February 2008 Archives

Spreadsheet Goodness

This is part 1 of a 3-part series.

• Part 1
• Part 2
• Part 3

Download the spreadsheet as:

• OpenDocument: InvestmentTaxSummary.ods
  
• Excel: InvestmentTaxSummary.xls

Knowing how to evaluate investments across across tax structures is an important core skill to have. Perhaps you need to run projections whether you should even start a small business. Or maybe you need to decide what retirement plans you will make available to your employees. In the past, I usually created one-off spreadsheets to model specific situations. However, I've been working on a unified format that let's you model everything from 401Ks to variable annuities. I think I finally fixed the last bugs so I'm ready to release this spreadsheet to the public.

Projecting 401K Contributions

Let's start simple -- suppose you plan to contribute $100 a month to your 401K for the next 10 years and then contribute nothing for the next 10 after that. How much money will you have when you retire in 20 years assuming annualized return of 10%? So let's head over to the Tax-Deductible section and fill out the following numbers like so. We'll make the simple assumption your tax rate will be fixed at 25% federal and 5% state.



And we have the answer. About $54.5K before taxes are applied. If you took it out all at once fully taxed at a single marginal rate -- $38K.

Historical Returns

You might say 10% every year is not accurate. In fact, you think 1970 is coming back with a vengeance. So we edit the % column with the actual S&P500 numbers from 1970-1989.



The nominal returns end up being even better ($88K/$61.5K) because contributions during 1970-1979 bought a lot of shares at discounts before the 80's. (What the real returns were is a story for another topic.)

401K versus Roth IRA

As you know, Roth IRAs are fully tax free (for now). That sounds way better than a 401K or Traditional IRA right? Let's head over to the Tax-Free section and give it a try. Key point: the monthly contribution is not $100 but $100*(1-tax) because you must pay tax on it first -- hence we put $70 as the monthly contribution.



Amazing, the $38,196 number matches the 401K number perfectly. You did not think the IRS was actually going to give you more money right? This is why people say fund one or the other depending on what your current tax rate is and what you think your future one will be. Better yet, fund both if possible to diversify for taxes.

HSA

Do you qualify to fund a Health Savings Account? When used for qualified medical expenses, it's the only thing available where you do not pay tax on either contribution or withdrawal. So we enter the pre-tax amount of $100 in the Tax-Free section.



No surprise, 30% higher than both the 401K and Roth IRA number. If you have an HSA option, make it your number one priority. Since the IRS is matching your funds by your tax bracket, that may even beat a 401K with matching. (Do both though!) Some employers will even fund part/all of a HSA which would make it truly the best thing since sliced-bread. And as far the limited use, everybody encounters medical bills in life -- you will be able to take the money out tax-free sooner or later.

To be continued in part 2 (taxable accounts) and part 3 (variable annuities, variable universal life) ...

For those of you coming into this topic cold, here's a good primer at The Penny Saved: Health Savings Account Vs Health Reimbursement Account Vs Flex Savings Account (and keeping my hair for cheaper)

I originally planned to write a followup on my previous HDP/HSA article after a few more months of medical bills. However, I just noticed an error in my spreadsheet so I've decided on an earlier update. The initial spreadsheet did not have a row for transaction costs -- this has been fixed now, download here: HSA_investment_options.ods, HSA_investment_options.xls

Spreadsheet Example: HSA Bank

Let's use HSA Bank as a quick example of how to use this spreadsheet. HSA Bank charges $2.25 per month if you have a bank balance of less than $3000. On the other hand, they pay a puny 2% interest compared to 5.12% at Patelco (minus $1/mo in fees). So we have 2 options:

• Keep $3000 at HSA Bank earning 2% interest and pay no fees
• Keep $0 at HSA Bank and pay $39 in fees

To run the numbers on this scenario, fill in the spreadsheet like so:



Although people don't like fees in general, sometimes it's better to pay them. In the above example, the 3.12% interest difference on $3000 is $93.60. Would you pay $39 in fees to get $93.60 back? I would.

