HSA ; Keep Invested or use the funds

[Happyras]

I am curious how others regard and use their HSA accounts. Currently, I had a series of medical issues resulting in an in-hospital procedure. Everyone wants their cut and follow up visits. It could use up 10% of my account to pay the coinsurance.

So I am faced with liquidating my HSA funds invested to cover my costs, or just paying with after tax dollars. Part of me wants to keep the HSA invested to grow tax free, but it is a small account (in proportion) and could simplify life to use the account as intended and close it in a few years.

I understand from a recent thread that Medicare premiums could be paid in the future from this account. This might be one reason to not use the account for current costs. I really do not want to go on medicare at 65, as we are covered as corp officers in our subS with a Gold plan. But I guess there is no option?

So my question to the group is how do you use your old HSA account. Do you consider it like a Roth IRA that is touched last, or do you use the funds since you can't make any further contributions?

 

[Fedup]

I have a very small account. Still investing.

 

[rodi]

We're kind of doing a mix of saving/using. I'd been cashflowing the bills until my son had a surgery last year... I didn't want to have to pull from other funds when a big bill came in - so I used the HSA funds. Reflecting on that, when I contributed this year I put 75% of the money invested in a vanguard fund, and left 25% in cash to be used for office copays and incidental bills as they come in. I'll weigh whether to sell shares in the HSA account to use for medical bills if/when I've exhausted the cash portion.

I've learned not to "knock wood" on whether we'll hit our max deductible/OOP. My two years on a HDHP I've hit the max both times... so far this year we're on track to have a low healthcare year ... but I fully expect something (sports injuries, ameloblastomas, whatever) to cause us to hit the max OOP again.

 

[CardsFan]

I only had an HSA available for 14 months while working, and it is not offered on the Retiree Medical plan. So my objective is to spend it down, hopefully, slowly.

 

[Exit 2024]

I am fully invested and do not take anything out, with limitation on tax differed space it is one that I really want to maximize, especially when we have aftertax dollar to cover current costs. if you keep all receipts- you can reimburse yourself for those expenses anytime in the future.

 

[littleb]

We have contributed the maximum amount into our HSA accounts for over 10 years. Most of the money is invested except the minimum balance required by the HSA administrator.

We consider these accounts like ROTH's and have never touched the money.

 

[Sue J]

We had HDHP with HSAs in 2014 and 2015 and we contributed the max each year. Then I reimbursed us for a major surgery in 2014. Since then we've left it alone as an investment. I have receipts for expenses in 2015 and later if I wanted to take the money out, but it's invested in Vanguard Wellington Admiral so I'm fine with leaving it there knowing I can take it out at any time.

I like the idea of HDHP with HSA and we would have chosen that again in 2016 and 2017 but in the ACA marketplace for our area the premiums for HSA eligible plans were substantially higher than non-HSA plans, which make no sense to me. This even takes into account the reduced MAGI income for making the HSA contribution.

To answer your basic question, we didn't use the account to pay for expenses with the debit card. We cash flowed and then withdrew a lump later. I would have kept it invested but the major surgery expense in 2014 was substantial so we reimbursed for that year.

 

[larry]

We're kind of doing a mix of saving/using. I'd been cashflowing the bills until my son had a surgery last year... I didn't want to have to pull from other funds when a big bill came in - so I used the HSA funds. Reflecting on that, when I contributed this year I put 75% of the money invested in a vanguard fund, and left 25% in cash to be used for office copays and incidental bills as they come in. I'll weigh whether to sell shares in the HSA account to use for medical bills if/when I've exhausted the cash portion.

I've learned not to "knock wood" on whether we'll hit our max deductible/OOP. My two years on a HDHP I've hit the max both times... so far this year we're on track to have a low healthcare year ... but I fully expect something (sports injuries, ameloblastomas, whatever) to cause us to hit the max OOP again.

I agree with this concept of saving/using of funds but long term plan is to use for supplemental insurance when on medicare.

