For HSA Receipt Savers

[kaneohe]

from the Bogleheads forum, an interesting thread about HSA receipt savers.....
one fellow does an analysis of the amount gained by not using HSA funds vs paying with HSA funds annually. The benefit is surprising small although still there. Of course it assumes that if you pay from the HSA that you invest the equivalent amount in a taxable account instead of spending it......perhaps, for some an un-natural forced savings unlike keeping it all in the HSA.
https://www.bogleheads.org/forum/viewtopic.php?f=1&t=156240

 

[travelover]

I put the max into my HSA each year and don't have nearly that much in medical and dental expenses. So, I just invest it in Vanguard's Total Stock Market inside the HSA. Once I hit Medicare, I'll take it out in big chunks to pay for premiums, so all the little receipts between now and then probably are not worth saving.

 

[GrayHare]

one fellow does an analysis of the amount gained by not using HSA funds vs paying with HSA funds annually. The benefit is surprising small

That poster forgot to include the tax deduction associated with contributing to an HSA. After doing so, the HSA comes out further ahead.

 

[NW-Bound]

An HSA is a good way to have additional tax-deferred savings. The question is when one should start to use it for medical expenses.

Same as Travelover, I anticipate plenty of chances to use it in the years ahead, hence keep no receipts for past expenses. However, I can see that younger people who defer the claims may want to keep receipts so that they can tap it in an emergency by making claims against past expenses. My HSA is not that much compared to other accounts that I have, so it is not worth the hassle of saving receipts.

 

[travelover]

An HSA is a good way to have additional tax-deferred savings. The question is when one should start to use it for medical expenses.

Same as Travelover, I anticipate plenty of chances to use it in the years ahead, hence keep no receipts for past expenses. However, I can see that younger people who defer the claims may want to keep receipts so that they can tap it in an emergency by making claims against past expenses. My HSA is not that much compared to other accounts that I have, so it is not worth the hassle of saving receipts.

I actually do save the receipts, but loose in a folder and if I ever need to prove to the IRS that I actually spent it on medical expenses, I could put together a spread sheet pretty quick.

 

[audreyh1]

That poster forgot to include the tax deduction associated with contributing to an HSA. After doing so, the HSA comes out further ahead.

According to my estimates, contributing to our HSA will save us over $2500 in taxes for 2014.

 

[audreyh1]

An HSA is a good way to have additional tax-deferred savings. The question is when one should start to use it for medical expenses.

Same as Travelover, I anticipate plenty of chances to use it in the years ahead, hence keep no receipts for past expenses. However, I can see that younger people who defer the claims may want to keep receipts so that they can tap it in an emergency by making claims against past expenses. My HSA is not that much compared to other accounts that I have, so it is not worth the hassle of saving receipts.

We intend to use it for reimbursing paid Medicare premiums (part B and D) when we are no longer eligible to contribute to the HSA. And it is invested accordingly.

But I'm still keeping records of HSA eligible current expenses. After a year they are already a pain, but I do have electronic copies and a hardcopy folder. I could organize a bit better, but haven't put in the time to do so yet.

 

[Sue J]

Over the weekend I just organized all my receipts for 2014s medical expenses. We put $7550 in the HSA, had large medical expenses (total hip replacement) paid from regular savings and I have withdrawn $3500 from the HSA. I'm planning on reimbursing ourselves with another another large hunk soon and then using it to make a contribution for 2015.

I made a spreadsheet to show all of our actual expenses (provider billing statement or receipt) including the date and method of payment. This includes our medical deductible and our dental expenses (no dental insurance). In the folder with the spreadsheet is also a copy of the bank or credit card statement showing the payment.

I tried to anticipate what someone would want to see in an audit. I can't imagine someone bothering to audit us as our income and tax liability are a tiny blip in the bigger picture of the IRS revenue stream, but you never know!

2014 was our first year with an HSA. The $7550 contribution gets us a $755 reduction in taxes. The reduced income for the ACA subsidy gets us and additional $792 and the account has grown by $294 for a total of a benefit of $1841 for having the HSA in 2014.

 

[audreyh1]

from the Bogleheads forum, an interesting thread about HSA receipt savers.....
one fellow does an analysis of the amount gained by not using HSA funds vs paying with HSA funds annually. The benefit is surprising small although still there. Of course it assumes that if you pay from the HSA that you invest the equivalent amount in a taxable account instead of spending it......perhaps, for some an un-natural forced savings unlike keeping it all in the HSA.
https://www.bogleheads.org/forum/viewtopic.php?f=1&t=156240

That was a useful link, thanks. It was good to see what people really had to produce if asked on the paperwork.

