Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
How big should your HSA account balance be?
Old 01-25-2011, 02:14 PM   #1
Dryer sheet wannabe
 
Join Date: May 2008
Posts: 20
How big should your HSA account balance be?

I have begun saving in an HSA (bi-weekly paycheck deductions for 2011, will contribute $3050 lump sum for 2010 before April 15 since I had my HDHP all of 2010), and I'm 30 years old. Plan on maxing it out every year, but how much should I sock away in an HSA given the strict rules and penalties on the account (can only use for health expenses before age 65 or pay income taxes and a 20% penalty on the withdrawal, etc.). And with Obamacare starting in 2014, I'm not sure how HSAs will be affected or for how many years I should max out the HSA.

Given the strict rules, should I just save enough to cover the deductibles, coinsurance, copays, etc. of my HDHP for a few years if I got sick? Or save more?

(I'm already maxing out my 401k and Roth IRA, btw).
__________________

__________________
cloudeleven is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-25-2011, 02:27 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
There are a couple of things I know for sure.

1) I buy health insurance on the individual market
2) The individual health insurance market is a disaster
3) I'm 39 years old, and healthy
4) One day I'll be older, and less healthy
5) Medicare may be significantly scaled back for people my age
6) HSAs currently give me a tax advantaged way to self-insure my health care expenditure risk

Given 1-5, I'm planning to make the maximum contribution to my HSA for as long as I can to build the biggest fund possible to try to provision for #6
__________________

__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 01-25-2011, 02:34 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
TromboneAl's Avatar
 
Join Date: Jun 2006
Posts: 11,197
Think of it as an traditional IRA with a withdrawal age of 65 instead of 59.5 and no RMDs.
__________________
Al
TromboneAl is offline   Reply With Quote
Old 01-25-2011, 02:47 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 7,376
Quote:
Originally Posted by Gone4Good View Post
There are a couple of things I know for sure.

1) I buy health insurance on the individual market
2) The individual health insurance market is a disaster
3) I'm 39 years old, and healthy
4) One day I'll be older, and less healthy
5) Medicare may be significantly scaled back for people my age
6) HSAs currently give me a tax advantaged way to self-insure my health care expenditure risk

Given 1-5, I'm planning to make the maximum contribution to my HSA for as long as I can to build the biggest fund possible to try to provision for #6
+1 !
Plus if you have or are planning a family you can use your HSA for any of your families medical expenses, too.
__________________
Mulligan is online now   Reply With Quote
Old 01-25-2011, 02:54 PM   #5
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Quote:
Originally Posted by TromboneAl View Post
Think of it as an traditional IRA with a withdrawal age of 65 instead of 59.5 and no RMDs.
And maybe even better - you can use it to pay Medicare premiums after that, I understand.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Old 01-25-2011, 03:20 PM   #6
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,078
Quote:
Originally Posted by Rich_in_Tampa View Post
And maybe even better - you can use it to pay Medicare premiums after that, I understand.
Yep. You can use it for payments of premiums for Medicare Part B, D or Medicare Advantage - just not medigap premiums (strange but true). http://www.irs.gov/pub/irs-pdf/p502.pdf
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 01-25-2011, 03:25 PM   #7
Dryer sheet wannabe
 
Join Date: May 2008
Posts: 20
Are you not concerned about the government changing the rules? Maybe not allowing non-health expense withdrawals until 75, or not allowing them at all? Or not allowing HSA to be used for Medicare premiums (if Medicare even exists in 35 years)? I'm sure there are tons of other possible detrimental changes. I'm only 30, so lots of time for big changes to be made.
__________________
cloudeleven is offline   Reply With Quote
Old 01-25-2011, 03:29 PM   #8
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by cloudeleven View Post
Are you not concerned about the government changing the rules?
The government can change the rules on us for anything at any time. We can either be paralyzed by that fact and do nothing, or we can make moves that seem optimal today (making sure you don't put all the eggs in one basket in case the gummint does something to make it a bad deal).