New Investment Option: Bancorp HSA

While browsing Boggleheads, I ran across this message about Bancorp HSA using a Fidelity platform with mutual funds available for $4.95 per transaction. (The price is scheduled to increase to $5.95 as of March 14 -- see their fee schedule for more details.) Fees are waived if you have an automatic ACH deposit plan. Among the list of 1500 mutual funds available at $5.95 are Fidelity's Spartan Index funds. Assuming you meet the minimums for those funds (or the minimums are waived for HSA accounts), this seems to be the lowest cost investment option available. (The updated spreadsheet includes Bancorp HSA.)

Updated Summary

In the below table, Bancorp HSA uses Fidelity Spartan funds at above 10K balance. Below 10K, index funds from Dreyfus, Columbia, JPM Morgan, etc are available ranging from 0.15% to 0.60%.

	HSA Administrators	HSA Bank	HSA Resources	Saturna Capital	Select Account	Bancorp HSA
$1000	5.62%	5.54%	6.84%	2.55%	5.43%	2.05%
$2500	2.56%	2.30%	2.82%	1.83%	2.51%	0.97%
$5000	1.54%	1.22%	1.48%	1.59%	1.43%	0.61%
$7500	1.20%	0.86%	1.03%	1.51%	1.21%	0.49%
$10000	1.03%	0.68%	0.81%	1.47%	0.88%	0.25%
$15000	0.86%	0.50%	0.50%	1.43%	0.88%	0.25%
$20000	0.78%	0.41%	0.47%	1.41%	0.80%	0.22%
$35000	0.51%	0.29%	0.33%	1.38%	0.70%	0.18%
$50000	0.41%	0.25%	0.27%	1.37%	0.66%	0.17%

Tax Filings

Remember to file Form 8889 if during 2007:

• You or your employer made contributions
• You withdrew money for any reason (medical, non-qualified or rollover)

After looking through this form, it appears the cheapest and quickest way to transfer money across acounts is to write a check to yourself and deposit the money manually as the various HSA administrators all seem to charge fees for an outgoing rollover. If you do it by hand, fill in a simple offset on lines 14a, 14b, 14c during tax time and it's a done deal.

Paying Medical Expenses

No issues. The bills I get in the mail, I use online bill pay. When I go to the pharmacy or optometrist, I use the debit card. And for reimbursements, I write a check to myself. Pretty easy.

My balance has remained relatively constant even though there's a constant stream of bills for my wife's pregnancy. The bills seem spaced out just enough to be covered by the employer contributions. Of course, making an additional contribution last year has helped maintain a good buffer. At this point, we're about $1800 away from the annual deductible and $2500 away from the out of pocket maximum. Once those numbers are hit, I expect my account to start growing again.

You also have the option of never paying a single medical bill out of your HSA. Instead, let it grow tax free until you pass away. At that time, your estate will then submit all your saved medical receipts for reimbursement. The math works out in your favor -- assuming Congress doesn't close this loophole.

Introduction

I can't think of a hook for this post so let's just pretend you just read something enlightening and skip right to the meat of the article.

Scenario

Location: Chinatown, San Francisco
Business: Ladies' clothing
Size: 750 square feet
Traffic: Medium high
Demographics: Low-to-medium income

The Chinatown neighborhood is a high traffic area with a mix of tourists and everyday shoppers.

Costs

Given the above setup, here is our startup costs in order by amount:

$25,000		lease buyout from previous store owner
$8,500		security deposit and 1st month rent
$7,500		inventory
$1,000		remodeling supplies
$750		store fixtures
$250		various licenses
$43,000		total

Split between my wife and her business partner, initial investment was $21,500 per share.

Lease

The biggest cost was getting the store location. In an existing popular shopping district, the rules of the game are slightly different. There are no empty storefronts waiting for businesses to fill them. Instead, the only way to get in is to keep a lookout for the few shopkeepers moving on and outbid competitors to get the old lease transfered to you. In effect, the lease has a monetary value beyond what a business in it produces -- and the value may go up or down depending on economic cycles and inflation.

