My HSA Just Got Better

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A few years before I retired, my company decided to broaden its health insurance options by introducing a high-deductible policy that was accompanied by a health savings account (HSA). Since I had no chronic ailments and wasn’t prone to accidents, I decided to give the high-deductible policy a whirl and take advantage of an HSA’s triple threat: no taxes on the income diverted to an HSA, no tax on the gains made by HSA investments, and no tax on money withdrawn from an HSA to pay for health care.

I have now had an HSA for eight years, and I’m very pleased with the results of this experiment. My health and fortunes have remained excellent. There’s been no need to tap my HSA to cover out-of-pocket medical expenses, and my HSA investments have been doing Dave Ramsey well (10-12 percent returns per year). And thanks to Obamacare allowing individual family members to have different plans with different deductibles, I have been able to choose a high-deductible plan that allows me to keep contributing to my HSA. This year’s HSA contribution limit for anyone 55 and over is $4,650.

The bank that manages my HSA is called Optum, and here are its HSA features in a nutshell:

• A minimum of $2,000 must be maintained in your HSA savings account
• Any contributions that exceed this minimum may be invested
• Optum currently has 30 mutual funds from various brokerage firms that you can invest in
• Optum charges $1 per month for maintaining your savings account and $3 per month for maintaining your investment account (providing you’ve invested any of your HSA money in any of its curated funds)

One of the curated funds in Optum’s investment choices is Vanguard’s total stock market fund. Bingo! I saw that and devoted every HSA contribution beyond the $2,000 minimum to that fund—until this year, that is. Just why I abandoned Vanguard’s total stock market fund will be explained shortly. All I want you to keep focused on right now is Optum’s management fees. For roughly eight years now, I’ve been paying Optum $4 per month to manage my HSA savings and my HSA investments—which comes to a whopping $48 per year.

Last year, Optum upped its game. It decided to partner with Schwab and allow its HSA clients to set up a brokerage account with Schwab. I was immediately intrigued by this option. Transferring HSA money to Schwab would give me more investment options, including individual stocks. So I ruminated on this tantalizing option for several months, and then come January of this year, I decided to pull the trigger. I liquidated my shares in Vanguard’s total stock market fund and moved that money over to Schwab. And my $4,650 in HSA contributions for this year have also been diverted to Schwab.

Now comes the bonus. I just assumed that I would continue paying $4 per month to Optum to manage my HSA savings and my HSA investments. Granted, Optum wasn’t technically managing my HSA investments anymore. But it was providing the portal to Schwab. Fortunately, however, I was badly mistaken. I finally got around to reviewing one of my Optum monthly statements and I discovered that Optum was no longer charging me $3 per month to manage my HSA investments. It was only charging me $1 per month to manage my HSA savings account. This means my HSA management fees have dropped 75 percent!* Mrs. Groovy and I will be saving $36 this year, enough for two glorious trips to Sonic. And they say the little guy can’t get ahead in America. Pfft.

* Just so you know, because I’m using my Schwab brokerage account to invest in an individual stock, I’m not paying any management fees to Schwab. Heck, Schwab didn’t even charge me for any of the trades it made on my behalf.

Final Thoughts

Okay, groovy freedomist, that’s all I got. I just wanted to use this post to say kudos to Optum. A twelve-dollar-a-year management fee for its HSA product and its very user-friendly online dashboard strikes me as incredibly reasonable. For those of you who have an HSA account, how do your institution’s management fees stack up to Optum’s? Let me know when you have a chance. Peace.