[Last updated on July 27, 2016. Older comments are for the previous versions of this article first published in 2011.]
When I first started my Health Savings Account (HSA), I decided to just use the savings account at Alliant Credit Union. At that time Alliant Credit Union’s HSA was paying 2% interest, which was comparable to the yield on a short-term bond fund. Because money is fungible, I just moved some money from short-term bonds to stocks elsewhere in my investment portfolio. That was as if I invested my 100% of my HSA in stocks.
As time passed, the interest rate on Alliant Credit Union’s HSA dropped from 2% to 1.25%, then to 0.65%. My HSA balance also grew. Now it’s time to look again.
HSA Bank is a popular HSA provider. If you keep $5,000 in cash earning 0.3%, you get the maintenance fees waived and you can invest the rest of your money at TD Ameritrade. If you want to invest the whole thing, you pay $66 a year in maintenance fees.
That’s not too bad.
Elements Financial, formerly Eli Lilly Federal Credit Union (Elfcu), offers a similar setup with TD Ameritrade as HSA Bank. You don’t have to work for Eli Lilly. You can join Elements Financial by making a one-time $5 donation to a non-profit organization called Tru Direction.
Elements requires $2,500 in the savings account earning 0.5%; or else you will charged a $3 monthly fee. You can transfer the rest to TD Ameritrade; each transfer costs $25. TD Ameritrade doesn’t charge any maintenance fee (a disclosure document shows $12.50 per quarter maintenance fee but it doesn’t apply under the Elements contract). You can invest in anything normally available through TD Ameritrade at its normal commission schedule. Take a look at 101 commission-free ETFs, 32 of which are from Vanguard.
Because Elements charges $25 for each transfer to TD Ameritrade, it’s better to limit such transfers to no more than once a year.
For a complete walk-through of setting up the HSA at Elements Financial, see Setting Up HSA at Elements Financial.
Saturna Brokerage Services
Saturna Brokerage Services offers an HSA in a brokerage account. You can buy pretty much any mutual fund or ETF for $15 a trade online, including Fidelity index funds. Vanguard mutual funds cost $10 extra. If you contribute the maximum once a year and do one trade, you only pay $15 or $25.
See this review on the Bogleheads forum for more details.
Saturna Brokerage Services is the best HSA provider for investing HSA money if you can limit yourself to one trade per year. If you trade more frequently, consider either HSA Bank or Elements Financial.
Transfer or Rollover
If you are interested in moving your existing HSA to any of these three providers, you can do it either as a transfer or as a rollover.
A transfer doesn’t pass through you. There is no frequency limit on transfers. Your current provider may charge you a fee for the outgoing transfer or account closure. Not all HSA providers charge; Elements Financial doesn’t.
If your current provider charges a fee for the transfer and you want to avoid it, you can do a rollover yourself, but you can only do it once per rolling one-year period (not calendar year). See How To Rollover an HSA On Your Own and Avoid Trustee Transfer Fee.
[Photo credit: Flickr user 401(K) 2013]
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