 

[ownyourfuture]

I'm no expert, but from similar posts I've seen here at ERF, the prevailing theory seems to be that if you can afford to pay the bills out of pocket, it's best to do that & let the HSA grow.

 

[easysurfer]

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 .

 

[pb4uski]

We have used our as a stealth Roth IRA and have never taken a dime out of it. While I think it is the right decision, it is a nuisance as there are limited providers and the fees are a nuisance. It is about 3% of our nestegg... sometimes I'm tempted to just liquidate a portion for all of our past qualified expenses and start using it to get rid of it sooner rather than later.

 

[Idnar7]

I went on Medicare May of 2015. For the four months prior to that I had a high deductible policy with BCBS. Of course in January I had a major health issue with over 8k OOP. I liquidated my HSA to cover that and was thankful to have that. I lived less than two miles from the hospital but the ambulance charge was over 1k. From the IV I had a blood clot which required sonograms at $750/pop. My HSA covered about 60% of my OOP and I would have been in a world of hurt without it. I only wish I had started it when first available.

 

[MooreBonds]

My income level doesn't permit me to contribute to a ROTH, and my employer's retirement plan doesn't permit me to contribute to a traditional IRA....so my HSA is the only additional retirement plan option I have. Plus - the best of all, even if I could do a ROTH - is that the HSA is tax-deductible regardless of income, and earnings are tax-free for medical.

I have maxed out contributions every year almost since HSAs were first created. Added in the fact that I just happened to accidentally make some of my best investing decisions in that account, and it's over $74k. I haven't withdrawn a dime from it yet. I have been saving my medical receipts, but they haven't even been that much (maybe $2,500 if I include regular dental checkups).

Worst-case scenario is that I just wait until I'm 65 and pay regular income taxes when I withdraw it like a regular IRA.

 

[FlaGator]

Built mine up over over several years while still employed, cashflowing the OOP. Kept all the EOBs, so could tap the full balance tax-free if I need to.

Basically use it as tax-advantaged savings. Once there was enough money to cover a couple years of max OOP, put the excess into a moderate growth VGD fund (VSMGX).

Contributed the max last year, and used it to wash some med expenses previously paid OOP. Expect to do the same this year.

Figure I'll let the invested balance grow and use it later.

 

[Mulligan]

My income level doesn't permit me to contribute to a ROTH, and my employer's retirement plan doesn't permit me to contribute to a traditional IRA....so my HSA is the only additional retirement plan option I have. Plus - the best of all, even if I could do a ROTH - is that the HSA is tax-deductible regardless of income, and earnings are tax-free for medical.

I have maxed out contributions every year almost since HSAs were first created. Added in the fact that I just happened to accidentally make some of my best investing decisions in that account, and it's over $74k. I haven't withdrawn a dime from it yet. I have been saving my medical receipts, but they haven't even been that much (maybe $2,500 if I include regular dental checkups).

Worst-case scenario is that I just wait until I'm 65 and pay regular income taxes when I withdraw it like a regular IRA.

You obviously make too much money, Moorebonds and should be banned from this forum! Seriously though, I am following your path. And I invest it and it is growing nicely...But if I make a few dumb trades down the road, I may regret my plan.

 

[RunningBum]

I've been leaving it alone, except that I had one situation last year where I think I wrote a check I didn't have funds to cover, and the best way was to transfer money over from my HSA at the same bank. I *think* I have overdraft protection but didn't have much time to look into it so I did the transfer. I'll also use it if I need more money but don't want to take income to stay qualified for an ACA subsidy, but haven't had to do that yet.


Someone mentioned high dental care costs, but what expenses I have and how I pay for them are two different things. The only thing that changes is the HSA becomes an option with medical expenses incurred, but paying out of pocket is a better choice for me. I can always reimburse myself out of the HSA later.

