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Use HSA $$ or pay out of pocket?
Old 01-13-2011, 08:52 AM   #1
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Use HSA $$ or pay out of pocket?

As part of my megacorp health plan, I have a deductible/out of pocket expense before benefits kick in.

2010 was a good year as we stayed healthy and only had $300 out of pocket expense for Dr appt and labwork.

My thought process is pay with regular funds and not tap the HSA as the HSA has an investment option. Currently, $$ is invested in a low cost Vanguard fund.

Is it better to pay out of pocket or pay from HSA? It's immediate savings or larger long term savings in my mind.

ER is anywhere from 6 - 14 years out, depending on market and passion for my career. At that point, I'll have to obtain an individual family policy.

Thoughts?
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Old 01-13-2011, 09:01 AM   #2
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Out 'o pocket....


But keep receipts of everything you pay so you can take the money out later.... (from what I learned in seminars, there is no time frame for taking money out)...
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Old 01-13-2011, 09:03 AM   #3
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Originally Posted by Aiming_4_55 View Post
Is it better to pay out of pocket or pay from HSA? It's immediate savings or larger long term savings in my mind.
Most here would undoubtedly suggest you pay out of pocket if your cash flow allows it in order to maximize tax-deferred or tax-free compounding (but to save receipts in case you want reimbursement for the future), and for the most part we do the same. However, there's nothing wrong with using the account as intended (to pay for qualifying health care costs) if you prefer or if cash flow considerations lead you to the decision.
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Old 01-13-2011, 12:26 PM   #4
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I've contributed max to my HSA for the 5 years I've had it. Fortunately, I've been able to pay out of pocket without touching the HSA so far, and will leave it as long as possible. Nice to have the company match and know it's there if we need it...
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Old 01-13-2011, 12:49 PM   #5
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I'm probably the minority here. I use my HSA to pay for qualified health care costs. Just got me reimbursement the other day automatically deposited in my checking account the other day.

The way I see it, anything left in my HSA account when I reach 65 is a bonus. In the meantime, it sure is nice to use that to pay for qualified costs year to year.
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Old 01-13-2011, 12:51 PM   #6
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Sounds good. The HSA is new as 2010 was the first year under that plan. I like the idea of letting it grow tax deferred.

I paid out of pocket and was thinking of getting a reimbursement, but I'll delay it for 5 - 10 years =)

Thanks for the feedback.
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Old 01-13-2011, 12:54 PM   #7
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My AA for HSA funds is basically a cash position with no return to speak of. If you manage your HSA more aggressively, and have no cash bucket in your HSA, I guess deferring makes sense.

Since it may need to be called upon immediately at any point in time, I treat my HSA like part of your cash holdings (MMF, CD, short term bonds) rather than risk having to sell low to meet expenses. And that amount can be very high in a serious medical "episode." If I were younger I might hold some equities as part of the mix in small doses.
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As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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Old 01-13-2011, 12:57 PM   #8
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I believe that if you pay out of pocket you can take it as a medical deduction on schedule A if your total medical expenses exceed the 7.5% threshold. This probably won't help working folks who have high salaries and company provided insurance, but for retirees who are paying for their own health insurance, it might.
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Old 01-13-2011, 01:05 PM   #9
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Originally Posted by Rich_in_Tampa View Post
My AA for HSA funds is basically a cash position with no return to speak of. If you manage your HSA more aggressively, and have no cash bucket in your HSA, I guess deferring makes sense.

Since it may need to be called upon immediately at any point in time, I treat my HSA like part of your cash holdings (MMF, CD, short term bonds) rather than risk having to sell low to meet expenses. And that amount can be very high in a serious medical "episode." If I were younger I might hold some equities as part of the mix in small doses.

I've got my HSA invested with HSA Administrators in the "Pssst..Wellington" fund there. It's #6 out of 22 on the risk level of their Vanguard funds available:

Vanguard Funds List

With them, I can choose more than one fund, but I just used a balanced fund to hopefully ride out the storm and to not make more work for myself than needed.
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Old 01-13-2011, 01:59 PM   #10
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My HSA is make 0.25%(megacorp plan), I'll take my 36% tax savings today, thank you.
Congress already as put limits on HSA, take the money and run
TJ
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Old 01-13-2011, 02:40 PM   #11
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I just started an HSA last year and based mostly on info read on this forum am doing this: 1) Building 6K cash fund, then investing the balance in mutual funds offered through the HSA 2) Pay out of pocket 3) Pensioner early retirees should remember an HSA is one of only a few ways you can get a tax deduction as you need "earned income" for IRA deductions, etc. HSA's are part of that exclusion 4) According to this website HSA maximum out of pocket deductibe for HSA's in 2014 is $6645 for individuals and $13,290 for families. Healthcare Reform - HSA for America Assuming this is corect and doesnt change if it is, I believe HSA's will survive and maybe thrive under health care reform.
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Old 01-13-2011, 03:28 PM   #12
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I just started an HSA last year and based mostly on info read on this forum am doing this: 1) Building 6K cash fund, then investing the balance in mutual funds offered through the HSA
My decision was to keep three years of out of pocket maximums (currently $4K per year for a total of $12K) in cash and the rest invested in mutual funds. The idea here is that if we had a large series of medical expenses over a 2-3 year bear market period, we could avoid being forced to "sell low" in order to pay the medical bills.
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