Tax Advantaged investing after ER using HSA's

[Looking4Ward]

I have twice the amount of investments in after-tax accounts as I do in a 401k, so I'll be living off of my after-tax investments pretty much until RMD's kick in about 16 years from now.

I FIRE'd at the end of May, and I'm trying to educate myself on HSA's.

I'm paying roughly $300 a month for a $6K deductible Bronze health care plan out of pocket with no ACA subsidies.

I'm thinking of opening an HSA and contributing the max to it each year using proceeds from my after tax accounts to help reduce my tax liability on capital gains and dividends.

What would your strategy be? Why?

 

[LOL!]

Is that bronze plan an HDHP? If it is, then you should do an HSA.

Your contributions are deductible, so you don't have to worry about the Schedule A thing.

The annual contribution limit is rather small, so tax savings may be minimal for the first few years. Also watch out for fees on the HSA and any associated investing account. I use HSA Bank + TDAmeritrade, but pay no fees since I am above the minimums so fees are waived.

I am not looking for a slam dunk in the investing account since I may need to use the money to pay health care expenses, so I invest in a bond fund. Perhaps if I had more money in there, I would up my risk level and add some index funds of equities.

 

[Looking4Ward]

I'm pretty sure it's an HDHP with a $6K annual deductible.

I'm looking at Health Savings Administrators, the one that Vanguard recommends (it contains all Vanguard funds). They charge a $45 per year admin fee plus 0.0008 per quarter times account balance (80 cents per $1000), capped at $20,000 account balance per fund.

 

[LOL!]

I can recommend HSA Bank which seems to have lower fees (as low as ZERO) than that. The TDAmeritrade investing can be commission-free Vanguard ETFs.

 

[MooreBonds]

Your contributions are deductible, so you don't have to worry about the Schedule A thing.

To expand on that - HSA deductions are input on Form 1040, Line 25 (for 2013 tax year), and you get the deduction whether your taxable income is $6,000 or $6,000,000!

I can recommend HSA Bank which seems to have lower fees (as low as ZERO) than that. The TDAmeritrade investing can be commission-free Vanguard ETFs.

I also have an account at HSA Bank/TD Ameritrade. They do charge a $5.75/month fee to have a bank account and the investment account @ TD Ameritrade....HOWEVER, as mentioned, you can buy anything you want in the TD Ameritrade account. If you know you are strictly going to stick with Vanguard funds, you could consider the other one....or, as someone mentioned earlier this year , Eli Lilly Federal Credit Union (Rates | Elfcu) offers an HSA with a $3/month fee if your balance is less than $2,500. It doesn't say they charge you for an Amertrade account, so their total fees appear to be less than HSA Bank, with the same benefits.

To qualify to join the Eli Lilly Credit Union, you have to have been a current or former employee of a variety of companies...or, like PenFed, if you pay a few bucks to join a non-profit group, you also qualify:
How to Join Elfcu | Elfcu

If you go w/ HSA Bank, it still makes sense to keep just a few $ in the bank account and pay the $5.75/month fee, because in order to avoid the fees, you have to keep several thousand dollars in cash in the bank account.

That several thousand dollars cash, depending on what you invest in, could easily bring in more than enough to pay for the $5.75/monthly fee.

 

[sengsational]

First year for me in elfcu. I have not gone into the trading thing yet. Zero fees, though, and I feel like I'm winning by getting 1% apr.

 

[pb4uski]

Until recently I had a HDHI plan that was HSA eligible and I fully funded a HSA each year from my taxable accounts as you are planning to do.

I had HSA Bank through my former employer and later switched to Health Savings Administrators since the ERs of the funds are lower than the funds from my former employer plan.

I viewed it as an easy way to transfer money from taxable to tax-free and get a juicy deduction in the process. It doesn't get much better than that.

 

[zinger1457]

I'm pretty sure it's an HDHP with a $6K annual deductible.

