were doing a lot of transactions every year, and had a much smaller HSA balance than I do, I could see where someone would choose HSA Administrators.
# 11 HealthEquity
HealthEquity made my research job pretty tough, but I think I found the information I was looking for eventually. They pay from 0.05-1.40%. There is some sort of an investment option, but you seem to have to open an account before they'll tell you what you can invest in. I did see something in a brochure that there was at least one Vanguard fund, but most were not. It bothers me that they spend most of the brochure trying to sell you some advisory services and a book. The account maintenance fee is $3.95 a month, or $47. 40/year. There is also a 0.4% AUM fee for invested money, and that's before the advisory fees if you choose to use an advisor. Between the fees, the lack of transparency, and the apparently limited investments, it's tough to place this one very high on the list.
[Update after publication: A number of readers wrote in or commented that HealthEquity offers a bunch of Vanguard funds. They also all claimed all kinds of varying amounts of fees that HealthEquity charges from nothing 3 basis points. In fact, even in HealthEquity's own brochures I found different levels of fees. No wonder everyone is so confused. As of the day of publication of this post, this is what was found on HealthEquity's site:
I really don't like AUM fees on these. When you combine that with an administrative fee and the fact that you can't invest your first $2,000, I'm not sure why this particular HSA has any fans at all. Nice to see the Vanguard funds though.]
# 12 Bank of America
BOA HSAs pay 0.1-0.3%. There is a $1,000 investment threshold. There are two reasonable iShares investment options (500 index and a developed markets fund.) The fees are $4.50 a month ($54.) Add another $80 worth of cash drag from that threshold, and you're at $134/year. Between the fees, the low interest rate, the thresh hold, and the poor investment options, this one is low on the list. Bank of America might be the only household name on this list (outside of TD Ameritrade), but their reputation isn't so hot. It's not Wells Fargo, but I wouldn't open a bank account there, so it is hard to recommend their HSA.
Conclusions
Well, you can see my biases when you look at how I made the rank list. I don't like annual fees, I really don't like AUM fees, I dislike having an investment threshhold, and I prefer a big name brokerage with lower commissions or being able to directly purchase Vanguard Funds. If you prefer the absolutely lowest annual fee, you may wish to go with Saturna instead of Lively. If you actually plan to make a bunch of trades each year, it may be worthwhile getting an HSA without commissions, such as Select Account, BenefitWallet, or HSA Authority. If you have a tiny account where the AUM fees won't add up to much, you might consider HSA Administrators. If you plan to leave a significant chunk of money in cash, Select Account or Bank of Cashton may be attractive to you.
The bottom line is that the HSA market is now very competitive. Fees are low across the board and you should be able to easily limit fees and commissions to less than $150/year. On the investing side, the differences between the top companies are not great, so if you are actually spending from the account, it may be best to make your final decision based on the non-investing features of the account. Since our account is currently with the firm I ranked second on this list, we considered changing from HSA Bank (# 2) to Lively (#1). I figure this could save us about $36 per year. However, then I got to thinking about the costs of closing the HSA Bank Account ($25.00), the cost of selling our shares ($6.95), the potential market losses of having the money out of the market during the transfer (just a 1% market change could be $600), and the cost of buying the shares back ($6.95) and it didn't seem so wise. But I figured, hey, both accounts would be at TD Ameritrade, why would I have to liquidate the investment at all? I called TD Ameritrade and they confirmed that I would not have to liquidate the investment or pay them any fees or commissions to switch. So it would only cost $25 to start saving $36 per year. It's not quite enough money for me to justify the hassle unless Lively's HSA is easier to use for spending and keeping receipts, especially since fees can change so quickly. I called HSA Bank to give them a chance to keep my business by lowering their fees, but they refused, so we may have a new HSA provider by the time you read this. [Update just prior to publication: Inertia is a powerful thing, still at HSA Bank. We're too busy getting ready for the WCI conference in Park City this week to take care of our own finances!]
What do you think? Which HSA provider do you use? Are you considering changing? Why or why not? Comment below!
Very thorough, WCI. Nicely done.
With fees measuring in the dozens of dollars per year, I wouldn’t bother switching unless I had a compelling reason to do so. Our employer switched us from Wells Fargo to Optum maybe a year ago. The cash balance required jumped from $1,000 to $2,000 but we gained access to the Vanguard funds as you mentioned, so that was a welcome switch.