Remodeling

In the costs there is a line item for remodeling "supplies" but zilch for remodeling "labor". Remodeling is one of the few startup costs that can be negotiated away using design, lighting, paint and sweat. We had a handy crew of friends do all the work over a weekend -- total costs were: $100 for lunch, $500 for a celebratory dinner and a mental bill for future repayment of favors. Counting up the people plus the time spent, professional contractors would have been an extra $20,000 out of pocket. (A friend opened up a similar-sized store, paid $40,000 for their remodeling and the contractors took their sweet time in finishing the work.)

Here are our before and after photos:

Before

After

A dramatic transformation on just $1,750. A big eyesore in the before photos is the counter display -- looks more in place with the wood floors and yellow color scheme.

Conclusions

Blah, no conclusions either.

Recession is in the air, people are tightening their belts and polishing their resumes and advice on networking is blooming. How do you network anyways? Let's see if Google can help us. I type into a search "networking + jobs" and one of the first results has the following passage:

"Wondering how to find your next job? Try networking -- the best way to find a job!"

Wow, why didn't I think of that? Join up networking groups right now ... and meet up with thousands of other people looking for jobs. Hmmm ... there seems to be some missing steps in this strategy. Perhaps it might be enlightening to see a perspective from the hiring side. Here's a summary of how my company has found employees:

• Former co-workers
• Client contact
• High school friend
• Craigslist job postings
• Online gaming
• Customer of my wife's store

The first few sources should not be a surprise. People you worked with -- either as coworkers or as contacts or during school -- tend to be gravitate to the top of hiring lists because you know what they can do. The last items deserve more explanations. For now, I'll skip talking about Craigslist as I probaby will dedicate a full article to flesh out what resumes and applicants caught our eye.

Online Gaming

Before getting married, I was big into computer games. With the internet, gaming was even more addictive since you were now facing people as good or better than you. Beating a game was no longer the end of the story -- there was always the option to improve your skills and face somebody even better. So in my game of choice, I applied to join a gaming clan where we competitively faced other clans in formal leagues. To be honest, I was not that good but I had some extra factors in my resume -- plenty of computer hardware and several server-level internet connections courtesy of my company. (Being able to host servers where clans can meet and practice is big-time currency in the online gaming world.)

Most gaming clans use IRC as the default method of communication to coordinate practices and matches against other clans. It became natural routine to be connected to IRC all the time so while I was busy programming, I always had a small IRC window open at the bottom of my screen to monitor conversations. The nature of IRC is semi-anonymous since all we see are gaming nicknames; hence people tend to be truthful about what's going on in their lives. When they're working on a new project, IRC is the first place they'll talk about it. When they're sick of school or work, they'll talk about it on IRC. When they have plans for travel or relocation or change, IRC. When they have a computer issue or a solution to a computer issue, IRC. Throw in the random chit-chat life in general and you end up getting rather good feel for everybody's personalities and abilities.

When my company picked up more customers than I could handle, all I had to do was open a private message window to the member I wanted to recruit as I knew he had the programming skills and was in the right stage of life for a change. Over time, we ended up hiring 2 members from my gaming clan as full-time employees and 2 more for contract work. There's a few more members I'd have no qualms about hiring since I know their skills in detail from trading tricks & tips about computer hardware, server software and/or programming. (Whether I could have the work enticing enough to attract them is a different story.)

So kids (and adults who haven't cut the cord yet) -- the next time your parents nag you about computer gaming, say you are networking. I'd suggest picking games that require teamwork versus off-line or one-versus-one games. And don't play Worlds of Warcraft as MMORGs tend to be all-consuming -- anybody competitive you meet in that environment probably wears diapers to avoid bathroom breaks.

Store customer

My wife runs a boutique clothing store and her target customers are rather talkative. For them, shopping is more of a pastime so while they're browsing for clothes, they tend to gab away. The typical topics are work, school, family, housing which is probably not too far off from what everybody else talks about. One customer mentioned she worked a half block down the street as a cashier in a souvenir shop while studying accounting at the local community college. Before you jump to any conclusions -- no, I did not offer her a job just like that.

