I recently completed a transfer of our health savings account (HSA) from Health Equity to Fidelity. Today, I want to tell you why I made this move and explain the process.
First off, if you aren’t familiar with health savings accounts, they’re one of the most valuable accounts you can have in your arsenal. I’ve talked about how an HSA is the best bang for your buck in that the account belongs to you and not your employer.
Unlike a Flexible Spending Account (FSA), the money you have in it doesn’t expire after the plan year is over either. It’s yours for the long haul!
Your money also goes in as pre-tax dollars, grows tax-free, AND is tax-free on withdrawal if used for medical expenses. No other account out there gives you all three of those benefits!
Additionally, I’ve written about how your HSA can be even more valuable if used correctly. The Mad Fientist turned me onto the realization that your HSA might be The Ultimate Retirement Account through what might be considered a loophole in the rules.
In essence, you can pay for medical expenses out-of-pocket and then reimburse yourself later. The key though is that there’s no expiration on when you need to reimburse yourself. So, if you can afford it, you can pay your medical bills out of pocket and let the money in your HSA continue to grow tax-free. Then whenever you want – decades later – you can then pull that money out for reimbursement.
That can be HUGE for your pocketbook! In our case, we don’t go to the doctor often, but over the past couple of years, we’re now sitting on receipts for $3,425.33 we’ve been able to leave in our health savings account to grow tax-free over the next few decades.
So now that we’ve talked about how valuable an HSA is, let’s talk about why I decided to move mine.
Our Health Savings Account
I started contributing to our health savings account as soon as it was offered in 2007 at the company where I worked. I didn’t realize the benefits right away and didn’t max it out until the last couple of years at my job.
Over time though, it built up and our HSA is currently valued at $27,245.34. That’s not a fortune, but it’s not chump change either. So, it’s important that we aren’t lax in keeping an eye on the account.
Unfortunately, if you’re lucky enough to have an HSA through your employer, you’re stuck with whoever they provide as the custodian. There are ways around that (like moving your funds periodically to another provider), but that’s some extra work most folks aren’t going to want to do.
In our case, our health savings account was through HealthEquity. When we first started with them, their investment offerings weren’t great and the fees they charged definitely irked me.
But at some point a couple of years ago, they switched to offering Vanguard funds… now we’re talking!
So I changed my investments in the account over to a few of those funds:
- Vanguard Target Retirement (VTTSX)
- Vanguard Institutional Index (VIIIX)
- Vanguard Short-Term Bond (VBIRX)
I had about half of my HSA invested in those funds with the rest sitting in cash. That was all fine and dandy, but HealthEquity was charging me a junk fee of between $4-5 every month for what they called “Investor Choice.” It was a charge of 0.0330% on your invested balance… bastards!
Look, let’s be honest – that’s not going to make or break anyone’s retirement dreams. Regardless, every month when I’d see that charge on my statement, it bothered me.
As I said, it’s a little bit of a pain to move your investments while you’re with your current employer.
But guess what – I’m retired now (yay!), so when I saw that stupid monthly fee again, I decided it was time to make a change. Remember that your health savings account is yours even when you part ways with your employer.
Most of our investments are through Vanguard so I would have gone that route if I could have for simplicity’s sake alone. But Vanguard isn’t offering HSA accounts to individuals yet.
So, the next logical choice was Fidelity. Not only are they a fantastic low-cost provider, but they’re now offering zero expense ratio funds. To me, it wasn’t enough to move all my investment accounts over to them (the expense ratios for my Vanguard fees are next to nothing), but it made perfect sense to transfer my HSA over to them.
Done deal! Let’s go through the process of moving the account…
HSA Trustee-to-Trustee Transfer
There are different ways to move your health savings account to another custodian. Be careful in how you do it though so you can avoid any taxes and penalties.
An HSA rollover involves your current HSA provider sending you a check or transferring the funds to your bank account. It’s then your responsibility to get that money into the hands of your new custodian within 60 days or you’ll suffer the wrath of the IRS. I don’t like that option.
Instead, I initiated a trustee-to-trustee transfer. I like this method because you don’t touch the money at all – it goes from one provider to the other.
So here’s how this worked…
Create your Health Savings Account
I went to Fidelity’s site and chose the option to open an account and found the choice for “Health Savings Account (HSA).”
I was then prompted on whether I was an existing customer or not. I had to create a Fidelity login, but obviously, if you already have one, you’ll choose that option and log in:
A few stipulations…
Time to enter in all your personal information…
Then your employment information…
And your preferences…
On the next screen, they show you all your information to review and confirm (I’m not showing that one). Then you’ll have to agree to their terms and go through a couple of other screens…
And that’s it – you’re health savings account is done! Well, it’s created… you still have to do the work to bring the funds over from your old HSA…
Starting the Health Savings Account transfer
At this point, you’re ready to start a transfer. From the dashboard, you’ll click on Transfer on the top menu. The key though is that in the pop-up box, you’ll want to select “See more transfer options”…
Then you choose “Transfer Assets from Another Financial Institution”…
And you get this handy-dandy guide on transferring your asset to Fidelity…
Here’s the important part – ensure you enter in the right information and details on the account you’re transferring your assets from…
And, in the words of Fidelity, “You’re Almost Done!”…
The “Almost Done” part of the process…
This process seemed easy enough. The part I wasn’t anticipating is that you have to print the document off and sign it. Why are we still printing things in 2019?!
The good news is it’s really that simple. Everything you just filled out throughout the account creation is on the PDF that you print.
The bad news is that I haven’t owned a printer in about a decade. So I went to the library and printed it there for the low, low cost of 15 cents!
I verified the info on the form, signed it, stuffed it in an envelope using the address they provide, and dropped it in the mailbox.
Time to wait…
Fidelity provides a way to keep an eye on the transfer to see how it’s coming along…
To get to that page later was a little confusing, so here’s a direct link in case you need it.
And that’s it, right? Now we just wait…
Well, that is until HealthEquity comes back and gives you a little bit of homework to do…
HealthEquity… ticking me off like most big financial institutions!
I knew this before I started the process at Fidelity, but HealthEquity charged me a fee of $25 to close my account. It’s ridiculously stupid that these big financial institutions are allowed to get away with kind of crap, but they’ve got us by the @#$%^ in most cases, don’t they?
If you remember, I had a similar situation when I left TD Ameritrade and moved everything to Vanguard, but I was able to creatively work it out so I didn’t have to pay a dime.
The other small wrinkle with HealthEquity was that they emailed me and said that I had to sell my investments before they would transfer my account over.
Um, ok, but wasn’t that exactly the whole point of this account transfer? Can’t they just liquidate the account and transfer it over?
No? Fine… whatever.
I logged in and sold all the investments in my account so everything went to cash in the account. After that, they finished the transfer to Fidelity.
All-in-all, it took a total of a month and one day for the process to be 100% complete from the time I opened the account at Fidelity until everything was transferred. Not a big deal considering I spent maybe an hour or so of work on my end to make it happen.
It cost me $25 to close my old account and a little bit of work on my end, but I’m glad I did it. I’ll recoup that cost pretty quickly by not paying the monthly junk fee. Plus the zero expense ratio funds I have the money invested in making it an even better deal.
In case you’re wondering, I invested the entire $27k in the Fidelity Zero Total Market Index (FZROX).
I’m happy with my HSA making money for me with no fees for the foreseeable future. Well worth the small amount of effort!
Do you have a health savings account? Are you happy with your investments, fees, and custodian of the account?
Thanks for reading!!