Electing My Past Employment HSA and IRA Into the S&P 500
When you find gainful employment, any employer worth a damn will offer benefits like a retirement 401(k), IRA plan or Health Savings Account (HSA). This is a reflection of how I made some smart moves with 2 previously dormant savings funds.
My HSA and IRA providers both listed all of the 20 or so funds to choose from with their plan fee rates. Every plan administrator will make a variety of funds accessible to you. There's usually options like a growth fund, total market fund, bonds fund, an international fund or small caps fund with more expensive fees. The cheapest option is usually a fund that tracks the S&P 500. In my case, my HSA S&P fund fee is 0.04% and the IRA S&P fund fee is 0.03%. Buying the S&P 500 was the cheapest in my case.
If you want to diversify your market exposure and gain better returns, it is tempting to try some of the other market or growth funds. However, the S&P 500 is more or less a lock to be a good investment. I'm buying as much of it as I can. In retrospect, I should have allocated more to the S&P index and less to individual stocks. Hindsight is 20/20. This month, I've essentially tripled down on the S&P 500. With my two retirement accounts now allocated to S&P 500 funds, I successfully bumped up my investment portfolio allocation from 2% to 7% in S&P 500 funds. Now I feel sufficiently exposed to the index. Who knows what that will grow to in the future.
I contributed to an HSA in my most recent job. My HSA provider was bought out, requiring a transfer to a new provider. After waiting for 6 months, I could finally invest my HSA funds after they were locked up in the transition from the old provider. I scanned the options to deploy this block of savings, noticing a fund named "Vanguard 500 Admiral Shares". This is a Vanguard S&P 500 fund, ticker VFIAX. I set the allocation to 100% and can now forget it for the next 20 years. One quirk of my HSA is that I'm required to keep $1000 in cash for medical expenses, so technically it's not all in the market. I have a card I can use to pay for medical needs that draws from the cash in the account. It's nice to have this extra cash savings set aside for medical expenses!
With my HSA settled into place, I turned my attention to a pesky IRA that eluded my understanding for far too long. I recently recovered the IRA from past employment I held 10+ years ago from my first job after college. I was not properly onboarded to the account from the onset and never really knew what was going on. To my surprise, I discovered it had been transferred from the previous bank that held the retirement fund to a new plan provider without any notice to me.
After calling the new provider, I finally gained online access to the IRA savings earlier this year. My savings had been auto-rolled to the new retirement plan provider and invested into a money market fund. Since being transferred, the IRA's account balance was slightly negative over 1.5 years in the money market fund after the provider fees being extracted from the account! The S&P 500 is up 36% over the same time period since Jan. 2023. I swiftly rebalanced the account to 100% allocation in Blackrock's WFSPX iShares S&P 500 index fund, the only S&P 500 fund the new retirement plan provider offered.
"The best time to plant a tree was 20 years ago. The second best time is now." - Unknown
This past year and a half was a missed opportunity for my IRA in hindsight. Not to mention the 8 years prior. It is a hard lesson to learn. I could have doubled that savings account had I invested it in the S&P 500 back in 2016. However, the important thing once you've realized a mistake is to correct course immediately and get the money invested. I want to let it grow with time by taking some risk in stocks. The S&P has proven itself consistently to steadily appreciate in the long run, despite a drawdown happening 1 in every 5 or so years. In 2024, it is up 18% year to date at the halfway point. It could and probably will retrace at some point. If you're a long term investor, the S&P is a stable bet, but not without some risk.
If possible, you may want to roll your IRA into your own custody. It's not possible currently with my HSA. I plan to do this for the IRA but in the short to medium term, it's now deployed into the S&P 500. Common sense investing for the win.
If you're not sure how your retirement money is being deployed, call the plan provider and gain control of your online account. Find out where your money is being put to work. When you've held multiple jobs, it's easy to let a retirement account fall to the wayside. I missed out on some easy market gains over the past year and a half because of this. Learn from my mistakes. Keep a good watch of your employment retirement savings and make sure they are working for you.