HSA ; Keep Invested or use the funds

[Midpack]

We use our HSA for all qualified medical expenses. The investment options available with ours don’t even keep up with inflation, so there’s no reason to wait to me. It only amounted to about $25K at it’s peak, now it’s down to about $16K. YMMV

 

[athena53]

Up until I changed jobs in 2012, I had access to an FSA (the use-it-or-lose-it type) but no HSA. I raided it when DH needed 2 endoscopies a few months apart (very bad planning that the second one was done after the first of the new year, so the deductible started again). Haven't touched it since, and I've contributed every year. Medicare starts 1/1, so I can't add anymore. It's at $27K.

I'm glad I haven't used it till now; when DH was alive we had enough medical expenses that we could deduct some (DH was over 65 so the 7.5% threshold applied). This year, despite $9K in health insurance premiums, I don't have enough medical expenses to deduct. Even if I use the HSA for a major expense, I'd treat it as a withdrawal from my investment funds since I count it in my net worth.

I guess it would depend on whether or not there was a tax advantage to paying out-of-pocket.

 

[mpeirce]

I had a chat with our CPA last week about the HSA. We had been tossing around the idea of paying DWs Medicare Advantage premiums from the HSA. He said we were nuts It's growing nicely - almost $60K invested in the Vanguard Total Market Fund.

It mildly annoys us keeping track of all the little medical bits that qualify for reimbursemwent in the future. So what we're doing is keeping track of DW's Medicare Advantage premiums (easy and predictable) paid from non-HSA funds, but having her pay the small copays and such out of the HSA.

Since we're still in our 50's and 60's that money probably has a long time to grow fully tax free.

 

[pb4uski]

I view our HSA as our reserve for LTC... in lieu of LTC insurance that I can't convince myself
buy because the value propositon is so poor... we currently have a bit over a year of nursing home costs and will let it grow... if we need to tap it by then it may be sufficent to cover 3-5 years depending on how strongly nursing home costs inflate.

 

[bingybear]

investing. I figure it will be used later on. possibly for LTC

 

[kaneohe]

Another benefit besides the HSA's "triple tax-free" status -- tax-free in, tax-free during, and tax-free out -- is that if you pay for medical expenses out of pocket you can deduct them on Schedule A. That is, any expenses in excess of 10% of AGI.

you can use medical expenses to do as you say or to reimburse yourself someday from HSA but you can't use the same expenses to do both.

 

[teejayevans]

Why would you ever treat it as an IRA and pay taxes on it if you have a qualified medical expense? You can wait, save the receipts, and take the money out later tax free.

It appeared some people are saving it, I assume to pull out later, like an IRA.
Im not sure of the legality:
You pay for it with cash
Do you use it as a deduction on taxes?
Then years later pull cash out and say it’s for medical expenses 20 years ago?

I don’t need to keep receipts, by paying with CC, it’s automatic. Seems like a lot of effort for little gain.

 

[RunningBum]

It appeared some people are saving it, I assume to pull out later, like an IRA.
Im not sure of the legality:
You pay for it with cash
Do you use it as a deduction on taxes?
Then years later pull cash out and say it’s for medical expenses 20 years ago?

I don’t need to keep receipts, by paying with CC, it’s automatic. Seems like a lot of effort for little gain.

If I use the expenses as a deduction on taxes, then I can't use it later for HSA reimbursement. I don't think you can pay it out of HSA immediately either, for medical expenses that you will include on Schedule A. If that's what you're doing, you need to look carefully at the legality of that.

Most years I don't take a medical deduction. I save and track those receipts in those years. It's not that much work to me. I've documented what I do too many times here, not going to bother again. Not certain how much gain it is, but it's something. It is totally legal for me to do this and pull cash out many years later. If you don't want to do it, that's fine, but it's wrong of you to say that you have to pay tax on it when you withdraw later under these circumstances.

 

[bingybear]

It appeared some people are saving it, I assume to pull out later, like an IRA.
Im not sure of the legality:
You pay for it with cash
Do you use it as a deduction on taxes?
Then years later pull cash out and say it’s for medical expenses 20 years ago?

I don’t need to keep receipts, by paying with CC, it’s automatic. Seems like a lot of effort for little gain.

