Modeling HSA and DAF

[thefist]

Following the recent Monster Roth conversion thread
https://www.early-retirement.org/fo...ns-how-big-to-go-and-for-how-long-107859.html

got me to thinking, are there any retirement calculators out there that include DAF and HSA? Perhaps modeling each as a Roth would help a bit, but the withdrawal rules of each won’t make that perfect. It would be nice if I-orp would add those.

 

[RunningBum]

Do you mean something else other than a DAF? Because you can't withdraw from a DAF. Funds can only be distributed to a charity.

HSA seems close enough to a Roth for withdrawal. Just withdraw from the HSA before a Roth if you have medical receipts for them, since inheritance of an HSA is not as good.

If you are looking for contribution guidance, I can't think of a reason you wouldn't contribute to an HSA if you can, other than cash flow problems. DAF is however much charitable giving you want to do.

 

[thefist]

Do you mean something else other than a DAF? Because you can't withdraw from a DAF. Funds can only be distributed to a charity.

HSA seems close enough to a Roth for withdrawal. Just withdraw from the HSA before a Roth if you have medical receipts for them, since inheritance of an HSA is not as good.

If you are looking for contribution guidance, I can't think of a reason you wouldn't contribute to an HSA if you can, other than cash flow problems. DAF is however much charitable giving you want to do.

I'm not asking how to use a DAF or HSA. I'm asking if there are tools which include those programs in their modeling. Yes, as I said, the Roth is a close approximation to an HSA, but withdrawal rules differ.

Looking at i-orp specifically, it comes up with a withdrawal plan for each category. It may not recommend Roth withdrawal until age 72 (or even later), but HSA might be better started at 65. It calculates IRMAA for us, so why not add the additional feature of paying for that from HSA first, if it's beneficial? It would/could be an additional optimization offered.

Regarding charitable giving, it's a retirement expense which can have a tax advantage attached. Again, would be nice to have that modeled.

This may be down in the weeds, but it would make for a more complete tool.

 

[RunningBum]

OK. That sounds pretty complex to me, for a lot of reasons. But maybe someone knows of such a tool.

 

[Animorph]

To me the HSA is just a Roth. I model them the same, although with HSA contributions being added in. The reasons to keep money in it longer are the same reasons to leave it in a Roth. When the time comes for Roth withdrawals I will take as much of the withdrawal from the HSA as I can, mainly because it has restrictions a real Roth doesn't. Otherwise it's part of my Roth AA. I don't see any reason why HSA withdrawals would be significantly earlier or later than Roth withdrawals.

I've considered a DAF but don't use one. It seems like that would be modeled as a separate pot of money from retirement assets. No real relation to retirement planning once it is set up. Additional contributions would be expenses to retirement. Withdrawals would be invisible to retirement. If you want to ensure donations can grow to some particular amount I'd model the DAF independently from retirement.

Maybe we need more details?

 

[audreyh1]

You don’t own the funds in a DAF. You get to direct the grants and how it is invested, but it’s not your money anymore. Once you made the contribution, it’s gone.

You get to take a Schedule A charitable deduction for DAF contributions, so depending, it may lower your taxes. And it’s a good vehicle donating appreciated securities. But that’s it.

 

[thefist]

To me the HSA is just a Roth. I model them the same, although with HSA contributions being added in. The reasons to keep money in it longer are the same reasons to leave it in a Roth. When the time comes for Roth withdrawals I will take as much of the withdrawal from the HSA as I can, mainly because it has restrictions a real Roth doesn't. Otherwise it's part of my Roth AA. I don't see any reason why HSA withdrawals would be significantly earlier or later than Roth withdrawals.

I've considered a DAF but don't use one. It seems like that would be modeled as a separate pot of money from retirement assets. No real relation to retirement planning once it is set up. Additional contributions would be expenses to retirement. Withdrawals would be invisible to retirement. If you want to ensure donations can grow to some particular amount I'd model the DAF independently from retirement.

Maybe we need more details?

What I’m inferring here is that there are no tools which model what I’m asking about. The reason I’m asking is because I’m currently modeling these special situations separately. It would probably be pretty detailed to create such a tool. At the very least, specifying annual spending would be needed.

In firecalc or i-orp, you can model one time events such as sale of a rental property, mortgage payoff, receipt of inheritance, boat purchase, etc. Well, why not charitable donation? I-orp takes taxes into consideration, but not to this depth. Firecalc ignores taxes.
Lumping in HSA with Roth is probably close enough, especially if the HSA is a small % of Roth.
One thing i-orp doesn’t do is consider a person who wants to use QCDs for charity instead of taking RMD as cash income. Or the use of the medical deduction. Granted, they are so personal that a general purpose tool isn’t likely to cover.
Large charitable donations in targeted years can be quite beneficial for many reasons. Would be nice to have a planning tool to include this.