Need to make sure your current plan is HSA eligible. At least half of the HDHP's offered to me through ACA are not HSA eligible.

 

[Accidental Retiree]

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[Looking4Ward]

Need to make sure your current plan is HSA eligible. At least half of the HDHP's offered to me through ACA are not HSA eligible.

How can I confirm that it is? Or isn't?

 

[REWahoo]

How can I confirm that it is? Or isn't?

Call your insurer and they can tell you. Also...

... in order to qualify for an HSA you must be an eligible individual (see above) and have a qualified high deductible policy (an HDHP). A qualified HDHP is one that has specified minimum limits for the annual deductible and maximum limits for out-of-pocket expenses. Specifically, for individual coverage the HDHP must have an annual deductible of at least $1,250 and require that annual out-of-pocket expenses (includes co-payments and deductibles but not insurance premiums) paid not exceed $5,950. For family coverage the limits are an annual deductible of not less than $2,400 and require that out-of-pocket expenses not exceed $11,900. These are 2014 limits.

https://www.hsaresources.com/faq/#opening-03

 

[pb4uski]

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Accidental Retiree posted and accidental reply?

 

[Accidental Retiree]

Accidental Retiree posted and accidental reply?

Apparently. I upgraded my phone's IOS and have had a few misfires, unintended cheek-dialed FaceTime sessions, stuff like that.

It's been magical.


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[zinger1457]

How can I confirm that it is? Or isn't?

Even if the plan meets the HDHP limits listed by REWahoo it may not be HSA eligible if it pays for certain medical expenses before the deductible is met. That seemed to be the reason many of the HDHP's offered to me were not HSA eligible. It's been awhile since I last accessed the ACA web site but it did have a search feature where you could list only HSA eligible plans. And as I recall the ones that were HSA eligible typically had HSA in the plan name or were clearly listed as HSA eligible.

 

[Looking4Ward]

Call your insurer and they can tell you. Also...

https://www.hsaresources.com/faq/#opening-03

Thanks. With a $6K deductible and $6K out of pocket limit, it sounds like mine is.

 

[thefinancebuff]

Thanks. With a $6K deductible and $6K out of pocket limit, it sounds like mine is.

A high deductible is only one of the qualifying criteria. See reply above. If your plan offers 1 non-preventative office visit a year with only a copay before meeting the annual deductible, it disqualifies itself. If it offers generic drug with only a copay before meeting the annual deductible, it disqualifies itself.

 

[Looking4Ward]

Darn, you're right. I checked the details of the plan online and it specifically states it is not HSA eligible.

This is really starting to confuse me - when I then check to see which BCBS plans are HSA eligible, they cost more per month and seem to offer less benefits.

 

[Mulligan]

Darn, you're right. I checked the details of the plan online and it specifically states it is not HSA eligible.



This is really starting to confuse me - when I then check to see which BCBS plans are HSA eligible, they cost more per month and seem to offer less benefits.

Interesting... Though I am still on an underwritten plan, I just checked ehealthinsurance for my comparisons....The 2 cheapest plans from Coventry and BCBS were HSA eligible, so it must be a location type thing. Until I develop health problems, I take the crappiest plan available and use it for tax savings. I am retired but in 25% fed and 6% state tax brackets, so this is a good savings. People in lower tax brackets, with higher cost HSA plans, in conjunction with their onerous fees may make them not worth the time for some to bother with.


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[Looking4Ward]

Interesting... Though I am still on an underwritten plan, I just checked ehealthinsurance for my comparisons....The 2 cheapest plans from Coventry and BCBS were HSA eligible, so it must be a location type thing.

