Have you ever moved your HSA to get better investment options?

Question

I haven't seen a lot of discussion about this topic which surprises me since I feel like personal finance people talk about HSAs all the time!

A couple months ago there was a guest on the BP money pod that said something I really liked, "put your risk in your ROTH" and by that he meant that if you're going to invest in something riskier that has the potential to have large returns, put that in your ROTH account because you're only taxed on what goes IN to your ROTH, not what comes out. I am thinking about that in another way, related to my HSA.

Since HSAs are really limited into what you can put in annually, but they're triple tax savings, I've been really thinking about what I'm invested in within my HSA. My employer uses Optum financial, but the investment options are really limited within that account. I've made a call to see if I can link a Schwab HSBA (health savings brokerage account) because Schwab said it was possible but Optum said they would have to "create a case" for that, whatever that means. Schwab doesn't offer their own HSA account sadly.

Getting to the point of why I am here - It seems I have the ability to open an HSA at any bank that offers them, then do a rollover from Optum for $20. If I want the bank with the most investment options for my HSA, which bank should I choose? Ideally I'd like the ability to invest in individual stocks of my own choosing (fractional shares is a plus), a diverse option of index funds, and ETFs.

Has anyone found a great banking option to have the most flexibility with your HSA investments?

Finally my closing thought is, is there any downside to moving HSA banks I may not have considered? I understand I likely won't have an HSA debit card like I do now, and that it would be harder to liquidate my investments potentially. I'm paying for medical out of pocket and keeping receipts so that it's really more of a savings account.

Kaaren Hall · Answer

Here's a blog I wrote about H.S.A.s invested in alternative assets Financial Independence Retire Early - Achieve FIRE Faster with a Self-Directed HSA- https://udirectira.com/achieve-fire-faster-with-a-self-direc...

Dmitriy Fomichenko · Answer

You should never use a debit card or pay for medical expenses from your HSA, ever! This would defeat the triple tax savings @Kaaren Hall described above. Contribute to HSA the maximum you can, then invest to get the best possible returns and wait. Accumulate all of the medical receipts and take tax-free distributions later, 10, 20 or 30 years later. That is how you get the most out of your HSA.

Kaaren Hall · Answer

@Rene Hosman Right?!  Surprising for sure.  The contributions are lower so it takes a while to build, but once you do, it's tax-free investing.  You get a deduction for the contribution, the gains grow tax-free and as long as you use the proceeds for health-related expenses the funds come out tax free as well.  It's the best of all worlds with regard to self-directed investing!

Kaaren Hall · Answer

@Rene Hosman You can read about H.S.A. investing in my new BP book - Self-Directed IRA Investing: A BiggerPockets Guide - www.BiggerPockets.com/SDIRA

Rene Hosman · Answer

Yes I'm so excited to read this, thank you!!

Rene Hosman · Answer

There are self directed HSA's?!?! @Kaaren Hall you just blew my mind with that one!

Josh St Laurent · Answer

@Rene Hosman, it’s awesome that you’re looking into ways to invest your HSA funds! Here’s a quick rundown of what you might consider:

1.	Employer HSA vs. Your Own Account

Employers usually pick the default HSA provider, but you can open one anywhere that offers a brokerage option. Popular choices like Fidelity, Schwab, or Vanguard let you invest in a range of stocks, mutual funds, and ETFs. If you go this route, be aware that you’ll lose payroll deductions—so you’ll have to track contributions on your own (see IRS Publication 969 for HSA rules).

2.	If You Own a Business

If you’re running an LLC or S-corp, you might be able to fund an HSA through that payroll. It can simplify end-of-year paperwork, but you’ll want to confirm the details with a tax pro.

3.	Long-Term Game Plan

Paying out of pocket and keeping your medical receipts can be a great strategy. This lets your HSA grow, and since qualified withdrawals are tax-free, putting more aggressive investments in an HSA can pay off in the long run (similar to the “put your risk in Roth” idea).

4.	Rollovers & Debit Cards

Most brokerage HSAs come with a debit card, so spending isn’t too hard if you ever need to. If you do a rollover from your current HSA, make sure you’re aware of any fees or time limits. Typically, you can only do one rollover per 12-month period (again, IRS Publication 969 has the details).

In the end, having the option to invest your HSA funds is usually a better bet than letting them sit in a basic savings account. Just be sure to stay on top of your contributions, fees, and any extra paperwork so you can get the most out of those “triple tax” benefits.

Hope this helps!

Paul Novak · Answer

This was a long time ago but I invested in REITs in my HSA because the dividends are always taxed as ordinary income vs. capital gains.  Same premise but I don't think that REIT's are what people had in mind when they were talking growth potential lol.

Kaaren Hall · Answer

Keep in mind this is a self-directed account and most are not.

Fees:The Set-Up Fee is $50The IRA Annual Fee is $275 (flat fee regardless of the number of assets & regardless of the account value)The Direction of Investment fee is $10**The Wire Fee is $15See our fee schedule for Crypto-currency feesPlease refer to the fee schedule to see metals storage costs. Check fees are $10**** When buying physical real estate, you must have a 10% cushion of the purchase price**We waive the first 6 transaction review fees for the life of the account.*** The first 12 incoming checks are free each year.

Havital Miltz · Answer

@Kaaren Hall after seeing your post i called them right away, their fees are extremely high for an HSA that for the most part most people don't have a lot of money in.

I max my HSA every year, but if you have a self only plan you can only put about 4k /yr  and if you have some medical bills it's less.

they are also very restrictive on taking money out, and no CC to pay the doctor.

prior to speaking with them I was extremely excited to see this opportunity you suggested,  but after my conversation I'm no longer...

I will look for other options now that I see there may be some, so thanks so much for bringing it up.

Have you ever moved your HSA to get better investment options?

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