HSA for ER couple in 50s

[2Muchfun]

We are retired. I am 59 and DW is 53. 0% tax bracket and pay $0 for HDHP via ACA. We signed up for an HSA in 2019, as our plan is HSA qualified. We would use the HSA as an investment vehicle. Looking to reduce taxable income later in life when we have RMDs and are taking SS. If we max out our HSA in 2019 with $7K + $1K (55+ catch up contribution), it would be wise to do a $8K tIRA to Roth conversion as it would be tax free, correct? Is it better to do a joint HSA or seperate HSAs to max out tax deductions? Anything that I am missing or something for us to consider?

 

[RunningBum]

There's no such thing as a joint HSA, is there? You could put both your contributions in one individual account or the other, but I don't see an advantage of that. Once she hits 55 you can both make catch up contributions, but I think they have to be made to individual accounts so you'll be doing that soon enough anyway.

Yes, definitely do at least an $8K Roth conversion. How much more income can you take and still pay $0 for HI? I'd at least max out Roth conversions to that point even if you are paying 10% or 12%, since you'll likely be paying more when you start RMDs+SS. Personally my choice is to max out Roth all the way to the ACA subsidy cliff but some people prefer to max out their subsidy instead. That's part personal situation, part guesswork on future taxes, so there's no clear answer which is better.

 

[2Muchfun]

I believe it is called a Family HSA. I'll look to see how much more income and keep HI at $0 and follow your guidance on adding more Roth conversion to cover this. When I asked my accountant, he said that the ACA subsidy is a bigger savings than Roth conversions with future tax savings with RMD and SS.

 

[audreyh1]

I believe it is called a Family HSA. I'll look to see how much more income and keep HI at $0 and follow your guidance on adding more Roth conversion to cover this. When I asked my accountant, he said that the ACA subsidy is a bigger savings than Roth conversions with future tax savings with RMD and SS.

The HSA is an individual account, even though contributions can be made to cover the family. There is not a different joint or “family” type HSA account. Only one individual is the account owner although they should make the spouse a beneficiary.

But you miss out on the opportunity to make two $1000 catch up contributions once both spouses are 55+. So ultimately each spouse wants an HSA. And the younger spouse can keep contributing once the older reaches 65.

 

[RunningBum]

Maybe I'm wrong. Lively HSA claims you could make a $2000 catch up if both of you are over 55. I'm not married so it doesn't apply so I'm not going to research this any more. But if this is true, I'd look at what happens when one of you dies with a family acct vs individual.

 

[audreyh1]

Maybe I'm wrong. Lively HSA claims you could make a $2000 catch up if both of you are over 55. I'm not married so it doesn't apply so I'm not going to research this any more. But if this is true, I'd look at what happens when one of you dies with a family acct vs individual.

Yes, two spouses can each make a $1000 catchup when both 55+, but you have to each have your own HSA to do that.

There isn’t a family HSA, it’s individual, like IRA accounts. It’s just that contributions for the family as a unit can be made to an individual’s HSA account. But only one catch-up contribution.

From irs.gov

In the case of married individuals, each spouse who is an eligible individual who wants to have an HSA must open a separate HSA. Married couples cannot have a joint HSA, even if they are covered by the same HDHP; however, distributions can be used to cover the qualified expenses of the other spouse.

Things are confused by the fact that there is an HSA family contribution limit for the case in which the couple is covered by a family HDHP rather than each having their own individual HDHP - most likely when children are also being covered. If there are no children covered, there is no price advantage of having a family plan - generally they are simply to price aggregate of two individual insurance plans.

We are a “family”, yet we each have our own HDHP, we each have an HSA, and each do the catch up contribution. The “family” contribution limit does not apply to us either, our contribution limit is 2X the individual contribution limit. Yes, it took a while to figure this out.

So basically the complications arise, IMO, by having a family health insurance plan rather than individual ones. The HSA accounts remain individual, but the contribution limits are impacted by whether you have a family insurance plan or individual plans for each spouse. If there are children to be covered, at least one of the spouses is going to have a family insurance plan.

 

[2Muchfun]

Thank you everyone!