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Old 08-24-2016, 10:41 AM   #21
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Useless fact...I read that only between 3%-4% of people who have HSA accounts use them for investment purposes. So you are definitely in the minority if you do. I never really even considered my HSA for health expenses. It was all about the tax break and making money investing it.
Seems like a fairly obvious advantage now, but I wonder if I'd be paying my medical expenses as they came up without being made aware of the investment strategy here. There are still advantages to using it for medical, just not as many. You do have to watch for fees though, especially on low balances.
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Old 08-24-2016, 11:38 AM   #22
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I also opted for the HSA health insurance option through my employer, which started offering it as one of our plan choices about 6 years ago. It's definitely been a "win-win" for the employer as well as the employees. Employer contributes $2,000/year to the HSA account (and I've been adding more to max it out, just like I do for my Roth IRA). Overall insurance costs for the employer have actually decreased since they started offering HSA plans. The plans all include the (government mandated) "well visits" to your doctor, as well as yearly preventive tests/procedures, etc, at no cost. I've been relatively healthy (knock on wood), and I pay for any non-covered visits procedures out of pocket, to maximize the HSA earnings.

When I RE (4 more months!!!), I'll probably do COBRA to keep that same plan as long as I can (18 months?), and then find my own HSA plan to continue until I turn 65 and qualify for Medicare. At that point, if I want to, I understand that I can withdraw from the HSA account to pay for Medicare premiums without having to pay tax or capital gains on it.
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Old 08-24-2016, 12:06 PM   #23
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I assume we can't just fund an HSA independently of whatever insurance we have, similar to funding an IRA?


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Actually, you don't need to keep your HSA with your employer chosen bank, you can select another HSA sponsor that better meets your needs.

That said, if you are getting a matching deposit from your employer, you need to factor the loss of the match into your decision.

- Rita
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Old 08-24-2016, 07:20 PM   #24
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When I RE (4 more months!!!), I'll probably do COBRA to keep that same plan as long as I can (18 months?), and then find my own HSA plan to continue until I turn 65 and qualify for Medicare. At that point, if I want to, I understand that I can withdraw from the HSA account to pay for Medicare premiums without having to pay tax or capital gains on it.
Some Medicare premiums (ie Part B), but not all.

If memory serves Medi-Gap (ie Medicare Supplemental) premiums are specifically not qualified health expenses for HSA purposes.

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Old 08-29-2016, 04:59 PM   #25
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Seems like a fairly obvious advantage now, but I wonder if I'd be paying my medical expenses as they came up without being made aware of the investment strategy here. There are still advantages to using it for medical, just not as many. You do have to watch for fees though, especially on low balances.


I let my balance drag near the bottom and pay the $3 monthly fee...My preferreds are generating more income than the $3 fee is dinging me so I keep fully invested.


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Old 08-29-2016, 05:34 PM   #26
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You guys don't use the HSA dough to pay for co-pays, drugs and dentist? Just invest it and use your after tax dough for that stuff?
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Old 08-29-2016, 05:36 PM   #27
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Obamacare policies sold in our state identify the HSA compatible plans. We have our contributions stashed at the credit union in an HSA account. We have a debit card for withdrawls.

BTW, contributions to HSA accounts help reduce your Modified Gross Income for Obamacare tax credits.
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Old 08-29-2016, 05:42 PM   #28
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You guys don't use the HSA dough to pay for co-pays, drugs and dentist? Just invest it and use your after tax dough for that stuff?


Yes. Outside of dental cleanings, I have no medical bills. But if I ever do, I will just put them in the envelope I have saved and not lose them. Then 20-30 years from now, if all goes well, I will pull out that amount on my receipts tax free. While hopefully using the balances to pay medicare premiums tax free also with the dough.
Since I am in 31% tax bracket ( state and fed) this is a rather nice tax benefit to milk as hard as possible. Plus I enjoy trading and flipping my preferred stocks in this account with no tax accounting needed!


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Old 08-30-2016, 07:00 AM   #29
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You guys don't use the HSA dough to pay for co-pays, drugs and dentist? Just invest it and use your after tax dough for that stuff?
Exactly.

We used our HSA in the usual way the first year. Then our CPA had a little talk with us and now we us it as a tax advantaged savings vehicle. We also keep records of our medical expenses so we can easily take money out of the HSA in the future when we want it.