I used to collect receipts and track them all on a spreadsheet, but that became more bothersome than I figured it was worth, so I now pay for medical expenses with a credit card that earns a reward, and immediately reimburse myself from the HSA. I still have to keep some record of the receipt, but Optum lets you upload it and attach it to the reimbursement, which is pretty convenient.
I realize I lose a little bit of tax-free growth by taking the money out now, but the advantage of waiting is also in the dozens of dollars per year, and I’d rather be sure to get the money out tax-free now rather than wait and do it all at some ill-defined later date.
Best,
-PoF
As always… interesting, useful and thorough post, WCI. HSA Bank could benefit from listening to your request to lower fees. They might not realize how many customers you drive to them, despite no official affiliate relationship. I’m one of them, and I’ve been a customer for four years.
POF… interesting comment. When you say “the advantage of waiting is also in the dozens of dollars per year,” could you be more specific? Have you run numbers on just taking the tax break now and spending the money versus allowing it to compound over time?
PoF – a good suggestion on HSA spending came from one of the forum threads. Take a picture of your medical receipt and email it to yourself. Save it in a separate folder and you have it forever. You can then take it out at that I’ll-defined later date after a suitable amount of tax-free compounding.
I like this digitization storage method!
Nothing wrong with that PoF. I was very close to doing the same thing last year.
I wish there was a like button for comments on the blog (or I can’t find it) like there are in the forum. I am struggling a lot with various decisions regarding how much I value my time and this seems very reasonable.
I just found out that Fidelity offers individual HSA account with no account maintenance fee and let you invest the entire amount in all the investment options that are available for regular brokerage accounts. I am waiting for HSA roll over amount to Fidelity from HSA bank. It was a very smooth transaction and Fidelity will take care of transfer once you fill out the account details for transfer.
I just opened an account with Lively a couple weeks ago. The setup process was very simple and took less than 5 minutes. Transferring funds into the account takes several days, then transferring funds from Lively to TD Ameritrade takes a couple more days after that. Otherwise, the entire process has been a breeze, so far. One thing I learned in this article is that I can still access Vanguard ETFs for only $6.95. I assumed the cost was higher, so I’d planned to settle for something else. Thanks, WCI!
Man, I wish I had access to an HSA. My employer doesn’t provide one because our plan apparently doesn’t qualify. It would be nice to have that extra bit of retirement space available, though.
Thanks for the thorough post, I’ll keep it indexed so that I can come back should my employer ever change the health insurance they provide and then offer an HSA (or if I change employers…who knows?).
That actually brings up a question. What happens to HSA’s that you use through an employer if you change employers? I presume you get to keep it, but just can’t add more contributions? Or is it more like a 457 where you have to do something with the money when you leave?
Yes you can keep it. And you can roll it over to another provider.
Would have saved me a bunch of time if you’d written this a few weeks ago. 🙂
I first had an HSA with my bank, then opened one with HSA Bank, then (before even funding it) found out about Lively. So I’m in the process of transferring my HSA funds there and I’m excited to have finally found a great solution. And to see others confirm that decision.
I agree Optum is pretty difficult to get information from. This is who our employer uses. The $2K investment threshold is accurate, but I got an invitation in the mail offering for me to join an “investor class” where the investment threshold was dropped to $500. The investment options aren’t that great, but there is a low cost Scwab target retirement fund and a Vanguard REIT that’s decent enough for me. My employer also puts $1000 into the account every year and won’t let me switch. I thought about opening a second HSA (if that’s possible) and transferring the funds to a better provider, but I’m not sure how much I would be gaining, and it’s easier just to leave it alone than trying to manage two HSA accounts and transferring funds 1-2 times per year.
Yes, some of these cut deals with larger employers.
Great timing. Opening an HSA for the first time this year.
Short of your antecdotal bad customer service experience, looks to me like HSA Authority deserves to be in top 2, given Lively’s very short track record perhaps #1.
Can invest 100%
Low fee ($36/yr)
Plenty of Vanguard admiral funds including VTSAX without commissions.
You may be right. I think I missed the invest first dollar factor there. For some reason I thought you had to leave $1000 in the savings side. Still hard to rank them high given the fact that not only was it so hard to get the answers when I called, but that I HAD TO CALL AT ALL. These weren’t hard questions I was asking, they should be on the website.
I ended up selecting HSA Authority before I read your articles. There were minor frustrations because the web sites are not integrated and you do have to call them to transfer funds to the investment account and they do have two separate websites.