 

[Deej]

We've had an HSA since 2013 and really didn't know much about its benefits. Gratefully, DH's employer contributes $1,250 per year to it which is half of the deductible amount, and DH was contributing some each paycheck, but not maxing out. For several years, we used the HSA to pay the deductible and all medical bills until I finally took the time to fully understand the benefits of this plan and its value (better late than never). With this knowledge, DH now maxes it out (+ extra $1K/yr) annually and we pay out of pocket for all medical expenses to allow the HSA to grow. Though by the time he retires in 4-6 years, the HSA may only have approximately $50K in there, but, we can pay ourselves back if needed or just use it for medical bills during retirement.

We now have a dedicated medical savings account at the local bank that we contribute to for all OOP medical bills. The past several years our med bills have been quite high due to 3 shoulder surgeries, back surgery, PT, emergency room visit, and many other less-serious unexpected issues. Oh, the joys of getting older!!

Our regret is not understanding the great benefits of having an HSA and not maxing it out from the git-go.

 

[Exit 2024]

My income level doesn't permit me to contribute to a ROTH, and my employer's retirement plan doesn't permit me to contribute to a traditional IRA....so my HSA is the only additional retirement plan option I have. Plus - the best of all, even if I could do a ROTH - is that the HSA is tax-deductible regardless of income, and earnings are tax-free for medical.

I have maxed out contributions every year almost since HSAs were first created. Added in the fact that I just happened to accidentally make some of my best investing decisions in that account, and it's over $74k. I haven't withdrawn a dime from it yet. I have been saving my medical receipts, but they haven't even been that much (maybe $2,500 if I include regular dental checkups).

Worst-case scenario is that I just wait until I'm 65 and pay regular income taxes when I withdraw it like a regular IRA.

I am here with you, MooreBonds
We can not do Roth (doing backdoor), 401k limited by HCE, have been maxing out HSA since 2006 and did not take anything out. Can not say that we did too good with investments - was doing mostly cash and chasing HSA interest rates till 2013, then consolidate all in HSABank and now have around $82k total balance.
2017 is the first year that we can not do Family limit, so it will be Single for me as SO's employer moved to PPO plan couple years ago and child is off our insurance now. Looking back - wish I started to invest earlier, but still pretty happy overall.

 

[Trooper]

I am fully invested and do not take anything out, with limitation on tax differed space it is one that I really want to maximize, especially when we have aftertax dollar to cover current costs. if you keep all receipts- you can reimburse yourself for those expenses anytime in the future.

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.

 

[wolf]

When I was " younger ", used HSA as investment vehicle. But after retirement, and as the years went by. I used it up as quickly as possible. Reason: To time consuming to
save receipts and use up the $. More importantly. When I'm gone, wife has no idea what it is and how to handle it. She would have to hire a CPA, and his/her fees would eat up
any savings.

 

[Helen]

I switched health insurance in November so can no longer contribute to my HSA. I would like to keep it and can afford to pay medical expenses from dividends and pensions. However, I have not yet found a good place to invest the HSA money. It's currently at a bank earning no interest. I will have to do some research.

 

[Gotadimple]

Helen,
Search for an HSA administrator that has an arrangement with a brokerage firm. That way, your HSA investments are still considered part of the HSA. There are several administrators/credit unions out there with these arrangements.

 

[teejayevans]

You get to take $ out tax free, if you wait and treat it as an IRA, you’ll pay tax on it.
So I figure I saved about 30% on taxes putting it in, will save 15% on taxes taking it out.
On top of that the market is at a high, it’s a no brainer, take from the HSA.

 

[teejayevans]

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 .

I feel your pain, literally, will be getting a crown after the holidays. And will be using HSA to pay for it.

 

[RunningBum]

You get to take $ out tax free, if you wait and treat it as an IRA, you’ll pay tax on it.
So I figure I saved about 30% on taxes putting it in, will save 15% on taxes taking it out.
On top of that the market is at a high, it’s a no brainer, take from the HSA.

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.