Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
HSA Tax Analysis
Old 10-31-2007, 11:43 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
TromboneAl's Avatar
 
Join Date: Jun 2006
Posts: 11,194
HSA Tax Analysis

Here's my first draft at answering the question:

How much do I benefit from leaving money in my HSA account for ten years, as opposed to using the funds immediately for medical expenses?

That is, how much benefit do I get from the tax free compounding?

To make it simple, I assume that the account makes x% gain each year, all of which is taxed at y%. There are some other complications that I've ignored. For example, if the money is never used for medical expenses, I have to pay tax on it.

So at this point, I figure I'll have about $4K more at the end of 10 years if I leave the money in the HSA account.

Let me know what mistakes I've made and I'll revise the spreadsheet.

HSATaxAnalysis.jpg
__________________

__________________
Al
TromboneAl 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 10-31-2007, 04:22 PM   #2
Recycles dryer sheets
mn54's Avatar
 
Join Date: Sep 2007
Location: mpls, mn
Posts: 440
Thanks for the info. t-al. I see your only putting in for one person. I assume if you were investing the max ( $5650 for 2007) this should more than double the amount you would have. Have we confirmed the fact that you can take out tax-free for medical bills incurred from previous years?
__________________

__________________
mn54 is offline   Reply With Quote
Old 10-31-2007, 04:56 PM   #3
Recycles dryer sheets
KM's Avatar
 
Join Date: Jan 2007
Posts: 391
Where/How are you paying for your medical expenses?

If you are investing $2850/year and you have $2000/year in medical expenses - how are you covering those expenses, if you are not using your HSA $$s? I think there is some "opportunity lost" that you also have to factor in for that- or am I missing something.
__________________
KM is offline   Reply With Quote
Old 10-31-2007, 05:00 PM   #4
Thinks s/he gets paid by the post
twaddle's Avatar
 
Join Date: Jun 2006
Posts: 1,378
He's just looking at the benefit of tax-free compounding. If you have the choice of paying bills from a taxable account or a tax-free account, use the taxable account.

Personally, I'm maxing out my HSA account and letting it compound forever. I think congress will eventually figure out that it's just a tax shelter.
__________________
twaddle is offline   Reply With Quote
Old 10-31-2007, 07:03 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
TromboneAl's Avatar
 
Join Date: Jun 2006
Posts: 11,194
Quote:
Have we confirmed the fact that you can take out tax-free for medical bills incurred from previous years?
Yes, on page 30 of this document:

http://www.treas.gov/offices/public-...SAs_051807.pdf

it says:

HSA Distributions can be used to
reimburse prior years’ expenses as long
as they were incurred on or after the date
the HSA was established.
– No time limit on when distribution must occur
– Individual must keep records sufficient to
prove that:
• the expenses were incurred,
• they were not paid for or reimbursed by another
source or taken as an itemized deduction

Quote:
I see your only putting in for one person.
Right. Luckily my wife didn't qualify, and she's still on a non-hsa high deductible plan. I say "luckily" because if she were on the plan, our "family" deductible would have been $7,000 instead of $3.500, and my hernia repair and colonoscopy this year would have cost me $7K! Also I found out that I can use my HSA money for wife's expenses too (thanks, Martha). Wild huh? Sounds too good to be true.

Quote:
Where/How are you paying for your medical expenses?
As most in this forum, I have enough after tax money for our usually modest medical expenses. There's no lost investment opportunity here; by paying with after tax funds, I have the opportunity to have my money compound tax free.
__________________
Al
TromboneAl is offline   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
HSA Tax Concern TromboneAl FIRE and Money 29 10-25-2007 04:54 PM
analysis help, please aggie FIRE and Money 6 04-14-2007 08:17 AM
HSA plans included in new tax legislation shiny FIRE and Money 11 02-20-2007 07:10 AM
HSA or other Pre-tax to pay for Health Care whitestick Health and Early Retirement 7 12-28-2006 11:13 AM
Vanguard Retirement Analysis vs. 4% withdrawal analysis familyretired FIRE and Money 3 08-26-2005 03:33 AM

 

 
All times are GMT -6. The time now is 03:43 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.