But, their fees are low, I invest everything as you said, another IRA type account. The cash balance is $0.
It had the added bonus of being Old National Bank which has offices in southern Indiana where I am. This area is ultraconservative in its mindset, so it is not surprising they lag on the web site. I wish it weren’t so, but so be it. In person in their branches and on the phone, once I figured them out, they have been really good. How good?
Remember the IRS fiasco last year when the max contribution was $7000, then it was $6950, then it was $7000? Of course I dumped the max on January 2, moved it to the investment account. When the IRS proclaimed it made a mistake which I though it never did, I was a good doobee and withdrew the fifty bucks. No charge. Then when the IRS changed its mind which I thought it never did, I was able to reverse the transaction again. They were really easy to deal with and really did accommodate this HSA newby well. I vote for #2 as well.
Thanks for sharing!
I use Saturna, and they have some decent NTF fee funds through T. Rowe Price. The ER is higher than a Vanguard equivalent, but not as expensive as paying commissions when you’re dealing with a small contribution at a time. I’m not sure I would have opened the account if I knew about the $75 closing fee. Hopefully the suck fairy doesn’t visit any time soon, since it would take a lot for me to leave. However, the biggest drawback to Saturna is that they eschew fax and email and require everything be done through snail mail. This means when you want to move funds from your employer’s HSA, you have to mail the forms to Bellingham, WA; wait for them to mail transfer requests to your employer’s HSA; then if the employer’s HSA is willing to cooperate, wait for them to mail a check back to Bellingham, WA, after which the funds should show up in the brokerage a day or two later. It takes about a month and would probably take even longer if I didn’t live a couple of states away. I don’t mind the waiting as much as I hate being out of the market for that long.
I move funds with a simple phone call each year. All you need to do is fill out the “ACH Authorization Agreement” form. Fax/mail that in and you’re all set. You just call in each year and say you want to pull X amount from your linked account and it is in your Saturna account the very next day.
I have never had an HSA because my employees wanted low deductible insurance plans.
I just opened a new HSA for my wife and I at HealthEquity. So far so good. I agree with you that they are not very transparent with their investment options, but their fees are low and the website is well done/easy to use.
FWIW, they offer all Vanguard Funds for their self-directed investment option. List below. That’s the main reason I went with them.
They do have a $2,000 minimum to invest though, which I don’t really mind.
VANGUARD SMALL CAP VALUE INDEX ADMIRAL
VANGUARD TOTAL BOND MARKET IDX INSTLPLS
VANGUARD TARGET RETIREMENT 2060 INV
VANGUARD GROWTH INDEX INSTITUTIONAL
VANGUARD TARGET RETIREMENT 2020 INV
VANGUARD WELLESLEY INCOME ADMIRAL
VANGUARD TARGET RETIREMENT 2040 INV
VANGUARD TARGET RETIREMENT INCOME INV
VANGUARD EXTENDED MARKET INDEX INSTLPLUS
VANGUARD TOTAL INTL STOCK IDX INSTLPLS
VANGUARD SHRT-TERM INFL-PROT SEC IDX ADM Passive
VANGUARD INSTITUTIONAL INDEX INSTL PL Passive
VANGUARD EMERGING MKTS STOCK IDX INSTL
VANGUARD SHORT-TERM BOND INDEX ADM
TARGET-DATE 2030
VANGUARD MATERIALS INDEX ADMIRAL
VANGUARD MID-CAP VALUE INDEX ADMIRAL
VANGUARD SMALL CAP INDEX ADM
VANGUARD TOTAL INTL BD IDX ADMIRAL
VANGUARD INFLATION-PROTECTED SECS I
VANGUARD TARGET RETIREMENT 2050 INV
VANGUARD REAL ESTATE INDEX FD INST SHRS
VANGUARD VALUE INDEX ADM
I have used Health Equity for the past six years. There is a lot that you can ding them for like higher fees and in the past, a weak website. However, they offer 23 funds, all Vanguard, most passive, and with a good variety of asset classes.
I do use the HSA as a “Stealth IRA” where I fund the account in early January and then forget about it.
Here’s the pdf of investment options for HealthEquity for those who are interested.
http://resources.healthequity.com/Documents/Investments/HealthEquity_Investment_Options_Explanation_1.03.08.pdf
Thanks for sharing that.
