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Old 02-05-2015, 02:19 PM   #21
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It's complicated, but you could do both things. Designate X in the HSA to cover a year's deductible, so invest it very conservatively, and then anything above X gets put towards a longer term investment. If the portion designated to cover the deductible gets drawn down, then replenish it before adding more to the longer term investment.

Or, you could keep your fund for paying the deductible outside the HSA, and use the HSA only for long-term investing.

It comes down to that "fungible" thing about money.
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Old 02-05-2015, 03:30 PM   #22
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I hit my OOP max every year (macular degeneration), DH does not but I've included him hitting it also in my budget. ....
Do you have stacked deductibles or separate policies or one policy and an aggregate deductible? If not the latter, the former might be beneficial to you.
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Old 02-06-2015, 09:12 AM   #23
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Do you have stacked deductibles or separate policies or one policy and an aggregate deductible? If not the latter, the former might be beneficial to you.
Thanks for that. You are absolutely correct. We will have have separate policies once we are both retired. He works PT and gets medical benefits so right now we use his plan which is very good and less expensive than my ER budget.
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Old 02-06-2015, 09:21 AM   #24
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Could you please tell me your thought process behind your decision to reimburse yourself yearly from your HSA (as opposed to the other option of using it an investment tool/allowing it to grow for reimbursement of expenses after age 65)?

I initially thought I would use it to reimburse ourselves like you are every year, but now after reading about the "triple tax savings" I'm considering the other option.
For me, when having a HSA, it's important to know in your own mind what you want to HSA as. In other words, an HSA is kinda like an IRA, and kinda like a FSA.

At first, I was going to use my HSA an an investment tool. But in retirement and no longer getting a real paycheck, I didn't want to dip into my other savings and investments to pay for healthcare.

So, I decided to treat my HSA like a FSA. But of course, a HSA is better as there is no spend it or lose it and no need to send it receipts.

Another way to put it, is the S in HSA for Saving and investing or Spending on qualified medical expenses. The choice is up to you, but I think trying to do both gets difficult to manage.

For me, I consider my HSA as a bridge to pay for medical expenses until I reach medicare age. By that time, anything remaining in the account, if any, is just gravy. I'm happy to just reimburse for qualified expenses year by year, take the contribution deduction each year.

Plus, it is nice too to use the HSA for dental expenses and that can get costly since I self-insure with that.

I think most folks use a HSA as another investment tool. For me, I use it more as a bridge until medicare.

Hope this helps.
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Old 02-06-2015, 09:46 AM   #25
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At first, I was going to use my HSA an an investment tool. But in retirement and no longer getting a real paycheck, I didn't want to dip into my other savings and investments to pay for healthcare.

...........

I think most folks use a HSA as another investment tool. For me, I use it more as a bridge until medicare.

Hope this helps.
Yes, this helps, thank you. It is nice to see someone else consider using it like an FSA instead of as an investment tool. I'm still waffling as to how we want to do it. Financially it feels safer to me to use it like a FSA b/c we will be following a close budget in order to FIRE. I'm running scenarios both ways in FireCalc.
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Old 02-06-2015, 09:53 AM   #26
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It's complicated, but you could do both things. Designate X in the HSA to cover a year's deductible, so invest it very conservatively, and then anything above X gets put towards a longer term investment. If the portion designated to cover the deductible gets drawn down, then replenish it before adding more to the longer term investment.

Or, you could keep your fund for paying the deductible outside the HSA, and use the HSA only for long-term investing.

It comes down to that "fungible" thing about money.
This is complicated, but I like it. I will consider both of these options, too. HSA charges a fee every quarter for < $20K so I may wait to start a 2nd account inside the HSA until I get to $40K.

Thanks!
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Old 02-06-2015, 10:00 AM   #27
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Yes, this helps, thank you. It is nice to see someone else consider using it like an FSA instead of as an investment tool. I'm still waffling as to how we want to do it. Financially it feels safer to me to use it like a FSA b/c we will be following a close budget in order to FIRE. I'm running scenarios both ways in FireCalc.
I think it makes sense to use the HSA to pay current medical expenses when you already have a large component of tax deferred savings in your portfolio. The marginal value of one more deferred tax account may not be meaningful.

Another scenario where it might make sense is when you are no longer saving and you also do not itemize deductions. Using an HSA in that case effectively allows you to take the standard deduction and deduct your medical expenses.

Using the HSA as an investment vehicle makes most sense when you are still interested in building your tax deferred portfolio.
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Old 02-06-2015, 10:05 AM   #28
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This is complicated, but I like it. I will consider both of these options, too. HSA charges a fee every quarter for < $20K so I may wait to start a 2nd account inside the HSA until I get to $40K.

Thanks!
Aren't you allowed several investments in the HSA account?

With HSA administrators, I have $X set aside in a "debit", i.e. cash account at HSA bank, and the remainder invested in a couple of mutual funds. You can exchange from the mutual funds to the debit account and vice versa at any time. Any payment for medical expenses, including self reimbursement, goes through the debit account. There is one annual fee and then some % of the mutual funds paid in fees each quarter. There is no fee on the cash (debit) account itself.