One last point. Although HSAs are better then even ROTHs (again if you follow the rules), they are not better when left in an estate. They revert to taxable of they are inherited by someone other than a spouse. So spend the money in an HSA before spending the money in a ROTH if you plan on leaving heirs.

https://www.bogleheads.org/wiki/Heal...#Inherited_HSA
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Old 08-30-2016, 10:11 AM   #30
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I use mine a lot for co-pays, drugs and especially dental. Four cleanings a year and I'm on my 2nd root canal and fifth crown and don't have dental insurance. I sent HSA Bank some more dough this year to stay above 5 grand, close to the max, so I'll get to write that off.

Me thinks I'll just continue to use it in this manner as my "receipt envelope" would get really fat and then I'd probably lose it -
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Old 08-30-2016, 10:17 AM   #31
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I use mine a lot for co-pays, drugs and especially dental. Four cleanings a year and I'm on my 2nd root canal and fifth crown and don't have dental insurance. I sent HSA Bank some more dough this year to stay above 5 grand, close to the max, so I'll get to write that off.

Me thinks I'll just continue to use it in this manner as my "receipt envelope" would get really fat and then I'd probably lose it -


If I wasn't investing proceeds with HSA money, I would do the same. I like the tax free profits from trading, and then hopefully the tax free use to pull out medicare premiums when hitting 65 down the road.


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Old 08-30-2016, 04:23 PM   #32
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.....and then find my own HSA plan to continue until I turn 65 and qualify for Medicare. At that point, if I want to, I understand that I can withdraw from the HSA account to pay for Medicare premiums without having to pay tax or capital gains on it.
That is correct. Initially I didn't know that and wrote checks for the Medicare premiums but later I paid them with HSA funds.
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Old 11-24-2016, 11:42 AM   #33
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Not all high deductible health plans are HSA eligible. If you have a copay for non-preventive care office visits and/or Rx instead of a deductible, the HDHP is not HSA eligible. If the copays only start after the deductible has been met, then it usually is HSA eligible. You can call your plan's customer service number and they can tell you if it qualifies.

For 2016, the plan's individual deductible must be $1300 or more ($2600 family). The out-of-pocket limit can not exceed $6,550 ($13,100 family). There are plans with higher OOP limits so they are also not HSA eligible.

https://www.irs.gov/publications/p969/ar02.html

First dollar benefit (copay) rules explained: White Paper Report: Most High Deductible Plans are NOT HSA-qualified
I'm trying to decide between an HSA and non HSA plan now.

The non HSA plan has things like $70 co-pay for the first 3 visits and some nominal fees for prescriptions without meeting the deductible.

I had HSA plans the last year and this year and have only visited doctors for physical exams or the preventive benefit which is covered (though I paid $35 for a blood test to a separate lab this year).

Last year, the HSA tax benefit was about $550 more in federal tax returns.

I'm not sure how much doctors visits are but I think they're in the range of $150-225 around here.

I tried plugging in actual premium quotes as well as 25% tax bracket and 4 doctors visits and 2 prescriptions in this calculator:

Health Savings Account (HSA) vs. Traditional Health Plan - (HDHP) High Deductible Health Plan Calculator--AARP

It spits out that the traditional plan would cost me $105 more a month than the HSA plan. The actual premium difference is $16 a month, which would give me $55 copays for doctors visits and $30 for generic prescriptions.

But the biggest thing is it estimates about $1100 a year in tax savings, which would account for most of the $105 a month difference in plans.

Now if the tax savings from last year was more in the $550 range, where is it getting this $1100 number?
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Old 11-24-2016, 12:31 PM   #34
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But the biggest thing is it estimates about $1100 a year in tax savings, which would account for most of the $105 a month difference in plans.

Now if the tax savings from last year was more in the $550 range, where is it getting this $1100 number?
You don't say how much your HSA contribution was but for an individual age 55+ the limit is $4350. If in the 25% tax bracket that's $1087 less in taxes.
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Old 11-24-2016, 12:52 PM   #35
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Yes it was $4350.
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Old 11-24-2016, 02:47 PM   #36
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I'm trying to decide between an HSA and non HSA plan now.
Don't overlook the fact that not only is there a tax deduction for current contributions, but all future gains are also tax-free when used for qualified medical expenses! There is not a single other better (or equal) provision in the entire tax code! I have been letting my HSA contributions grow in my account for many years, and will be reaping the benefits when I start withdrawing for various medical expenses in the future.
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