I'm maxing it out every year. I'm keeping about 3 years of maximum out of pocket annual costs in cash and investing the rest in a 50/50 allocation to stocks and bonds.

I think the same about the HSA as a Roth IRA -- at some point they may freeze new contributions and cancel the programs, but most likely if they close that deal anything already in the accounts could be grandfathered under the old rules.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 01-25-2011, 03:29 PM   #9
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,078
I anticipae changes to HSA rules but I would expect any changes to not be retroactive to monies already contributed to a HSA.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 01-25-2011, 03:35 PM   #10
Dryer sheet wannabe
 
Join Date: May 2008
Posts: 20
Quote:
Originally Posted by REWahoo View Post
I anticipae changes to HSA rules but I would expect any changes to not be retroactive to monies already contributed to a HSA.
Well, they've already increased the penalty for non-health withdrawals from 10% to 20% starting Jan. 1 of this year, and it's retroactive to previous years' HSA contributions.
__________________
cloudeleven is offline   Reply With Quote
Old 01-25-2011, 03:38 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by cloudeleven View Post
Are you not concerned about the government changing the rules?
Yup, but I'm more concerned about $500K in uninsured medical expenditures.

Sure, the government can, and might, tweak these things around the edges. But they're probably at no greater risk of political meddling than 401(k)s and the like. Besides, what's the worst that happens under your list of concerns? I lose the tax advantaged status? In which case I'm no worse off than if I never got the tax break at all.

I look at my HSA money as a self-insurance fund. I don't view it as part of my other assets. I don't care if I lose the ability to withdraw the money for non-medical care related expenses, because I never intend to do that. The day I stop needing money set aside for medical expenditures is either the day I die or the day I find some bulletproof health insurance plan that can never go away. And I'd be delighted if my HSA funds were made obsolete by a bulletproof health insurance scheme, even if that means I'd get penalized on HSA withdrawals.

I consider health care expenditures to be one of my largest financial risks. It's only prudent to put aside as much money as I can to try to cover that risk.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 01-26-2011, 08:47 PM   #12
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Quote:
Originally Posted by cloudeleven View Post
I have begun saving in an HSA (bi-weekly paycheck deductions for 2011, will contribute $3050 lump sum for 2010 before April 15 since I had my HDHP all of 2010), and I'm 30 years old. Plan on maxing it out every year, but how much should I sock away in an HSA given the strict rules and penalties on the account (can only use for health expenses before age 65 or pay income taxes and a 20% penalty on the withdrawal, etc.). And with Obamacare starting in 2014, I'm not sure how HSAs will be affected or for how many years I should max out the HSA.

Given the strict rules, should I just save enough to cover the deductibles, coinsurance, copays, etc. of my HDHP for a few years if I got sick? Or save more?

(I'm already maxing out my 401k and Roth IRA, btw).
It sounds like you're in relatively good health. Given that, I'd strongly suggest you look at getting quotes on your own individual policy. Healthy young workers are what drive down the group cost for the workers who are older and/or have high healthcare expenditures - you could easily find substantial savings for getting your own individual high deductible policy, even after factoring in the tax benefit of buying it through your employer (and you can set up your own HSA account on your own regardless of whether your policy is through your employer or yourself).

I do have slight concerns about changes to the HSA rules (I've maxed out contributions since the second year they've offered them, and have roughly $30k in my stash, thanks to some decent returns)...however, there are bigger concerns to keep me up at night than higher taxes/penalties on my HSA, especially considering that I've already received the tax deduction on contributions.
__________________
Dryer sheets Schmyer sheets
MooreBonds is online now   Reply With Quote
Old 01-26-2011, 09:06 PM   #13
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Oh - one more use of HSA: long term care expenses.

My only regret is that I didn't start an HSA sooner.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Old 01-26-2011, 09:35 PM   #14
Recycles dryer sheets
 
Join Date: May 2007
Posts: 309
Is it true HSA contributions do not have to be earned income?
__________________
homestead is offline   Reply With Quote
Old 01-26-2011, 09:44 PM   #15
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,078
Quote:
Originally Posted by homestead View Post
Is it true HSA contributions do not have to be earned income?
True.

