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...

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

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

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.

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!

Rene Hosman · Answer

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

Rene Hosman · Answer

Yeah this is exactly the plan!

Josh St Laurent · Answer

@Rene Hosman all good options! If you like the idea of a self-directed HSA like @Kaaren Hall mentioned check out providers like Accuplan and IRA Financial Trust. The setup and ongoing fees will likely be higher but you'll be able to leverage the account to buy RE so it's a tradeoff like anything else.Happy researching!

Rene Hosman · Answer

Thanks Josh, plan currently is to keep employer HSA and then open up a second HSA myself with better investment options. My top priority is having maximum flexibility with what I can invest in within my HSA, second priority is ease of use and convenience of the investing platform, third is minimizing any account, trading, or management fees charged by the HSA provider. Currently the options I'm looking at would all have me keeping employer HSA for ease of payroll deduct but possibly adding other HSAs that aren't for adding contributions, but just for rolling over funds and investing. These options are: 1. If Optum tells me I can link a Schwab HSBA to my current HSA through my employer then I'll do that for now. Seems easiest, and I like Schwab. 2. Open up another Optum HSA separate from my employers that allows me to link a Schwab HSBA, rollover funds from employer. 3. Open a Fidelity HSA because it's free, rollover most of my funds from Optum and use Fidelity to invest. 4. Open up an HSA with HealthEquity because they directly link to Schwab's HSBA, I prefer Schwab's trading platform, and it helps me keep my investments consolidated for ease 5. Now that Kaaren has mentioned a self-directed HSA I think I'll definitely look at that in the future, there's not quite enough saved up in there yet to make sense to invest in truly alternative assets but at some point maybe!