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Old 10-30-2013, 05:29 PM   #21
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Would someone who has an HSA with vanguard comment on the convenience in terms of paying for service from the account?
Easy. The just redeem some fractional shares to pay the fee IIRC.
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Old 10-30-2013, 05:37 PM   #22
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Originally Posted by mikefixac View Post
I read about HSA accounts, but it seems more hassle than what it's worth.

If anyone is using HSA, could you please extol its benefits? Thank you.
Name one other plan that has the triple threat of contribution deductible, earnings tax deferred, and withdrawals tax free.
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Old 10-30-2013, 06:24 PM   #23
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Name one other plan that has the triple threat of contribution deductible, earnings tax deferred, and withdrawals tax free.

We have had an HSA policy for the past couple of years because it is way cheaper than the other option we had.

That said - I don't use the HSA part of it. The reason is that we max out our family out of pocket each year (mostly due to some meds our kids take). HSA accounts always seemed more advantageous to me for people who weren't going to be using the money in the HSA for years. In our case we are already withdrawing from DH's IRA (he is retired for 3 years now) so contributing to an HSA would mean withdrawing more money from the IRA and paying taxes on it just so we could then put it in the HSA.
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Old 10-30-2013, 06:30 PM   #24
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Name one other plan that has the triple threat of contribution deductible, earnings tax deferred, and withdrawals tax free.
Not to be picky, but you meant treat, right?

I was thrown into confusion for a few seconds there.

PS. I did have a typo myself in the above short post, but fixed it up quickly. However, I am sure some readers caught it before I saw it.
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Old 10-30-2013, 06:36 PM   #25
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We have had an HSA policy for the past couple of years because it is way cheaper than the other option we had.

That said - I don't use the HSA part of it. The reason is that we max out our family out of pocket each year (mostly due to some meds our kids take). HSA accounts always seemed more advantageous to me for people who weren't going to be using the money in the HSA for years. In our case we are already withdrawing from DH's IRA (he is retired for 3 years now) so contributing to an HSA would mean withdrawing more money from the IRA and paying taxes on it just so we could then put it in the HSA.

Couldn't you just put the money in HSA, turn around and take it out immediately and use it for medical expenses? You would get to take that HSA amount off of your income resulting in a reduction in AGI.

Even if you are using IRA money, it still would benefit you. In effect you would be withdrawing money from your IRA and not pay any taxes on it.

Am I missing something?
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Old 10-30-2013, 07:20 PM   #26
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Not to be picky, but you meant treat, right?

I was thrown into confusion for a few seconds there.

PS. I did have a typo myself in the above short post, but fixed it up quickly. However, I am sure some readers caught it before I saw it.
I believe he meant "triple threat". It's an old football terminology from the "wishbone offense" days. But you definitely understand the meaning which is all that matters, as to me it is also a triple treat too!
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Old 10-30-2013, 07:34 PM   #27
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Thanks for the explanation!

As I have stated often, I know nothing about spectator or competitive sports.
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Old 10-30-2013, 08:40 PM   #28
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Not to be picky, but you meant treat, right?
Since it's almost Halloween, I guess it could be............but I guess I was thinking of threat as in running, passing, and?? kicking??.....not as threat to you but to opponent.
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Old 10-30-2013, 08:42 PM   #29
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Couldn't you just put the money in HSA, turn around and take it out immediately and use it for medical expenses? You would get to take that HSA amount off of your income resulting in a reduction in AGI.

Even if you are using IRA money, it still would benefit you. In effect you would be withdrawing money from your IRA and not pay any taxes on it.

Am I missing something?
Sounds like it would work as long as your qualified medical expenses were equal to or more than your IRA withdrawal. Could be a backdoor way of avoiding the medical expense deduction limitation.
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Old 10-30-2013, 08:52 PM   #30
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Couldn't you just put the money in HSA, turn around and take it out immediately and use it for medical expenses? You would get to take that HSA amount off of your income resulting in a reduction in AGI.

Even if you are using IRA money, it still would benefit you. In effect you would be withdrawing money from your IRA and not pay any taxes on it.

Am I missing something?
sounds good to me.......might not want to overdo till you get near 65 since non-qualified early distributions have a 20% penalty in addition to tax.
....but no RMDs is my understanding unlike TIRAs.
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Old 10-30-2013, 08:58 PM   #31
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I wasn't even thinking of matching the IRA withdrawal $ for $. I was talking about just offsetting the actual medical expenses for each year -- and my comment was -- to the extent that money comes from IRA, it would be like a tax free withdrawal. Katsmeow already mentioned that he was tapping the IRA- hopefully without penalty.

But if you have money already in the HSA account, and if you have past documented medical expenses that could be tapped, then you can even take more than that year's medical expenses. That way you can tap your HSA account *instead* of IRA, and that would of course be tax free. For that you don't really need to participate in a HSA that year.

If you don't contribute to HSA in the year you participate in a HSA plan, that opportunity is forever lost.
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Old 10-30-2013, 09:12 PM   #32
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Originally Posted by Katsmeow View Post
We have had an HSA policy for the past couple of years because it is way cheaper than the other option we had.

That said - I don't use the HSA part of it. The reason is that we max out our family out of pocket each year (mostly due to some meds our kids take). HSA accounts always seemed more advantageous to me for people who weren't going to be using the money in the HSA for years. In our case we are already withdrawing from DH's IRA (he is retired for 3 years now) so contributing to an HSA would mean withdrawing more money from the IRA and paying taxes on it just so we could then put it in the HSA.
Fund the HSA from wherever the funds for those out of pocket expenses are coming from, then pay those expenses from your HSA.