It must be - I just checked again and here were the least expensive results for both HSA and non-HSA plans:

BCBS HSA non-eligible Blue Advantage Bronze HMO 006: 280.40 per month

BCBS HSA eligible Blue Choice Bronze PPO 006: 384.01 per month

 

[Mulligan]

It must be - I just checked again and here were the least expensive results for both HSA and non-HSA plans:



BCBS HSA non-eligible Blue Advantage Bronze HMO 006: 280.40 per month



BCBS HSA eligible Blue Choice Bronze PPO 006: 384.01 per month

I looked a little closer for mine (age 50) and Coventry HSA was about $15 cheaper( $253).... BUT the deductible was a thousand dollars higher and no copay assistance on visits... BCBS HSA was about $8 cheaper ($284) but deductible was $2k higher. So even for me where I live, you pretty much need to be healthy to get any benefit from an HSA. The differential should be greater than that. They must not want people in the HSA plans for some reason.


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[MooreBonds]

It must be - I just checked again and here were the least expensive results for both HSA and non-HSA plans:

BCBS HSA non-eligible Blue Advantage Bronze HMO 006: 280.40 per month

BCBS HSA eligible Blue Choice Bronze PPO 006: 384.01 per month

I still have my old-school, high deductible, pre-Obamacare grandfathered plan (until it finally gets phased out in 1 or 2 years), so I haven't really shopped for the current Obamacare plans, so I don't know if this question is relevant or not...but does the non-HSA plan have co-insurance? IF you are on the hook for 10%-30% of the cost above the deductible, then it would be cheaper.

Also, I see the non-HSA plan is an HMO, while the HSA plan is a PPO. That's a somewhat significant difference as well, where you have to get pre-approval from the HMO before getting treatment. Plus, the network is likely different as well.

 

[pb4uski]

It must be - I just checked again and here were the least expensive results for both HSA and non-HSA plans:

BCBS HSA non-eligible Blue Advantage Bronze HMO 006: 280.40 per month

BCBS HSA eligible Blue Choice Bronze PPO 006: 384.01 per month

Interesting. In our area the HSA eligible bronze plan with a $5,000 deductible is $341 a month and the bronze plan that is not HSA eligible has a $3,500 deductible and is $359 a month.

 

[Mulligan]

I still have my old-school, high deductible, pre-Obamacare grandfathered plan (until it finally gets phased out in 1 or 2 years), so I haven't really shopped for the current Obamacare plans, so I don't know if this question is relevant or not...but does the non-HSA plan have co-insurance? IF you are on the hook for 10%-30% of the cost above the deductible, then it would be cheaper.

Also, I see the non-HSA plan is an HMO, while the HSA plan is a PPO. That's a somewhat significant difference as well, where you have to get pre-approval from the HMO before getting treatment. Plus, the network is likely different as well.

That is a good point, MooreBonds. I was just reading "the headlines" and assuming it was copays on doctor visits...There are other copays involved. That is why I just prefer knowing the first $5500 is on me and nothing after that...Provided I get to the right in network hospital, the right in network doctors are cutting on me, and all other gotcha fine print is followed to the "T". It's just easier staying healthy and not going to doctors. I think I will just continue doing that!


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[ziggy29]

I still have my old-school, high deductible, pre-Obamacare grandfathered plan (until it finally gets phased out in 1 or 2 years), so I haven't really shopped for the current Obamacare plans, so I don't know if this question is relevant or not...but does the non-HSA plan have co-insurance? IF you are on the hook for 10%-30% of the cost above the deductible, then it would be cheaper.

As I recall when I was shopping some of the BCBSTX Bronze plans were HSA-eligible and some were not. I seem to recall that the ones that *were* eligible had co-insurance requirements before the OOP maximum kicked in. The ones that were **not** HSA eligible were the ones which had a deductible which was the same as the OOP max (i.e. no coinsurance after the deductible was met).

 

[MichaelB]

It must be - I just checked again and here were the least expensive results for both HSA and non-HSA plans:

BCBS HSA non-eligible Blue Advantage Bronze HMO 006: 280.40 per month

BCBS HSA eligible Blue Choice Bronze PPO 006: 384.01 per month

Blue Choice and Blue Advantage are different networks. Blue Choice is a PPO and Blue Advantage is an HMO. That explains the price difference.