The story now takes meandering route before we return to the networking topic. I have a son that recently hit 2 years so he is quite the handful. After my work shift is over, I pick up my son and head out to my wife's store to hang out for a while. Being the typical rambunctious toddler, he often ransacks the store so I often take him for walks around the neighborhood to give my wife some sanity. On the days I pass by the aforementioned souvenir store, the cashier was always busy reading textbooks when no customers were shopping. (Although she would fly out to play with my son if she noticed us.)

One night, I dropped by the office and our CEO was there again working the midnight hours away. I point-blank ask him if we need to hire somebody to take some duties off his plate. He agreed yes and the first idea in my head was my wife's customer. Within days, we arranged an interview with her and the rest was history. Currently, she works for us a few days a week while continuing her college education. The managing staff uniformly are impressed with her tenacity and attention to detail -- we definitely would like her to become our full-time accountant after finishing up school with eventual growth into a controller role (and ultimately CFO) as the company grows also.

So when you're shopping (or doing anything else), it doesn't hurt to chit-chat a bit. While not every shopkeeper will have a spouse involved in running a separate company looking to hire, entrepreneurs tend to know other entrepreneurs so you never know.

What this all means

The big unknown in hiring is work ethic and ability to learn more skills. Perhaps large companies can get by with the square hole + square peg method just from sheer number of workers but small companies are always under the gun for resources and having flexible, ambitious workers is a must. Unfortunately, resumes and interviews don't provide the window into people to make this judgment. After all, applicants can practice their words and speeches into perfection so you can't discover the real person behind the polish with that brief interaction.

One bad employee could kill a small business which means networking is just as important for hiring as job seeking. And the best type of networking is natural social interaction. Look not for the person who's mingling at a trade show party handing out business cards and talking quick blurbs about themselves. Instead, keep mental tabs on everyday contact. The barista making your latte, the receptionist answering the phone at your doctor's office, the clerk ringing up your purchase -- in all likelihood, they want to move up in the world and are looking for that foot in the door. While you would not hire somebody on the spot after 6 seconds of conversation, perhaps you can give them more opportunities to reveal more about themselves when you periodically patronizing their workplaces. (It may not be polite to eavesdrop but it works.)

Job seekers -- you cannot tell from appearances who has contacts or influence to help your career. If nature's law held sway over this arena, business owners would have red plumes on their jackets, CEOs would wear yellow robes and hiring managers have green cuffs. (Although I do have a wag you would get better odds focusing on quiet people doing more listening than talking -- after all, it seems slightly boastful to talk about having decision making powers over others unless you're in a bar trying to pick up the opposite sex.) Since it's not that simple, networking needs to be a integral part of you instead of an active thought or process. When the time comes when you need to call in some chips, you definitely do not want the other person to be thinking "first call in 3 years and it's to ask about a job".

I have a dozen topics lined up to be published about once a week but I'll interrupt that schedule to post a public service announcement. While the emphasis is now on internet scams (Nigerian scam, etc), you still need to steer clear of off-line scams.

Just today, my mom got a call saying my car was towed. I needed $200 ASAP to get my car out of impound and someone would be by to get the cash for me. Of course, I didn't make the call because my cellphone was supposedly locked in the car. Now, this entire attempt in my mind was completely laughable. (1) I don't need $200 from my parents. (2) I certainly would be in no hurry where I'd send some random stranger to my mom's house. (3) I have no problems walking home or to my office in order to get access to a phone. However, the fact this scam attempt happened says some people do fall for it -- especially the elderly.

This is not the first time somebody has tried to scam my parents. A while back, she got a call saying my brother owed $10,000 but if she would give them her bank account info right then and there, they would cut the amount due to $4,000. My mom actually got her check book out before she asked a few more questions about this supposed past due. That was when the gig was up as the info they had was from multiple people. However ... if they had nailed that part right (which is not too hard considering how wide our personal data has dispersed), she might be out $4,000 as we speak.

So if you have parents and relatives getting older and hitting the age where their minds are slowing down, periodically reinforce that there are a lot of scammers out to get them. It's bad enough with the scammers that come at you legally (e.g. unethical mortgage/stock/insurance brokers) -- let's at least avoid outright fraud.