One more issue with HealthEquity is that they require you keep $2000 in cash (which you watch slowly diminish as the fees come out of it).
I don’t have that restriction with HealthEquity, but my account is through my employer. $1,000 minimum before all of it may be invested. I also don’t have an AUM fee, only the 3 basis points added to the already low Vanguard fees.
While I don’t like the 39.6 basis point annual fee for Vanguard funds, this is slightly countered by the fact that most of the Vanguard funds are institutional shares with really low expense ratios, even for Vanguard. Vanguard Emerging Markets institutional shares (VEMIX) has an ER of .11%, whereas the investor shares have an ER of .32%. If you have enough in your HSA to getVanguard’s Admiral shares, this benefit is obviously much less. Also, HealthEquity doesn’t charge anything for trades, so for relatively small HSA balances, the total cost is probably no more than most of the others on the list.
However, once I build up my HSA, I plan on transferring it to another administrator.
I am also at HSA Bank and been very happy. I haven’t seen the monthly charge on the HSA Bank side – maybe paid by my employer – but agree with the $6.95 commission on the TD Ameritrade side. The only disagreement I have with your comments about the $6.95 commission being low is that it really adds up if you buy securities with every paycheck transfer. And if you want a diversified portfolio across multiple asset classes, the no commission fee options (usually the State Street ETFs) really make sense, and impacts from bid-ask spreads can be minimized if trades are always placed with limit orders.
I don’t think limit orders do much for bid-ask spreads.
It doesn’t effect the bid/ask spread but looking at the NAV and placing your limit accordingly you’re not going to get abused by the spread.
I’m with HSA Bank and can confirm that the monthly fees are covered by my employer. Of course, this will vary depending on the employer. I’m able to make my contributions to HSA Bank through payroll deduction and have HSA Bank sweep any balance above $100 to my TD Ameritrade account automatically.
Sorry I’m a bit late to this post, but I’m glad you made the comment regarding the $6.95 transaction fee, or as TDA calls it, an “Internet” fee. Lively appears to be one of the best options out there. But, as you mentioned, if I want to purchase securities with each paycheck transfer, that’s $14 a month plus Livelys $2.50 monthly fee. Are most investors simply depositing their money into the “cash” account and only purchasing securities maybe once or twice a year?
That’s what I do with my HSA. One transaction each January.
Another competitive option is Payflex. The APR on cash ranges from 0.05% for balances of $0 to $1,000 up to 0.40% for balances over $10k.
A minimum of $1,000 must be maintained in the cash deposit account.
Payflex charges a $2/mo fee, or $24/year, for investment balances under $10,000. When the investment balance exceeds $10,000, the monthly fee is waived.
Payflex offers a limited selection of Vanguard funds, including Vanguard LIfeStrategy Conservative Growth, Vanguard LIfeStrategy Moderate Growth, Vanguard 500 Index Fund Admiral Shares, and a few others.
No transaction fees are charged when buying or selling Vanguard funds.
These properties should put Payflex at the top of your Best HSA list.
As WCI noted, cash drag is the largest fee on these accounts. 7% lost return x $1000 = $70 a year. The top 5 on this list all offer first-dollar investing, and I agree with making that a requirement to land at the top.
Thanks for sharing. The $1,000 minimum would keep them off the top of the list for me, but I agree they’re a competitive option.
I’m looking at payflex through my employer. I’m new to this so I read the Q n A on the web site then looked up some customer reviews. They were very bad. Can anyone give me a good customer service review? It would be my easiest option if they check out ok.
Any HSA options for folks on Medicare with Tricare?
No. Medicare and Tricare are not HDHPs, so they don’t qualify for an HSA.
I use Saturna. not problem to make one trade/yr for $14.95–which is the only “yearly fee” I need to pay. If bigger brokerages finally accept HSA, I can ask for reimbursement of $75 closing fee if they want my business. too much variable many years down the road but so far it fits me.
My company uses Benefit Wallet; they’re fine, not great. Lousy web interface though.
I keep hoping that Vanguard will offer an HSA account type alongside their other accounts. Maybe too much work on the backend to support that?
Here’s a meta question; I get the idea of using all tax advantaged account types possible. But if your HSA balance is ~1% of your net worth, is it really worth having an HSA at all? Is the complication of thinking about it, about how to invest it, about which HSA administrator to use, about how to use it, etc… worth it? The marginal benefit of having that account versus saving the money in a taxable account instead is de minimis.
