foglifter wrote:
I have my HSA brokerage account at TDA and being a CA resident I only held Treasury bond ETFs EDV and IEI (to mimic the supposedly "bad" share-lending TLT) to avoid state tax. Turns out SPLT is a good and cheaper (0.06%) replacement for both EDV and TLT. Higher trading volume than EDV is also a plus. So I moved from EDV/IEI to SPLT. A slight gain from selling yesterday and buying today was an extra bonus.
Why does being in California matter as to what investments you buy inside the HSA?
California is one of 3 states that don't comply with the federal law regarding HSAs. Both contribution and earnings are taxed at the state level. Interest paid by Treasury bonds is exempt from state taxes.
Tyler wrote:FWIW, I've been paying $8 per VTI trade at Fidelity for years and the impact of the commission on my bottom line is completely negligible for how little I trade.
Agreed at $8 but you will enjoy even more negligible $5 trades next time you rebalance.
Nice! I love it when brokerages are cutting fees so fast you can't keep up.
Tyler wrote:FWIW, I've been paying $8 per VTI trade at Fidelity for years and the impact of the commission on my bottom line is completely negligible for how little I trade.
Agreed at $8 but you will enjoy even more negligible $5 trades next time you rebalance.
Nice! I love it when brokerages are cutting fees so fast you can't keep up.
It’s amazing how even that small fee is enough to make me think twice vs. a similar commission-free fund that may have other risks like lower volume or reliance on securities lending. But whenever that happens I just imagine a small scrunched nose dog telling me to mind the spreads and pull the trigger on the Vanguard fund.
Mr Vacuum wrote:
Agreed at $8 but you will enjoy even more negligible $5 trades next time you rebalance.
Nice! I love it when brokerages are cutting fees so fast you can't keep up.
It’s amazing how even that small fee is enough to make me think twice vs. a similar commission-free fund that may have other risks like lower volume or reliance on securities lending. But whenever that happens I just imagine a small scrunched nose dog telling me to mind the spreads and I pull the trigger on the Vanguard fund.
Tyler wrote:
Nice! I love it when brokerages are cutting fees so fast you can't keep up.
It’s amazing how even that small fee is enough to make me think twice vs. a similar commission-free fund that may have other risks like lower volume or reliance on securities lending. But whenever that happens I just imagine a small scrunched nose dog telling me to mind the spreads and I pull the trigger on the Vanguard fund.
For someone that normally makes many many many small purchases of commission-free ETFs each month, a $6.95 fee seems like much more of a barrier than it may seem to others that only incur a fee once every few months or longer. I liked to nibble all month as I transferred money into my accounts each week. Clearly I need to change my approach and/or my vehicles.
I kind of want to give State Street the benefit of the doubt and go with:
1) SPTL instead of TLT
2) SPLG instead of IVV
3) SPMD instead of IJH
4) SPSM instead of IJR
Commission-free plus lower ERs all around. Definitely losing liquidity and narrow spreads in the process, though.
Even if I did this, I can't just sell all my holdings in my margin account or I'd get demolished in taxes, so I'd have 2 ETFs for each asset class which is giving my OCD a headache already.
My other very real option is to keep my holdings and just be more "hands off" and wait for larger rebalancing opportunities to minimize the impact of commissions.
How are other TDA clients here going to approach this in your taxable and non-taxable accounts?
Don't agree with me too strongly or I'm going to change my mind
Actually, after taking a look at the overlap in these State Street funds, I don't like the looks of them... Here's the MidCap (SPMD) vs. SmallCap (SPSM)... 737 overlapping constituents... 74% of the ones in SPMD also reside in SPSM!
foglifter wrote:
I have my HSA brokerage account at TDA and being a CA resident I only held Treasury bond ETFs EDV and IEI (to mimic the supposedly "bad" share-lending TLT) to avoid state tax. Turns out SPLT is a good and cheaper (0.06%) replacement for both EDV and TLT. Higher trading volume than EDV is also a plus. So I moved from EDV/IEI to SPLT. A slight gain from selling yesterday and buying today was an extra bonus.
Why does being in California matter as to what investments you buy inside the HSA?
California is one of 3 states that don't comply with the federal law regarding HSAs. Both contribution and earnings are taxed at the state level. Interest paid by Treasury bonds is exempt from state taxes.
Kriegsspiel wrote:
Why does being in California matter as to what investments you buy inside the HSA?
California is one of 3 states that don't comply with the federal law regarding HSAs. Both contribution and earnings are taxed at the state level. Interest paid by Treasury bonds is exempt from state taxes.
Ok I did see something about that. Do they tax div/int/capital gains annually, or only when you make a withdrawal?
It's actually a gray area to me: both the core account holder (HSA Bank) and the brokerage account provider (TD Ameritrade) apparently treat the HSA as a pretax account. So they don't track tax lots and don't send any 1099Bs as with a regular brokerage account. And the CA state tax form simply asks for a single number - "interest earned in HSA". For now I report the interest earned in the core account (whole $10 ). I'm not selling anything so I don't have any capital gains in the investment account. And the interest/dividends from Treasuries aren't taxable.
Of course if I end up living in a different state in retirement the problem will go away.
After some serious thought, I'm sticking with TD Ameritrade and my iShares ETFs for now in both my taxable and non-taxable accounts, despite the loss of being commission-free. They're solid funds and that's worth a lot to me. If the new State Street funds can gather some serious support, I may entertain them at a later date.
Don't agree with me too strongly or I'm going to change my mind
My wife's HSA is at TDAmeritrade as well so here are the changes I made (I hate paying commissions if I can avoid them):
Gold = IAU (unchanged, and not commission free, but no commission-free options exist).
Long-term Treasuries = SPTL
Stocks = SPTM
Cash = None (I don't believe in holding cash until I start withdrawing from the portfolio).
Instead of cash, I split that amount between SLYV (small cap value) and USRT (real estate). Both are good diversifiers. I might also consider adding SPEM (emerging markets) for further diversification as it is doing well these days.