For my first "real" post, I have resurrected an article about health insurance I was working on late last year. It's been sitting on my hard drive for the past few months while I've pondered how to publish this.

Traditional health care expenses

I never thought much about health insurance as I had not seen a doctor since Bush Sr was in office. (I did visit a walk-in acute care center for a few drops of peroxide to clear out extreme wax buildup in my ear.) While I knew that it was important to be covered by insurance, I had no idea what kind of coverage I had or how much it cost. It was only after my wife's pregnancy (and son's birth) that all sorts of medical bills showed up at home. Every time I opened up a bill, I'd frown in puzzle -- doesn't insurance cover this and if not, what's insurance good for then?

Previously, I had talked in passing to our CEO about reviewing the benefits package (medical, 401K, etc) but neither of us had it as a priority on our to-do list. But after being harassed by this flock of medical bills, I took on the project as my personal hobby. Step 1: I looked through our current health insurance plan; my reaction after looking at the numbers: YIKES! For 90% coverage from Blue Shield, our company was paying $8K a month for 9 participants. (12 people total -- classified as "small group" so Blue Shield charges us an extra 10%.) To top it off, a 11% rate increase was scheduled. After payroll, this was definitely the biggest expense on the books. My specific premiums were $15,000 per year and I still had to cover $3500 in out of pocket expenses for the birth of my son -- this did not feel like a bargain.

The search for options...HSA?

Thus began my search for health insurance options. I had come across mentions of the HSA acronym in the past but my brain usually glossed over the descriptions thinking it was yet another variation on the use-it-or-lose-it FSA. Now that it was my job though, I finally read up about Health Savings Accounts and realized this is the best thing since sliced-bread! The quick low-down on HSAs:

• Tax-free contributions -- can come from employee or employer
• Annual contribution limit: $5650 for family, $2850 for individual -- individuals age 55+ can contribute another $700 per year
• Tax-free withdrawals for qualified medical expenses at any time
• After 65 1/2, withdrawals for non-medical purposes treated like a Traditional IRA
• Withdrawal for non-medical before 65 1/2 subject to tax + 10% penalty
• Money totally under employee control
• Requires high-deductible medical plan

As far as I know, this is the only savings/investment vehicle where you don't get taxed either on the contribution or the withdrawal as long as the money is used for qualified medical expenses. While that may seem limiting, a big portion of life's expense is medical. This recent study from Fidelity claims the average couple in retirement will spend $215K for medical. So for practical purposes, any money saved in a HSA probably will never get taxed unless you have to take the money out for non-medical emergencies. Hence, I describe HSAs as IRAs on steroids.

Since a HSA requires a high deductible plan, the key question is rather simple: can the premium reductions from a high deductible plan cover possible out of pocket costs? With that in mind, I used the site HSAInsider to search for for HSA-compatible health insurance plans. If you enter the number of employees and average age into their search engine, HSAInsider will also return premium estimates. Those numbers were pretty close to the follow up quotes from our broker. Turns out we're not we are not experienced-rated (nothing special about workers sitting in front of computers) so our premiums are based solely on headcount and age.

The health insurance plans

So a week after a phone call to our broker, we got the following numbers:

Plan	Premium	In Network	Out Network	Indiv Ded/OOP	Family Ded/OOP
Blue Shield PPO 250 (current plan)	$8978	90%	70%	$250/$2000	$500/$4000
Blue Shield HSA 2600	$3617	70%	50%	$2600/$5000	$5150/$10000
Blue Shield HSA 3400	$3128	70%	50%	$3400/$4500	$9000/$9000
Blue Cross HSA 2400	$3879	80%	50%	$2400/$3600	$4800/$5500
Blue Cross HSA 3500	$3412	100%	50%	$3500/$4000	$7000/$7500
HealthNet HSA 20	$3880	80%	50%	$2500/$3500	$5000/$7000
HealthNet HSA 30	$3105	70%	50%	$3500/$4500	$7000/$9000

What do these numbers mean? Here's my best guess from paying medical bills and reading convoluted plan materials:

• You first pay 100% whether you're in network or out of network up to the deductible.
• Next, the health insurance plan pays the predetermined in-network/out-of-network percentage until the OOP (out of pocket) max is hit.
• Finally, the network is responsible for 100% of all costs beyond OOP whether in network or out.