Regardless - you can always use a spreadsheet to track funds set aside. You don't have to physically have multiple accounts.
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Old 02-06-2015, 10:30 AM   #29
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I think it makes sense to use the HSA to pay current medical expenses when you already have a large component of tax deferred savings in your portfolio. The marginal value of one more deferred tax account may not be meaningful.
Hmmm...61% of our funds are in tax deferred savings. Something to consider for sure...would need to project how much we could potentially grow that fund without touching til age 65 and see if it seems worth the added value.

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Another scenario where it might make sense is when you are no longer saving and you also do not itemize deductions. Using an HSA in that case effectively allows you to take the standard deduction and deduct your medical expenses.
This is our situation. Thank you for pointing that out!
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Old 02-06-2015, 10:48 AM   #30
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Yes, this helps, thank you. It is nice to see someone else consider using it like an FSA instead of as an investment tool. I'm still waffling as to how we want to do it. Financially it feels safer to me to use it like a FSA b/c we will be following a close budget in order to FIRE. I'm running scenarios both ways in FireCalc.
You're welcome. For me, I decide to treat my HSA as a separate thing outside of an investment tool. This makes the planning easier for me.

The account is with HSA Administrators, Vanguard Wellington, but I don't track the value as part of my investments or anything. Instead, as long as there's a positive balance to cover the medical expenses, I'm a happy camper. The other stuff like tax savings, is just a bonus in my mind. As I mentioned in the previous post, my HSA serves as bridge until medicare.
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Old 02-06-2015, 10:49 AM   #31
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Aren't you allowed several investments in the HSA account?

With HSA administrators, I have $X set aside in a "debit", i.e. cash account at HSA bank, and the remainder invested in a couple of mutual funds. You can exchange from the mutual funds to the debit account and vice versa at any time. Any payment for medical expenses, including self reimbursement, goes through the debit account. There is one annual fee and then some % of the mutual funds paid in fees each quarter. There is no fee on the cash (debit) account itself.

Regardless - you can always use a spreadsheet to track funds set aside. You don't have to physically have multiple accounts.
Yes, sorry, I misspoke and used the word account. I meant fund. Yep, it is a quarterly mutual fund account fee per fund. I have to admit - I didn't realize they charged a fee on funds until recently (DUMB! ). Too busy and distracted the last couple of years to even notice. Now that life has calmed down and I am taking the time to investigate I have realized this. I should have kept what we did invest so far in just their debit acount like you did until it grew to $20K, then transferred it. Instead I had put it in the Vanguard MM acct. Imagine my surprise when I finally took a close look and saw all those fees from my acct. LOL At least it wasn't a huge costly mistake.

So....I think what you are saying is a great plan. I will keep over $20K in a mutual fund and let that grow. I'll keep a certain amount in the debit account that will cover the difference between what I budget for my yearly HSA contribution and our max OOP on our healthplans. We'll reimburse what we need after the year is over and whatever is left over (if any) will go into the mutual fund that we let grow.

Thanks so much everyone for helping me think this through!!!
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Old 02-06-2015, 12:24 PM   #32
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Yes, sorry, I misspoke and used the word account. I meant fund. Yep, it is a quarterly mutual fund account fee per fund. I have to admit - I didn't realize they charged a fee on funds until recently (DUMB! ). Too busy and distracted the last couple of years to even notice. Now that life has calmed down and I am taking the time to investigate I have realized this. I should have kept what we did invest so far in just their debit acount like you did until it grew to $20K, then transferred it. Instead I had put it in the Vanguard MM acct. Imagine my surprise when I finally took a close look and saw all those fees from my acct. LOL At least it wasn't a huge costly mistake.

So....I think what you are saying is a great plan. I will keep over $20K in a mutual fund and let that grow. I'll keep a certain amount in the debit account that will cover the difference between what I budget for my yearly HSA contribution and our max OOP on our healthplans. We'll reimburse what we need after the year is over and whatever is left over (if any) will go into the mutual fund that we let grow.

Thanks so much everyone for helping me think this through!!!
Oh you are welcome! Yes - I would say to use that debit account as the place to stash the money to cover annual expenses as needed, then the rest can be invested. The nice thing with the HSA Administrators setup is that there is no fee on the HSA Bank part of it. I think if you have an HSA Bank account directly there is $2.50 maintenance fee every month until you reach $5000. Maybe that annual $30 gets paid out of the $45 we pay HSA Administrators - I don't know.

HSA fees are never going to be super low. HSAs are more costly to administer and also there is not as much competition, and the funds invested aren't nearly as high as in a regular discount brokerage. So I don't sweat the fees on the funds in the HSA account - especially since I can pay the overall fee outside of the account.

We've been adding to our HSA account for tax deferred savings because our IRAs are only 10% of our investments. So we are taking advantage of the only tax-deferred option available to us as retirees until each of us reaches Medicare age. So our strategy is likely going to be different from yours. We intend to ultimately use those funds to pay for Medicare premiums as allowed.

Our HSA are going to save us over $2500 in taxes owed for 2014. That's been a huge incentive.
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