Legally, sure you can. Without medical expenses you have to pay tax, but no penalty. With receipts and not using them for deductions, you can hold on and take it out whenever you like. And who keeps receipts? If you took the deduction you should have receipts for that with your taxes.

For me, I scan my receipts and tally them up each year. So I have a record. I have not used my HSA for medical bills yet. After 65 it can be used for part of your medicare premiums (one part is not allowed). I see this as part of my LTC and med coverage in later years. I'm in a low tax bracket now and to take a deduction you have to exceed the standard deduction and some % of income. For me the HSA should be more valuable at RMD time or LTC time.

 

[prototype]

I only have had a medical plans that allowed HSA contributions since 2016 so I only had about $8750 in my HSA with about 2.5 years or so left to contribute so I was never going to have a huge amount of $$'s in my HSA. I was just getting ready to invest about $5K of it in some Vanguard funds that were available on my HSA, when I found out I needed a major surgical procedure in April. So I ended up using ~ $6.4K (my max out of pocket medical plus a couple of dentist visits) from my HSA in 2017.

I think I did some "back of the napkin calculations (tax implications, probable investment returns,...) that showed I was better off $$ wise using my HSA $'s than dipping into my cash. Whether or not that was the right bottom line $ decision for me I can't say for sure . Maybe it a "wash" $ wise. Who knows. At the time a few hundred dollar swing one way or the other was the least of my worries.

Off topic - Either way, I way over ran my medical budget line item for the year. That was offset by the savings of missing out on a nice vacation due to post-op recovery time-line.

 

[LiveBelowMeans]

I use Optum Bank for my HSA. Have never taken out of account and now have over 6 figures. They have Vanguard funds available. JMHO

 

[Montecfo]

I keep my HSA invested with TDAmeritrade which is one of the options. I save year end insurance summaries to document expenses, if needed.

However, I expect to use it for FUTURE medical expenses, not to pull out past ones. If we remain so healthy that we are pulling out past expenses, that will be a high quality problem.

HSA now north of 75 k.

 

[dvalley]

Wow, you guys have fairly high amounts in your HSAs. I never had the opportunity to participate until last year so I'm only at about $6k maxing out both years (I'm single). I haven't started investing it because they (Payflex) charge a fairly high % on the funds they offer.

 

[Gotadimple]

Wow, you guys have fairly high amounts in your HSAs. I never had the opportunity to participate until last year so I'm only at about $6k maxing out both years (I'm single). I haven't started investing it because they (Payflex) charge a fairly high % on the funds they offer.

You can always change the HSA administrator. Unless you are getting a match from your employer and they dictate who the administrator will be. The same would be true if you have your employer deducting your HSA contribution monthly and forwarding to the administrator.

- Rita

 

[JoeWras]

Been at it for 6 years. I used some of the funds first year, and haven't since. At the individual contribution level ($3k to $3.4k), I have about $33k available. My investments are only part equities. I have some REIT exposure in this account.

 

[bada bing]

I think the name "Health Savings Account" throws a lot of people off into thinking
it has some advantages paying OOP medical expenses as they are incurred. If you
have long term money saved in non-tax deferred accounts, why would you spend the
tax deferred HSA money first and loose the tax deferred space ? It really is
no different than taking Roth money out to pay OOP medical when you have
taxable savings available.

I have an excellent HSA plan from my employer. My provided HDHP is through
Aetna and they also manage the "Playflex" HSA. My OOP medical expenses are
saved on the HSA web page and it shows me exactly how much OOP "credit"
I have available if I were to choose to withdraw some. My employer contributes
$1000 a year to my HSA, there are no expenses on me associated with the
account, it has Vanguard index funds as investment options and I am allowed
to keep it after early retirement. I think my employer really hit one out of
the park with the HSA offering and I wish similar was widely available to bolster
support and participation in the HSA concept.

 

[JoeWras]

I think the name "Health Savings Account" throws a lot of people off into thinking
it has some advantages paying OOP medical expenses as they are incurred. If you
have long term money saved in non-tax deferred accounts, why would you spend the
tax deferred HSA money first and loose the tax deferred space ? It really is
no different than taking Roth money out to pay OOP medical when you have
taxable savings available.