Cost savings and benefit changes

With precise numbers in hand, we can now calculate what happens if we fund employee HSA accounts to the IRS max (7 family * 5650, 2 indiv * 2850) to offset the high deductibles/OOP max.

Plan	Premium	HSA Funding	Savings	Yr Savings
Blue Shield PPO 250 (current plan)	$8978	$0	$0	$0
Blue Shield HSA 2600	$3617	$3771	$1590	$19K
Blue Shield HSA 3400	$3128	$3771	$2079	$25K
Blue Cross HSA 2400	$3879	$3771	$1328	$16K
Blue Cross HSA 3500	$3412	$3771	$1795	$21.5K
HealthNet HSA 20	$3880	$3771	$1327	$16K
HealthNet HSA 30	$3105	$3771	$2102	$25K

Basically, every HSA option compared to the standard PPO plan was a winner for the employer even after funding everybody's HSA account to the IRS max. But what about possible downsides for plan participants? Let's look at what employee exposure for paying with their own money beyond employer HSA contributions.

Plan	Indiv Exp	Family Exp
Blue Shield PPO 250 (current plan)	$2000	$4000
Blue Shield HSA 2600	$2150 (increased exp)	$4350 (increased exp)
Blue Shield HSA 3400	$1650	$3350
Blue Cross HSA 2400	$750	-$150 (guaranteed surplus)
Blue Cross HSA 3500	$1150	$1850
HealthNet HSA 20	$650	$1150
HealthNet HSA 30	$1650	$3350

After looking at these numbers, the final decision was rather easy. The Blue Cross HSA 2400 plan had the least exposure which made it an easier sale to employees and only was a tad bit more expensive than higher deductible plans. In terms of network coverage, Blue Cross and Blue Shield are relatively equal for the states our employees are in (California and Florida) with HealthNet trailing behind in number of doctors. Of course, pre-funding a HSA means you don't care whether you're in network or out of network up to the deductible amount.

HSA account funding

With high deductible + HSA a win-win for all parties involved (except for insurance companies receiving lower premiums), the next phase was researching the implementation details. To make HSAs work, somebody has to administer the money. Why not a simple bank account you ask? Unfortunately, somebody has to report to the IRS that you made a tax deductible contribution just as if you contributed to an IRA. Hence a rather specialized industry has formed to meet this need.

A quick look at Vimo shows hundreds of HSA administrators (mostly banks) offering varying services, benefits and fees. On a lark, we decided to filter for local banks and Patelco Credit Union was 1 of 2 local administrators. 5.12% APY, $1/monthly fee, free bill review service, checks, debit card -- perfect for funding initial accounts. Vimo's HSA report shows Patelco has having the highest net (interest - fees) return so it looks to be a good choice.

Managing HSA money

For HSA account holders, managing money requires some extra planning. While you certainly shouldn't hold off treating life-threatening problems or emergencies, scheduling as many treatments as possible during a single plan year produces the best monetary result. For example, if you are planning to have a baby, most of the medical visits are clustered around the months before (for the mother) and after birth (for the baby). This means having a baby about 6 months into a plan year would use up all HSA funds for the year (and then get covered by insurance) but would leave most of the previous + following years untouched.

The idea of course is being a smart buyer for medical goods and services reduces expenses all around for everybody involved. Because our decision to switch health plans is so recent, I don't have a lot of experiences to share in this arena. However, some easy things I can think:

• Buy generic drugs and supplies
• Ask for discounts beyond fee schedule in return for immediate payment -- health insurance is typically slow in paying bills and many doctors live a high flying lifestyle requiring constant cash-flow
• Preventive health care and maintenance
• Live healthier lifestyles

How much could you build up in your HSA account over time? My guess now is the average family could see HSA surpluses of about $3000 3 years out of 5 with a fully funded account. And a young single participant could probably bank almost everything 9 out of 10 years. This makes investing HSA surpluses important after a few years of buildup.

