“Better the devil you know than the devil you don’t.”

— Idiom

(It’s a highly handy idiom. I know it’s a bit much to compare HSAs to the devil, but really, I think they may well end up doing more harm than good.)

This post contains affiliate links. If you click on an affiliate link and buy something that I’ve recommended (or something that I haven’t recommended), I’ll get some money. That money might help me retire earlier, or I might spend it on chocolate.

I like my investments to be cheap, without extra fees hidden anywhere. I want to pay up front, then hang on to the investment until I need it. With any luck, I shouldn’t need to dip into anything I’ve invested for at least a decade, possibly longer. So cost is really, really important. In my heart, I’m a Boglehead, and I love the idea of finding buying a chunk of the market for a low price and leaving it alone for many years.

Enter HSAs.

An HSA is a Health Savings Account. For people with HDHPs, which are not-super-expensive health plans that kind of suck, an HSA is a way to put away money tax-free and let it grow tax-free.

Part of the reason that I’ve felt ambivalent about benefiting from an HSA is that I dislike the whole system. American healthcare remains privatized for those of under 65 who don’t have a qualifying disability or a qualifying income. The goal of the consumer is to get the best care possible for the best price. The goal of the company is to maximize profits. Anyone who’s lived under this system for a while has probably seen those goals come into conflict. In my opinion, HDHPs are annoying and discourage all but the wealthiest people from seeking care. But I have one, since economically it’s the best choice for me at this moment. I am fortunate in that I’m healthy, and so I choose to save money by buying a lame healthcare plan. It’s a calculated risk.

If Mr. RN and I choose to continue living in America, high health care costs will be our future unless something major changes in the next several decades. So we can’t escape that reality, and I think we may as well save for it.

The problem is that HSAs, compared to most other investment options, are pretty expensive. The funds tend to be much more expensive than they would be if purchased through an IRA or a regular taxable account, and there are all kinds of fees. Different accounts distribute them differently, but spending a good chunk of change on either keeping cash in the HSA or paying to invest/reinvest the money is a given. From what I’m reading, HSAs need to be a little more expensive, as most people have an HSA debit card that gets a lot of use. Sure, it’s possible to use an HSA as a retirement savings vehicle only, but because that’s ostensibly not what these accounts are used for, it’s still a bit of a “hack” rather than a standard use thing. Thus, the HSA administrators need to count on people using their HSAs pretty frequently, and they need to keep the fees high enough to allow for this. For this reason, I’ve been avoiding putting money in an HSA for some time now.

What has changed? Well, once I max out my i401K and my Roth IRA, I’m not left with a lot of great options, tax-wise. Taxable accounts are fine, but I’d like to limit our taxes as much as I possibly can this year, and I love investing in accounts where earnings can be withdrawn at a future date some years later. I’m also thinking about a 529 for that reason, although my state’s 529 plan is sub-par and I’d rather not have to contribute to that one just to get the tax deduction.

I’m planning on opening a couple HSAs in Saturna over the next few months. Mr. RN and I have separate health plans (the cost was lower than getting one plan for both of us, oddly), so we should each be able to contribute the individual max. We’re part of a not-great health system, but this is the best we can do for ourselves working within that system. I’ll post an update once I see how it goes.

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