HSA strategies?

[twaddle]

Back-story: my investments have been on autopilot for over 10 years, so I'm currently in the process of mental rust removal.

I've been blindly dumping money into an HSA for a long time, because a long time ago I analyzed them for nearly a minute and determined "looks like yet another tax-deferred savings account; I'm in!"

Now that it has grown to 6-figures, do I need to consider taking some money out or should I just keeping stuffing it full?

More info: I'm 59 years old, trophy wife is 7 years younger, not a ton of medical expenses other than OUTRAGEOUS insurance premia.

These things are basically the same as traditional IRA's with the added benefit of tax-free withdrawal for medical expenses, and that expands to insurance premia after age 65, right? No RMD, right?

TL; DR: keep maximizing transferred funds from taxable accounts to HSA or do I have to pay more attention?

 

[bada bing]

The only strategic trick I know of is to retain all your out-of-pocket medical expense receipts. They can be used at any time in the future to withdraw from your HSA tax free as a qualified medical expense. You don't have to withdraw for qualified expenses as they are incurred. A potential big qualified future medical expense for some people are the fees for moving into a CCRC. Basically, there are few people that won't eventually have enough qualified medical expenses to exhaust their HSA on, so using it as a traditional IRA and paying taxes on the withdrawals is very seldom a good plan.

An additional tip for people employed with a workplace HSA is to use payroll deductions for all your contributions. HSA contributions by payroll deduction are exempt from FICA tax as well as income tax. Direct contributions only get the income tax deferral/waiver.

 

[RunningBum]

I would continue making contributions if you have an eligible HI plan. They are tax-deductible with tax-free growth and tax-free withdrawals for medical expenses. Hard to beat.

Hopefully you've been saving those medical receipts for the last 10 years, so that you can make a tax-free withdrawal. Yes, you are correct that you can use it to pay Medicare, but not Medigap. And no RMDs, but you do want to use it before you die if at all possible. If you die with a balance, your heir (other than spouse) has to take it as taxable income, that year. No stretch of any kind.

So the best strategy is to withdraw from an HSA (with medical receipts) before tapping a Roth. And before you die, if it's not sudden. Even if you start withdrawing now, it's still best to continue to make withdrawals because of the triple tax advantage.

I plan to start drawing mine down at 65, if not earlier. It's a great source of tax free cash.

 

[twaddle]

If you die with a balance, your heir (other than spouse) has to take it as taxable income, that year. No stretch of any kind.

That does complicate things a bit, especially since I can't predict that date.

And even if spouse gets it tax-free, the same rules apply to her, so it just kicks that particular can down the road. (Sorry, hun.)

 

[mpeirce]

I’m also 59. My HSA has also (just) reached six figures. For the last couple of years I’ve been using it for our medical and dental expenses.

Since our medical expense are very modest, the HSA has continued to grow.

If we need it, it’s a healthy pile of tax free money in reserve for some unexpected medical expenses.

I try not to over think it.

 

[RunningBum]

That does complicate things a bit, especially since I can't predict that date.

And even if spouse gets it tax-free, the same rules apply to her, so it just kicks that particular can down the road. (Sorry, hun.)

Well, you do your best. Don't hoard it into your 80s. If your health goes chronically bad, take what you can. If one spouse dies, the other should start draining it. Unless you both go in a car wreck or contagious virus, you should have time. And it's not like it's totally gone, it just becomes taxable.

 

[twaddle]

This is complicated enough that a short how-to should probably be written for spouse:

1) I died. Please pay for all medical expenses associated with my death from your new HSA.
2) If you're over 65, party on. Use it for whatever with no penalty. Extra bonus: no tax either if used for medical expenses.
3) If you're younger, probably best to ignore it till you're 65.
4) Warn the kid that if she gets it, taxes will be fairly severe. No consideration for basis. Pure taxable income. Sorry, kid, but there should be some left over to spend.

 

[audreyh1]

Back-story: my investments have been on autopilot for over 10 years, so I'm currently in the process of mental rust removal.

I've been blindly dumping money into an HSA for a long time, because a long time ago I analyzed them for nearly a minute and determined "looks like yet another tax-deferred savings account; I'm in!"

Now that it has grown to 6-figures, do I need to consider taking some money out or should I just keeping stuffing it full?

More info: I'm 59 years old, trophy wife is 7 years younger, not a ton of medical expenses other than OUTRAGEOUS insurance premia.

These things are basically the same as traditional IRA's with the added benefit of tax-free withdrawal for medical expenses, and that expands to insurance premia after age 65, right? No RMD, right?

TL; DR: keep maximizing transferred funds from taxable accounts to HSA or do I have to pay more attention?

Keep putting money in while you can as it lowers your taxable AGI.

Just figure out what you are going to spend it on. If you have records of some medical bills that you can reimburse yourself for, you can do that at any time. You can also cover future Medicare Part B and Part D premiums, eyecare expenses, dental expenses.

DH is using his now to pay his part B medicare premiums. I'm still under 65.

 

[TrvlBug]

... ...

DH is using his now to pay his part B medicare premiums. I'm still under 65.

Does this include the IRMAA on both B & D? Or do I need to calculate and document just the base amounts of B & D? Google is not providing the info!!!

 

[audreyh1]

Does this include the IRMAA on both B & D? Or do I need to calculate and document just the base amounts of B & D? Google is not providing the info!!!

Of course! That’s what we a billed from Medicare. It’s part of the premium. You just get to pay larger Medicare premiums because you get less subsidy when you are subject to IRMAA.

There is no mention anywhere that IRMAA is excluded from HSA payments.

 

[TrvlBug]

Thank you .

 

[Montecfo]

Continue to contribute as long as you can. Definitely start collecting up a the old receipts you can for tax free withdrawals in the future.