HSAs are personal accounts -- that means you have right to transfer money out of an employer funded account at anytime to another account of your choosing. Unfortunately, the investment options currently are sparse. You can't simply call Vanguard up and sign up for a HSA. Instead, you have to go through 3rd parties who will then pass on extra fees to you. Here are some of the better options I've been able to Google up:

Administrator	Options	Fees
HSA Administrators	21 Vanguard Funds	$39 yearly +0.36% on balance
HSA Bank	Brokerage	$27 yearly for < $3K savings balance $15 per trade various irritating fees
HSA Resources	Brokerage	$40 yearly $14.95 per trade
Saturna Capital	6 Saturna Funds	No fees other than fund expense ratios
SelectAccount	15 Funds from various companies	$27 yearly

When you visit these sites, you'll see most of them have all sorts of complicated twists in their schedules of fees so you have to analyze each option in terms of opportunity cost. For example, if you have to put in a minimum of $2000 in their checking account earning 2% interest, would it be a better option to instead get 5.12% at Patelco and pay the low balance fee? So I created the a spreadsheet (HSA_investment_options.ods) that models all the factors based on how much you have invested. Assuming we're picking the 65/35 stock/bond fund options available, the total expense ratios look like so:

	HSA Administrators	HSA Bank	HSA Resources	Saturna Capital	Select Account
$1000	4.43%	2.80%	4.10%	1.21%	5.45%
$2500	2.09%	1.18%	1.70%	1.21%	2.53%
$5000	1.31%	0.64%	0.90%	1.21%	1.55%
$7500	1.05%	0.46%	0.63%	1.21%	1.23%
$10000	0.92%	0.37%	0.50%	1.21%	1.07%
$15000	0.79%	0.28%	0.37%	1.21%	0.90%
$20000	0.73%	0.24%	0.30%	1.21%	0.82%
$35000	0.49%	0.18%	0.21%	1.21%	0.72%
$50000	0.39%	0.15%	0.18%	1.21%	0.68%

One word: ugh. I am used to investing directly at Vanguard so the low balance total expense ratios are total turnoffs. (Mind you, these are the cheapest HSA investment options available.) Unless better options come to the market, I have no plans to invest my HSA money until I reach the $7500 mark.

Final thoughts

My personal experience with HSAs is just starting so I can't claim to be the ultimate authority on this subject. However, it does look to be be a great option for those who are responsible for their own health insurance premiums (self-employed, high share of premiums, money-back for not participating). My recommendations: If you work for a "nice" company currently offering a traditional plan, ask HR to look at HSA options. If you work for an "evil" company, I'd stay completely silent as they'll probably take the premium reductions and tell you to fund your HSA yourself.

Updates

• I wrote the majority of this post in 2007. Since then, the contribution limits for 2008 have increased to $5800 for families, $2900 for singles.
• We switched our plan starting September so all participants were funded for 4 months in 2007. However, the IRS allows a full contribution even for mid-year starts. This allowed me to make an additional deduction contribution of $3766.66 to reduce my taxable income for 2007.

EDIT: Replaced broken Forbes link with the source Fidelity article.

"Groan ... not another personal finance blog."

If all I did was repeat "spend less than you earn" advice, this website would have little value since there are plenty of good blogs (e.g., Get Rich Slowly or The Simple Dollar) that already cover these areas rather extensively. Instead, I will focus on topics more targeted towards small businesses. Perhaps you are an owner or employee at a small company and want a better health insurance or retirement savings plan. I will post about some of our experiences in those arenas and hopefully it may give you some pointers on where to turn. But due to this tight focus, I won't be able to fire off new ideas compared to a more general finance site. (I wouldn't have the time either.)

"Interesting ... but why should I read YOUR blog."

I'm not going to claim to be the ultimate business entrepreneur but I do have experiences in several ventures. I am a major stakeholder in a small Internet ASP (application service provider) that is finally hitting maturity after a decade of intense work. At the same time, my wife is half owner of a boutique clothing store. Hence, I have knowledge of both the high flying tech industry and also the traditional retail industry. Over time, I will try to sprinkle stories from both (and from failed attempts) in between posts filled with enough numbers to numb your brain.