I haven't had a dime of earned income in more than five years but have contributed the max to my HSA annually.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 01-26-2011, 09:53 PM   #16
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Quote:
Originally Posted by REWahoo View Post
True.

I haven't had a dime of earned income in more than five years but have contributed the max to my HSA annually.
And even better: you can deduct HSA contributions regardless of total income (ROTH had limits of under $100k for individual filer, or something like that), so not only do you get tax free growth and get to deduct contributions in the year you make them, but it can qualify for any income level!
__________________
Dryer sheets Schmyer sheets
MooreBonds is online now   Reply With Quote
Old 01-26-2011, 10:14 PM   #17
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Posts: 1,648
Do all of you have HDHP plans...meaning a plan that actually states it is a HDHP? I ask because I looked into this several years ago and it seems (if I am remembering correctly) that I had to get a qualified plan offered from the provider - one they had specified as HDHP). At that time, I didn't like the high deductibles (boy have things changed!). So now I have Anthem Premier with a $3,500 deductible. I know it meets the deductible criteria from the IRS but it doesn't state that it is a HDHP from Anthem. Can I use that plan and start a HSA?
__________________
sheehs1 is offline   Reply With Quote
Old 01-26-2011, 10:35 PM   #18
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Quote:
Originally Posted by sheehs1 View Post
So now I have Anthem Premier with a $3,500 deductible. I know it meets the deductible criteria from the IRS but it doesn't state that it is a HDHP from Anthem. Can I use that plan and start a HSA?
The basic requirement is that you are responsible for 100% of all costs up to your deductible (free annual wellness visits do not apply), and once you reach your deductible, the 0% co-insurance kicks in and you pay 0% after the deductible, with a minimum of a $1,000 deductible. Consult the IRS and your health plan rules and regulations for full details.

I have Anthem's Lumenos plan, which makes a reference to pairing with an HSA:
Find a Health Insurance Plan - Anthem Blue Cross Blue Shield

Usually, in order to maximize their profits and get a cut of the layers of the fees serve you better, a most valued customer better, they will inundate you with requests and attempts ask if you want to open up an HSA plan with your HDHP if it qualifies.
__________________
Dryer sheets Schmyer sheets
MooreBonds is online now   Reply With Quote
Old 01-26-2011, 10:35 PM   #19
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Quote:
Originally Posted by homestead View Post
Is it true HSA contributions do not have to be earned income?
...though you do lose out on part of their non-taxed status if you contribute using post-tax funds.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Old 01-26-2011, 10:50 PM   #20
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Quote:
Originally Posted by Rich_in_Tampa View Post
...though you do lose out on part of their non-taxed status if you contribute using post-tax funds.
Remember that HSA contributions are deductible on your 1040 if you use post-tax dollars. I don't know if your pre-tax HSA dollars are still hit by Social Security/Medicare or not...but even if you gain a 7.6% benefit by using pre-tax dollars by contributing through your employer's plan, your employer's HSA plan could contain unsavory investment options, whereby it might be worth it to lose the 7.6% benefit by going with a bank that has lower fees/better investment options.
__________________

__________________
Dryer sheets Schmyer sheets
MooreBonds is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Checking Account Balance Question misanman FIRE and Money 17 12-23-2010 09:57 PM
Any reason to maintain level balance with my spouse's account? tranceFusion FIRE and Money 18 11-19-2010 03:58 PM
HSA's - What if expenses are greater than account balance? porcelain FIRE and Money 13 03-15-2009 11:03 AM
Recommendation for HSA account A854321 Health and Early Retirement 6 10-01-2007 06:20 PM
Account Balance for Periodic Payments garyrt FIRE and Money 1 08-04-2002 05:25 PM

 

 
All times are GMT -6. The time now is 09:41 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.