Your future medical should be more than enough to drain it. Last estimate I saw was the average couple retiring at 65 will incur $250-350k of future health care expenses. If you do not, that is a high quality problem.

I'm no longer able to contribute as no HDHI, but due to investment gains it's pushing $200k.

 

[swakyaby]

More info: I'm 59 years old, trophy wife is 7 years younger, not a ton of medical expenses other than OUTRAGEOUS insurance premia.
?

I had to look up “trophy wife.” According to Wikipedia, a trophy wife has little personal merit besides her personal attractiveness, requires substantial expense for maintaining her appearance, is often unintelligent or unsophisticated, does very little of substance beyond maintaining attractive. Referring to a spouse as a trophy wife usually reflects negatively on the character or personality of both parties.

 

[twaddle]

I had to look up “trophy wife.” According to Wikipedia, a trophy wife has little personal merit besides her personal attractiveness, requires substantial expense for maintaining her appearance, is often unintelligent or unsophisticated, does very little of substance beyond maintaining attractive. Referring to a spouse as a trophy wife usually reflects negatively on the character or personality of both parties.

I was wondering if somebody would take offense. Told myself "nah!"

Trophy wife: a young, attractive wife regarded as a status symbol for an older man.

I was comically highlighting the difference is our ages. May I respectfully suggest that you next look up self-deprecating humor?

 

[swakyaby]

I was comically highlighting the difference is our ages. May I respectfully suggest that you next look up self-deprecating humor?

It was enough to say she was 7 years younger. But since you find it humorous, wikipedia went on to say about referring to a spouse as a trophy wife, "For the husband, it has a connotation of pure narcissism and the need to impress, and that the husband would not be able to attract the sexual interest of the attractive woman for any reason apart from his wealth or position."

I think that sounds harsh, but perhaps you were not aware or even care that's the impression.

 

[twaddle]

I think that sounds harsh, but perhaps you were not aware or even care that's the impression.

Mostly I'm hurt that somebody not only didn't see the humor but somehow found it offensive.

I always do a self-check on anything I write that I intend to be humorous, but sometimes I fail to consider an interpretation.

To be clear, nobody who understands the term would consider a 7-year age difference to be a "correct" stereotype. It was clearly an exaggeration of that difference.

And the stereotype generally applies to "young' women. 50-something is rarely consistent with the stereotype. If you'd like I can run it by my wife, but my expectation is that she'd consider it a compliment.

Anyway, thanks for your contribution to the thread. I'll happily edit the reference to restore your faith in random internet strangers if you'd like.

 

[Hopeful]

I am 7 years younger than my wife, I would be thrilled if she called me a trophy husband. Somehow I don't think I will be hearing those words from her mouth.

 

[pb4uski]

I had to look up “trophy wife.” According to Wikipedia, a trophy wife has little personal merit besides her personal attractiveness, requires substantial expense for maintaining her appearance, is often unintelligent or unsophisticated, does very little of substance beyond maintaining attractive. Referring to a spouse as a trophy wife usually reflects negatively on the character or personality of both parties.

I presumed that he was kidding. Lighten up.

 

[harllee]

I also have a large HSA. I am planning to move into a Continuing Care Retirement Community in a few years. There is a substantial move in fee and a portion of that is considered medical expense. I plan to use my HSA to pay the medical portion of the CCRC move in fee.

 

[pb4uski]

If you are working I would continue contributing for the tax benefit. In fact, I continued for a couple years after I stopped working because I had a HSA eligible health insurance plan and for every dollar that I contributed I could Roth convert a dollar tax-free.

As our balances started creeping toward six-figures I am no longer interest in growing them. We'll used them to reimburse ourselves for Medicare Part B and Part D premium costs and any deductibles and co-pays, dental and vision costs from here on out.

I didn't want what we spent on eligible expenses to go un-redeemed so in 2020 I did a withdrawal for all of our eligible medical costs from when we started our HSAs in 2010 to the end of 2019. After that, each Jan/Feb I'll do a withdrawal to reimburse for the past year's eligible cost. We have our HSAs at Fidelity so there are good investment options available to us.

Finally, if either of us end up needing long-term care then we would use the HSA for that too.

 

[Z3Dreamer]

Added to our HSA's for many years. During those years we kept a record of expenses which we could use to draw down. We are now drawing down those funds to keep taxable income low. Has worked out well.

BTW, I took no offense at the Trophy reference. My definition is a younger, attractive spouse. No negative. Furthermore, I am 2 years younger than DW. Many, no some, no maybe someone thinks I am attractive, so I guess I am a Trophy husband.

 

[sengsational]

I always do a self-check on anything I write that I intend to be humorous, but sometimes I fail to consider an interpretation.

.

I don't consider it any kind of failure. Humor in this medium isn't always easy, but yours worked with me, anyway.

 

[Animorph]

DW doesn't mind being a "trophy wife", at least in the being attractive sense. She is five years younger than me. She's an electrical engineer and keeps me on my toes. And it was particularly ironic when she continued working after I retired and I could claim my trophy wife was supporting me! I figure that makes me super smart.

 

[BlueberryPie]

So keep your medical bills that you pay directly for years, then when you need cash in the future, just reimburse yourself? A bout of COVID just cost me $4k but I didn't use my HSA, singer to draw $4K for free any time in the future?

 

[RunningBum]

So keep your medical bills that you pay directly for years, then when you need cash in the future, just reimburse yourself? A bout of COVID just cost me $4k but I didn't use my HSA, singer to draw $4K for free any time in the future?

Not sure what "singer to draw" means, but yes, save your receipts, and you can pull out $4K at any time against that receipt, tax free. As long as you don't use that $4K as a schedule A medical deduction.