I have a health savings account (HSA) linked to my high-deductible health plan (HDHP). I have been contributing to it for several years at the annual maximum. I have the HSA through UMB. The account is divided into three sub-accounts:
- Deposit Account. I think of this as a sort of buffer. The first $1,000 contributed to the HSA must go here; everything above that must go into a different account.
- Money Market Sweep Account. This one isn't FDIC insured. It returns the money market mutual fund rate, which is nearly nothing.
- Self-Directed Investment Account. This is basically a brokerage account for mutual funds. The fund selection ranges from very conservative to pretty risky.
My goals for the HSA are to be able to cover my family's routine medical expenses, which are around $500 per year, and have enough in the kitty to cover the deductible on the insurance were anything terrible to happen. I have a 401k, also funded to the maximum allowed, with my contributions split between BlackRock Lifepath 2040 (LIKIX) and a Vanguard Small Cap index (VSCIX), and we own two rental properties that generate a little income. My employer contributes to my HSA as well.
What's the general guidance on how to best allocate money in an HSA? I don't want to put it all on the line, but don't want to miss out either.