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Old 04-12-2012, 05:00 PM   #21
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FD,

I do not think that "earned income" is a requirement for contributing to a HSA.

If I am wrong, then I will need to file an amended 1040X for 2010....
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Old 04-12-2012, 05:34 PM   #22
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No, you need not have earned income to contribute to the HSA.

No, there is nothing magical about the year of retirement.

The quote (3) means this: if you convert $1K to a Roth, you will have to pay tax on it. That is, it is treated as income. If you also contribute $1K to an HSA, then it will offset the conversion, so that you effectively pay no tax on it. That is, they a related only in that the conversion increases your taxable income and the contribution decreases it.
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Old 04-12-2012, 06:28 PM   #23
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Quote:
Originally Posted by Finance Dave
Ok I need some help here...can someone please explain this in a bit more detail?

I understand that you can contribute to an HSA tax-deferred, and use it on health care costs without paying taxes...up to the max (which I think is about $3,100)....but there a couple things I don't get in the post above.

1) What is magical about the $8,150? Where did that come from? Can someone provide a link? Is that a max for HSA contributions or something?

2) Is the fact that the OP is (actually will be) in the year of retirement relevant to the entire discussion? Is there something magical about that one year?

3) This quote confuses me "my HSA contributions for the year will allow me to make an additional Roth conversions of equal amount without incurring any tax." I didn't know there was a rule about additional Roth conversions related to HSA contributions...is there a link on this?

I need to learn more on this topic. We have been maxing our HSAs annually, and not using them when we have medical costs...so we are essentially using them to gain an additional tax-free investment...but it seems there may be more that I'm missing.

Dave

Edit: Just found this...which answers my question #1. I was not aware of this...but I'm only 50 so that's why.

"If you are age 55 or older, your contribution limit is increased by $1,000. If you are married filing jointly and both you and your spouse are over age 55 and are not enrolled in Medicare, the total contribution limit is increased to $8,150."

Given that, do you have to have "earned" income to contribute to the HSA? I'm wondering if after we FIRE we can do this to lower our taxes...essentially converting the 401k (which will be rolled to a TIRA upon FIRE) to a "Roth-like" investment.
You probably know this, but keep all your medical receipts as there is no time limit on when you can claim them from your HSA. 15 years from now you may want to use some of this money tax free by claiming old medical bills. Also HSA money can be used to pay medicare premiums. That ultimately is my goal for my HSA.
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Old 04-12-2012, 06:43 PM   #24
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Quote:
Originally Posted by TromboneAl View Post
No, you need not have earned income to contribute to the HSA.

No, there is nothing magical about the year of retirement.

The quote (3) means this: if you convert $1K to a Roth, you will have to pay tax on it. That is, it is treated as income. If you also contribute $1K to an HSA, then it will offset the conversion, so that you effectively pay no tax on it. That is, they a related only in that the conversion increases your taxable income and the contribution decreases it.
Thanks!

Ok, so let me see if I have this right. If we were going to max out our HSAs annually regardless, then the discussion about conversion from a TIRA to a Roth is moot?

However, if we normally did not contribute to an HSA, but wanted to shield some income from taxes, you're saying the strategy would be to use the HSA contribution to offset the taxable event of the TIRA to Roth conversion...right?

That makes sense...I guess since we always plan to max out HSAs this is not something I really thought of. The only thing I may want to do in 2013 is increase DW's HSA amount because she turns 55 next year.
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Old 04-12-2012, 06:45 PM   #25
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Quote:
Originally Posted by Mulligan View Post
You probably know this, but keep all your medical receipts as there is no time limit on when you can claim them from your HSA. 15 years from now you may want to use some of this money tax free by claiming old medical bills. Also HSA money can be used to pay medicare premiums. That ultimately is my goal for my HSA.
I knew the first part, but not about using it to pay Medicare...thanks for the tip.

I'm learning that I've focused too much on what currently affects my situation...and now that DW is approaching 55...and I'll be there in about 5 years....I need to start considering and learning about these things now.

This board has been great in that regard...thanks everyone!
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Old 04-12-2012, 07:02 PM   #26
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I had always thought of my HSA as an account to save for my health. But a poster on Boglehead woke me to reality. Money is fungible, so you are not using an HSA for your health, you are using it solely for the tax deduction. I am not too impressed with my HSA investment costs or currently the interest being paid. However, I am saving all medical receipts, so in essence I will use my HSA as an emergency fund when it builds up so I can invest more with my other money and not leave so much in my savings account. Hopefully this will not be needed then I will use it to pay for medicare and old age maladies that may require medical attention.
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