When I first graduated college (20-ish years ago) I did a short-term consulting gig while working full time. Based on that I was able to put $1000 or so into a SEP-IRA. At the time $1000 was real money to me; I had a negative NW after all. 20 years later that account has grown to about $3000, and sits alongside several $M in other assets in Vanguard. Likewise my HSA has about $45K in it, and I dutifully continue to contribute while not spending anything.
But the reality is those accounts are literally noise, but the kind of noise that I have to think about every month when calculating net worth. Aside from the personal finance hobbyist aspect, I can’t help but wonder if I should just dump these accounts.
Anyway, I guess I’ll spend Monday pondering that deep question.
Triple tax-advantaged is still triple tax-advantaged no matter if it is a large or small percentage of your portfolio. Money is money, so I would say why leave any on the table? If you have a way to buy health care “on sale” then why wouldn’t you? It’s not much work to stuff some money in once a year, and as for calculating your net worth, use something like Personal Capital, and all that is done for you.
Why wouldn’t you just convert that SEP-IRA to a Roth IRA to enable you to do Backdoor Roth IRAs or at least to simplify things?
At any rate, you’re in a great position when $45K is background noise. Hooray for first world problems.
Just opened an HSA at BOA a month ago or so and in process of transferring my wife’s HSA there. I saw some good posts about it at Bogleheads and chose it mostly due to the convenience. Their investment options aren’t bad for me but I hope to see more in the future.
Felt I needed to followup this post. My advice would be strongly to avoid Bank of America HSA. For starters there is no added convenience if you already have other BOA accounts. It is completely separate. I could explain in detail about my experience but suffice it to say I spent well over 10 hours trying to get the account set up properly and was not able to. Getting in touch with someone on the phone is painstakingly difficult. Nobody there seems to have much of a clue. The online interface is terrible. Just to summarize—-steer clear of Bank of America HSA.
I had the opposite experience with Lively. I spent a total of well less than one hour setting up a new account at Lively and transferring everything there. What a pleasure Lively has been to work with. I have only needed to correspond via email so far and their responsiveness and knowledge has been spot on so far. The online interface is modern and user friendly.
My old employer had Select Account, so that’s where my HSA sits now. It requires $1,000 in cash, plus the $18 annual fee to invest, plus a $1 per month fee to keep that money in cash. So not counting the cash drag, it’s $30 a year. I opted to just put it all into the Vanguard S&P 500 fund that they offer, which I personally think does the job.
Glad to see you happy. The truth is this space is pretty competitive, and the differences even between # 1 and # 10 on this list are pretty slight when compared to other investing issues.
When I saw that HSA Administrators offered DFA funds, I jumped for it. As a DIY investor this is one of the few opportunities to get access to DFA.
Another one is the Utah 529.
I have HSA bank. It is simple to use, good customer service so far, and has excellent TD Ameritrade commission free options, such as SPTM (US total market), SPDW (international), and SPAB (Bonds), which have some of the lowest expense ratios around. Whether you choose to leave $5000 in the bank account to avoid the monthly fees (and actually pay health care bills if you are short on cash), or have it all invested, it doesn’t matter too much.
HSA bank is one of the more established participants in the new field of HSA banking options. I would need a very compelling reason to move away from them. I do not see a big enough reason so far. But, many of the others are also excellent options. You would need a compelling reason to move away from them, too, and unless you have one of the poor options, you should likely stay where you are.
Through my work I have UMB Bank HSA.
Good so far! First $1000 goes into savings (currently only .10% APY) after that I have automatic monthly investing set up in the HSA Saver ($3/month) portion of UMB in Vanguard’s VTSAX (.04 ER).
Using payroll contributions, what % of taxes does it save?
Dave
At a minimum your share of the medicare taxes, so 1.45%.
1.45%, more than enough to cover my $36/year UMB fee.
Great website!
Thanks,
Dave
Glad I found someone who has some experience with UMB Bank! Our employer offers HSA via UMB Bank as well, but the annual fees are $24. Investment funds are run by Devenir and they are not the greatest, but there are some inexpensive Schwab index funds (i.e. SWPPX, SWISX, SWSSX). I’m thinking of investing our money in these. I just can’t figure out from the Terms and Conditions if there are any additional fees for transactions. There is an Appendix titled “Charles Schwab Bank’s Master Custodial Account Fees To Be Paid by Shareholder Servicing Payments”, but then in bold letters it states “These fees will not impact the Account Holders balance in neither the HSA Investment Account, nor the HSA Deposit Account.” What’s your experience with UMB Bank; did you notice any other fees besides $3/month?