I have an excellent HSA plan from my employer. My provided HDHP is through
Aetna and they also manage the "Playflex" HSA. My OOP medical expenses are
saved on the HSA web page and it shows me exactly how much OOP "credit"
I have available if I were to choose to withdraw some. My employer contributes
$1000 a year to my HSA, there are no expenses on me associated with the
account, it has Vanguard index funds as investment options and I am allowed
to keep it after early retirement. I think my employer really hit one out of
the park with the HSA offering and I wish similar was widely available to bolster
support and participation in the HSA concept.

My first year I was a little less savy and used it for OOP. At tax time, it was a pain. I joined (and learned a lot) here at about that time and quickly stopped that when I realized that managing the outflow later in retirement would be easier. And of course letting it grow.

My Megacorp has an OK plan. They pay the admin fee. I have to figure out what to do next year when I leave. I don't like this administrator.

 

[Helen]

I have to figure out what to do next year when I leave. I don't like this administrator.

I need to find a plan that allows for inexpensive stock investing. I am no longer on a high deductible policy so I want to move it out of the bank where it is earning nothing.

I wish Fidelity had a HSA that was open to everyone.

 

[JoeWras]

I need to find a plan that allows for inexpensive stock investing. I am no longer on a high deductible policy so I want to move it out of the bank where it is earning nothing.

I wish Fidelity had a HSA that was open to everyone.

My admin changed to Vanguard institutional funds, which is GOOD. But they charge another fee on top. I can't remember how much, but it is quite a bit. Megacorp pays for it while employed.

 

[Gotadimple]

I need to find a plan that allows for inexpensive stock investing. I am no longer on a high deductible policy so I want to move it out of the bank where it is earning nothing.

I wish Fidelity had a HSA that was open to everyone.

Hi, Helen,
I'm confused. If you aren't on an HSA compatible health plan, then, you can't contribute to an HSA, but you can keep the account until you are ready to withdraw the money. So you want to leave the money in the HSA and invest it using low-fee investments to grow the account?

Almost all HSA administrators are either banks or credit unions. So you probably won't find another administrator who pays you for your savings as if it was a high yield account. Most of these administrators offer a connection to a brokerage firm where you can buy stocks, bonds, mutual funds. There is a commission you have to pay for each trade, AND, sometimes you need to keep a minimum of cash in your HSA to avoid a monthly bank administration fee.

If you want to cancel the account, you can, but there may be tax consequences to liquidating and using the funds to reinvest, it depends on your age. For you, it might be worth investigating what the impact of canceling this account is: the bank will want to charge a fee for liquidating your account, and there may be tax impacts to liquidation. Then you can take the remainder and invest it as you normally would through Fidelity, etc.

- Rita

 

[caninelover]

I only had access to HSA for a couple of years now so I only have $6k in it. I do leave it alone and generally pay out of pocket, but I am still fairly young and healthy so I don't have much in the way of medical bills.

I do keep $4k (annual out of pocket limit on my plan) in cash if I do have a year where I need to use those funds. But generally the plan is to use it after FIRE.

 

[RetMD21]

I might be the exception here as I raid my HSA to pay for qualified medical expenses. Those dental fees can add up.

Update: As I was eating dinner, the crown on my dental implant cracked as I was eating a pork chop. I estimate will cost me about another $1000 for a new crown. Time to raid my HSA some more .

This is what I do as well. I participated in a qualified insurance and contributed the max to the HSA for a couple of years but due to insurance changes at work we don't have the HDHP any more. The HSA is perhaps 1% of my net worth. I plan to spend it down for co-pays and dental. When it is depleted I can stop saving receipts for possible future audit.

 

[easysurfer]

I issued my online request ("Show me the money!") to my HSA today to remimburse myself for my qualified medical expenses during 2017.

 

[RetMD21]

I might be more excited about growing my tiny HSA investment if I had better investment options inside the HSA

 

[FlaGator]

I might be more excited about growing my tiny HSA investment if I had better investment options inside the HSA

Since you're no longer tied to a HSA-compatible plan, look for alternatives to transfer the balance. From my limited research, there aren't many, but there may be one better than what you have. I stayed with Payflex (legacy of my Aetna coverage) and they now have a broad selection of VGD funds.