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Old 10-24-2007, 02:40 PM   #21
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Regarding the receipts: I plan to sit down one cozy december or January afternoon and put the amounts all into a spreadsheet, then prep them to be scanned into the computer so I'll have portable electronic backups available.

I'm viewing it as a supercharged traditional IRA on the way in (tax deduction plus FICA tax avoidance completely), and as a Roth on the way out.
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Old 10-24-2007, 02:48 PM   #22
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I'll allow the HSA to compound year after year and might use it for tax planning purposes should the need arise. I haven't nailed down the exact exit strategy. Maybe I'll try to withdraw essentially all of it by the time mortality rates start to creep up (in my 50's or 60's?).
I'm also letting mine compound. On my death, the HSA becomes my DW's HSA.

I hadn't planned to keep any receipts or seek reimbursement. If I ever hit major medical expenses, that's when I'll use it. Since most medical expenses hit you when you're a really old fart, that's when I expect to need it.
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Old 10-25-2007, 06:23 AM   #23
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I'm maxing it out this year $5650 I think? And $5800 for next year. DW's employer is allowing the full $5800 to be payroll deducted, meaning we'll save another 7.65% on the $5800 by not paying SS/Medicare taxes.
No, SS takes its cut before HSA/401K deductions.
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Old 10-25-2007, 02:45 PM   #24
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No, SS takes its cut before HSA/401K deductions.
TJ
That's not the way the HSA payroll deduction works in my past experience with DW's employer. I agree w/ the 401k - SS is always taken out. I believe the HSA is taken out through a cafeteria plan, just like the dental and health insurance, and SS is never taken out. 401k is treated differently. I could see how some employers might have the HSA not funneled through the cafeteria plan, and in that case the deductions could be treated as post tax.
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Old 10-25-2007, 03:16 PM   #25
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I'm also letting mine compound. On my death, the HSA becomes my DW's HSA.

I hadn't planned to keep any receipts or seek reimbursement. If I ever hit major medical expenses, that's when I'll use it. Since most medical expenses hit you when you're a really old fart, that's when I expect to need it.
We're being moved into an HSA at Megacorp next year, and I plan to do the same, but in reality it depends on our cash flow.

The main reason for me is that you can pay for COBRA coverage with the HSA. Since we'd likely be unemployed and thus have rotten cash flow if we were both unemployed and had no health insurance, I'd need a nice, fat balance in the HSA to pay for continued coverage because it's not like we could afford it with unemployment insurance and any other crappy part-time jobs we might have in the interim.
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Old 10-25-2007, 03:23 PM   #26
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That's not the way the HSA payroll deduction works in my past experience with DW's employer. I agree w/ the 401k - SS is always taken out. I believe the HSA is taken out through a cafeteria plan, just like the dental and health insurance, and SS is never taken out. 401k is treated differently. I could see how some employers might have the HSA not funneled through the cafeteria plan, and in that case the deductions could be treated as post tax.
IF they are payroll deductions, SS gets it's cut. If the corp pays then
SS is not taken out. It depends, most megacorps probably do a combo,
they deposit some, you deposit some.
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Old 10-25-2007, 03:30 PM   #27
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IF they are payroll deductions, SS gets it's cut. If the corp pays then
SS is not taken out. It depends, most megacorps probably do a combo,
they deposit some, you deposit some.
At the particular megacorp DW works at, payroll deducted HSA contributions are not subject to SS tax. They are furthermore not subject to fed/state tax. Federal tax law also allows HSA contributions to fall under the 125 cafeteria plans. As you say, the corporation IS technically paying DW's elective HSA contributions instead of paying her salary. That's the beauty of the 125 cafe plans - you elect not to receive a certain amount of pay in exchange for some pre-tax elective bennies. So maybe we are agreeing on this point?? I know that when I go to the bank and make a regular HSA contribution, I don't get an SS tax break, but rather I get a deduction on my state and fed income tax forms.
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Old 10-25-2007, 03:45 PM   #28
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At the particular megacorp DW works at, payroll deducted HSA contributions are not subject to SS tax. They are furthermore not subject to fed/state tax. Federal tax law also allows HSA contributions to fall under the 125 cafeteria plans. As you say, the corporation IS technically paying DW's elective HSA contributions instead of paying her salary. That's the beauty of the 125 cafe plans - you elect not to receive a certain amount of pay in exchange for some pre-tax elective bennies. So maybe we are agreeing on this point?? I know that when I go to the bank and make a regular HSA contribution, I don't get an SS tax break, but rather I get a deduction on my state and fed income tax forms.
I need to look into this more. If that's the case it's a strong incentive to max out HSA contributions, even if it means cutting back some on the non-matched 401K contributions which are subject to SS and Medicare taxes.
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"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)

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Old 10-25-2007, 03:48 PM   #29
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I need to look into this more. If that's the case it's a strong incentive to max out HSA contributions, even if it means cutting back some on the non-matched 401K contributions which are subject to SS and Medicare taxes.
Yep - the tax savings are pretty impressive. Here is a quick link to the US Treasury's web site discussing HSA's.
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Old 10-25-2007, 04:54 PM   #30
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The thing is that my tax rate is so damn low these days. I'll make up a spreadsheet to really nail down the risks/rewards and let you know.
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