I have been using the UMB HSA since Jan 2017. The only fee I have seen is the $3/month for investing and the expense ratio of course (.04% for the Vanguard VTSAX I’m using). Might vary with how your Co has it set up.
Dave
I also have an HSA at UMB from my previous employer. $1000 minimum on the savings side, then the rest can go into an Investing Subaccount for 3$/month. My employer paid the $3/mon overall account fee, but after retiring, I’m now responsible for it. So total is $72/yr + cash drag on $1000. Investment options are very good including a number of vanguard funds, as well as some high-priced funds. I’d say it is a good option if you are employed and the employer is covering the overall $36/yr fee. I’ll be looking more at the top two options above that offer first dollar investments at some point.
I currently have 26 tabs open as I have been researching this topic for the last two weeks (should have asked if you had a post coming.) As a book reader, newsletter reader and podcast reader I am glad glad to see that my conclusions were very similar to yours. (your guidance is working). I actually opened HSA bank about halfway through researching, and thought I was going to regret it.
I am sticking with HSA just because it is has been around for a while, and the new fees with ameritrade weren’t HSA bank’s fault. (shakes stick at TD for being greedy).
Good to see Vanguard is making active investing firms scared.
Nice HSA review. Thanks for doing the research, and too bad Optum gave you a tough time. Our company (and my account) uses Optum, and $2000 is only the minimum for NO fees. If you invest every $$$, annual fees are $1.75/mo, so total only $21/year. That’s straight from their Schedule of Fees page. Seems like a pretty good deal unless I’m missing something. Savings yield is 0.2%…that’ll buy a Peppermint Mocha every holiday for every $6000 invested 🙂 I sent a message to confirm all these details and will follow-up if necessary. Perhaps our company is paying some fees associated with our high-deductible health plan.
Per this: https://thehsareportcard.com/optum-bank
The investment threshold for an Optum Bank HSA varies from $0 – $2,000 if you are part of an employer group plan. For individuals and families enrolling on their own, the investment threshold is $2,000.
So I’m not sure your deal is the same one I would get if I went there. I think I’d have the $2K threshold.
I want to apply hsa health savings account for myself. To paid my medical pharmacy
Looked at my optum statement for the past year and a half. There were no annual fees.
Is your employer covering them?
No….. it is waived with a balance of $3000.00 and they take 0.03 percent of your investment with vanguard. So it would be 0.07% in total fees with Vanguard. Essentially same cost as spy……
I can’t quite reconcile what you’re saying about them with what I’m reading on the website and what Big Money is saying above. Guess I’ll have to dig in a little more there when I get the chance. Amazing how tough it is to get this information out of these firms and keep it current.
I believe Saturna has a $10 surcharge to invest in Vanguard or Fidelity index ETFs so it’d be $25 per year to do what you want.
That’s an interesting charge. I didn’t see that anywhere.
Couldn’t find on their site where it’s disclosed but it’s discussed here and also applied to Schwab. https://thehsareportcard.com/saturna-capital/
The $10 surcharge is only for Mutual Funds, not ETFs. I have Saturna and own just one fund within it, VTI (0.04 ER). I pay $14.95 per year, plus $1 each quarter for the dividend reinvestment, so $18.95 total. I front load my HSA contribution at the beginning of the year through my employer and then do an HSA Rollover into Saturna (I space these apart by 365+ days, per IRS rules). Very simple and definitely the best option for anyone looking to use their HSA as a stealth IRA.
Yes there’s a $10 surcharge that was added to the Fidelity index ETF that was a surprise for 2018, it had always been that way for Vanguard.
So I went ahead and decided this year to buy T ROWE PRICE EQUITY INDEX 500 which has a higher expense ratio but there was no fee at all to buy it.
I use Optum Bank for my HSA. I pay $66 in fees per year. They charge a $2.50 monthly investing fee to invest in mutual funds. They also charge a $3.00 monthly maintenance fee if you don’t keep $5k in their savings account. I come out ahead by investing the $5k in the Vanguard S&P 500 index fund rather than keeping it in the savings account that earns 0.05%. I typically keep some money in the savings account in case we want to use our HSA debit card for medical expenses.