While it's true that it's more advantageous to let the HSA grow tax free, you still get a very nice tax credit just for funding the HSA, even if you turn around and immediately withdraw it.
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Old 10-31-2013, 11:33 AM   #33
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I have not had an HSA in the past. However, now that I'm retired I'm trying to figure out how to balance 0% capital gains, Traditional to Roth conversions, Affordable Care Act subsidies for 2014, and COBRA benefits.

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But the real cool part of HSA is that it reduces your AGI directly in 1040 line 38.
On the plus side, it appears that because an HSA contribution reduces your AGI, it could change one's Affordable Care Act subsidy, or alternatively potentially make corresponding Traditional withdrawals/Roth-conversions tax free. (I still need to research how it plays with 0% capital gains.)

On the downside, hassles, paperwork and fees. I was initially enthralled by the save your receipts for decades approach. However, I've long since stopped reinvesting dividends in taxable accounts to avoid the specific identification hassles of lots of tiny tax lots. I also don't want to leave my wife a pile of medical receipts. So I assume I would pay medical expenses immediately from the HSA. That means my HSA balance is likely to remain small, which makes the fees less tolerable. It looks like even http://www.hsaadministrators.info would charge more than $45/year in fees. Which on the one hand seems reasonable for the services provided, on the other it seems like a pretty high expense ratio if the HSA never grows.

I have not yet decided if I will open an HSA account in 2014. Let the thread continue!
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Old 10-31-2013, 11:38 AM   #34
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On the plus side, it appears that because an HSA contribution reduces your AGI, it could change one's Affordable Care Act subsidy, or alternatively potentially make corresponding Traditional withdrawals/Roth-conversions tax free. (I still need to research how it plays with 0% capital gains.)
Yes. HSA contributions and 401k/403b defined contributions reduce your MAGI. Traditional IRA contributions, even if tax-deductible, do not.

As far as I can tell, LTCG at the 0% rate are not included in MAGI but at the 15% rate or higher, they are.
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Old 10-31-2013, 12:01 PM   #35
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Yes. HSA contributions and 401k/403b defined contributions reduce your MAGI. Traditional IRA contributions, even if tax-deductible, do not.

As far as I can tell, LTCG at the 0% rate are not included in MAGI but at the 15% rate or higher, they are.
LTCG *are* definitely included in your MAGI, 0% rate or otherwise. That's one of the most painful aspects of this whole thing for me. It's free, but it's expensive.

Because of all the shenanigans possible to reduce your taxable income, they went straight for the jugular and based this thing on MAGI. The 0% tax rate calculation for LTCG appears only while calculating the tax. In the first page of 1040, qualified dividend, LTCG all are lumped in with ordinary income.

Tough.
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Old 10-31-2013, 12:04 PM   #36
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As far as I can tell, LTCG at the 0% rate are not included in MAGI but at the 15% rate or higher, they are.
I found this at fairmark

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Q: Are capital gains included in AGI?
A: Yes. For example, if you have a $20,000 capital gain, it will increase your AGI (and your modified AGI) by $20,000. This is true even for long-term capital gains that are subject to special tax rates.
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Old 10-31-2013, 12:09 PM   #37
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Couldn't tell if bam's question had to do with 0% cap gains and the ACA (correctly answered in the two posts above) or HSA and 0% cap gains. If it's the latter, an HSA deduction gives you room for another $3250 of 0% cap gains or dividends. Remember that the 0% rate isn't unlimited. Once you pop the 15% cap including those, any cap gains or divs above that get taxed at 15%.
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Old 10-31-2013, 12:12 PM   #38
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Ah, I stand corrected, it would seem. I saw something from a couple of what seemed to be reasonably reliable sources that seemed to indicate otherwise.
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Old 10-31-2013, 12:13 PM   #39
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Fund the HSA from wherever the funds for those out of pocket expenses are coming from, then pay those expenses from your HSA................
This is what I've done for years with my Patelco account. Basically it is just a checking account. The money I put in is counted as my HSA contribution. The checks I write are counted as distributions. I pay a monthly fee of $2, Patelco sends me a yearly a statement of contributions and withdrawals and I keep the receipts in a folder and do a yearly spread sheet as a scorecard, in case I'm ever audited. As I'm in the 25% tax bracket, it is like getting 25% off on all medical and dental expenses.

Lately I have kicked up the contributions and started investing in their available Vanguard accounts. I'll let these contributions grow until I'm 65, then deplete the fund eventually with Medicare premiums.
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Old 10-31-2013, 12:14 PM   #40
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I wasn't even thinking of matching the IRA withdrawal $ for $. I was talking about just offsetting the actual medical expenses for each year -- and my comment was -- to the extent that money comes from IRA, it would be like a tax free withdrawal. Katsmeow already mentioned that he was tapping the IRA- hopefully without penalty.
A minor point. Katsmeow is not a he.

On a more substantive point, Katsmeow's husband is 66 to withdraws from the IRA without penalty.

In response to some of the other comments, I guess I could make an HSA contribution (DH is on Medicare so can't do so) and then spend it that year. However, when I looked at it I felt there were a lot of complexities involved. And, it was easy to go wrong and a lot of paperwork maintenance for just not a lot of value in our situation.
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