Use investment option in HSA account?

[red92s]

My HSA plan allows an option to invest the account balance in a selection of T. Rowe Price mutual funds once the account balance reaches $2,000. Otherwise, it earns something like .02%.

My HSA balance is around $2,500 so I'm eligible to use the investment option. I'm young, I'm healthy, and I take steps to keep it that way. I have not had a prescription for something other than antibiotics since . . .well, a long time ago. The current value of the account is enough to cover the yearly out-of-pocket maximum for my plan should I face a major health event.

So, would it be foolish to use the investment options available to me?

[simpletron]

many things cause medical expenses other than sickness like car accidents. whether the maxinum out-of-pocket is in the HSA or some outside savings account doesn't really matter, it just needs to be there when you need it, which is anytime. after that is taken care, I would invest the rest of the HSA as aggressively as your retirement accounts(401K/IRA).

[MonkeyMama]

Agreed, to a point.

If you have the cash to cover a year or 2 out-of-pocket, I would also invest more aggressively. I don't think it's foolish. If you end up needing the cash portion, you can replenish it.

That being said, 401ks and IRAs are FAR better investments. I would max those out before I put more in a HSA. HSAs tend to have high fees.

HSA is great for the tax break - if your retirement plans are maxed out.

[red92s]

I wasn't implying that I'd actively use it as an investment vehicle. I will hit the Roth max this year but still have a ways to go before being able to hit the 401)k) max as well. I wouldn't be changing my monthly contribution amount at all ($50/month). Just seeking a better return on the funds in the account.

[MonkeyMama]

I guess my point is $50/month would be better off in your 401k. (In most cases - depends on all the details).

Stock mutual funds are "long term investments" in my book. THough maybe you have some cash or bond options?

But mostly, people don't invest in HSAs for the returns.

[poundwise]

If you only have $2,500 in a HSA, you probably shouldn't invest that balance in a mutual fund(s).

Depending on your deductible and what expenses are covered by your health insurance, you need to keep a portion of monies available for medical expenses; expected and unexpected.

Save investing for when your HSA balance is larger and invest a portion of your total.

Some people max out their HSA and have no intention of using any of it for medical expenses, so they invest the balance for the longer-term. That is a different scenario. For most of us, the HSA balance, or a significant portion of it, is potentially needed to cover deductibles and out-of-pocket expenses that could occur in any 12-24 month period. Money that may be needed within such a time-frame is not money that I consider eligible for investment.