Not quite a year ago we made the decision to switch to a high deductible health plan (HDHP). In our case, it was a no-brainer. The quality of the coverage was just as high as with our old plan; the only difference was a $3000 family deductible.
Because we opted for an HDHP, we were also able to open a health savings account (HSA). While we’re free to choose our own custodian, we went with my employer’s preferred custodian in order to take advantage of the “seed” money that they were offering.
After nine months on the HDHP, we couldn’t be happier. We hit our deductible back in May, but are miles ahead of where we would have been if we had stuck with the old PPO. Not only that, but we have a bunch of money socked away in our HSA.
Speaking of the HSA… We’re planning on using it as an alternative investment vehicle. As I’ve mentioned previously, the HSA is an ideal tool for juicing up your retirement savings. Our plan is to leave the money in place and invest it instead of pulling it out as we incur medical expenses. As long as we save the necessary documentation, we can always pull it out later.
Sounds like a great plan, right? Well, we just passed the balance threshold to start investing, so I was finally able to get in and start poking around. Believe it or not, we couldn’t actually view our fund options until our account got over the minimum balance for investing.
Anyway, now that I’ve had a chance to look, I’ve discovered that our investment options stink. The available funds include a handful of Fidelity Advisor Freedom funds as well as a bunch of First American funds. Care to take guess what the fees look like?
Every single fund has a front-end sales load ranging from 3.50% to 5.75%, and the ongoing expense ratios are also quite high, in the 1.25% range. This is totally unacceptable, so we’ll be taking our business elsewhere.
The good news is that we can transfer our money to another custodian. Now that we’ve received all of the seed money, we’re free to go ahead and do so. I’ve previously asked for (and received) recommendations as to the best HSA custodian. It’s now time to dig in and figure out where to move our money.