Maintaining a log is probably a really good idea in addition to having copies of receipts and proof of payment.

 

[Mulligan]

According to my estimates, contributing to our HSA will save us over $2500 in taxes for 2014.

I am late to HSA game only getting to start one after I retired 5 years ago. Being single my tax savings right at $1000 yearly. I have no health costs and if I get lucky and make it to 65 that way I should have around $150k. Since I annually buy safe preferred investment grade stocks with this money each year earning 6-7% I could possibly crank out 9k or so yearly in tax free income to help pay for my future maladies. This income will also avoid the 31% in annual taxes I pay if I do not need it that year. So for me, I believe it to be a valuable tool long term provided I stay healthy.


Sent from my iPad using Tapatalk

 

[kaneohe]

That poster forgot to include the tax deduction associated with contributing to an HSA. After doing so, the HSA comes out further ahead.

He was comparing HSA with no reimbursements to HSA with annual reimbursements. Deduction in both cases so need to take that into account.

 

[kaneohe]

I actually do save the receipts, but loose in a folder and if I ever need to prove to the IRS that I actually spent it on medical expenses, I could put together a spread sheet pretty quick.

Have you never had a receipt fade to illegibility?

 

[BellBarbara]

We don't touch ours. We get high deductible health insurance plans and only plan to touch the money if/when someone gets really ill. For example, if we need some chemo that is one of the expensive drugs that costs thousands a month. If feels good to have it there. I think we have 20K. No longer working so it won't grow that quick.

 

[GrayHare]

He was comparing HSA with no reimbursements to HSA with annual reimbursements. Deduction in both cases so need to take that into account.

Hmm, then I'll have to run my own calculations since on the surface it appears an HSA's tax-free growth should give it a decent advantage over time.

 

[GrayHare]

OK, in his example I see no accounting for the tax pending on the growth of the money put into a non-HSA account rather than the HSA. He arrives at $42,485 in his non-HSA account, but he does not deduct the taxes pending on its growth.

When I run similar calculations using his growth %, after 20 years with solely HSA I have $146948 available for medical expenses, but only $127586.2 (after 20% CG tax) with his HSA+non-HSA approach. The HSA is ahead by almost $1000 per year.

 

[kaneohe]

OK, in his example I see no accounting for the tax pending on the growth of the money put into a non-HSA account rather than the HSA. He arrives at $42,485 in his non-HSA account, but he does not deduct the taxes pending on its growth.

When I run similar calculations using his growth %, after 20 years with solely HSA I have $146948 available for medical expenses, but only $127586.2 (after 20% CG tax) with his HSA+non-HSA approach. The HSA is ahead by almost $1000 per year.

He got a 1.4K delta ignoring the tax on the taxable account. The taxable acct had 42.5 value with 20K basis for CG of 22.5K. With 20% CG tax of 4.5K, wouldn't your delta be 4.5+ 1.4 = 5.9K? He said he ignored CG tax because it was ymmv .....could be 0% to 20%+

 

[GrayHare]

He got a 1.4K delta ignoring the tax on the taxable account. The taxable acct had 42.5 value with 20K basis for CG of 22.5K. With 20% CG tax of 4.5K, wouldn't your delta be 4.5+ 1.4 = 5.9K? He said he ignored CG tax because it was ymmv .....could be 0% to 20%+

Good catch, yes, my $127586.2 should have been $141077.8, roughly the $5.9k delta you suggest, or about $300 per year more money with the HSA. The higher the CG rate the more the HSA comes out ahead; at a 0% CG rate the delta is small.

 

[travelover]

Have you never had a receipt fade to illegibility?

Let me rummage around in the bottom of the shoebox and get back to you.

But seriously, I'll probably exhaust it with Medicare payments in big chunks, and even then, I'd only need receipts if I was audited.

 

[ChrisC]

Let me rummage around in the bottom of the shoebox and get back to you.

But seriously, I'll probably exhaust it with Medicare payments in big chunks, and even then, I'd only need receipts if I was audited.

Really? I once thought that with current payments for LTCi premiums, Medicare -Part B, when I get 65, and other medical expenses that I would easily exhaust my HSA in my 80's. We now have $75K in our HSAs before making this year's maximum family and catch-up contribution and have around $41K in qualified medical expenses, which includes $18K in LTCi premiums and major dental care and replacement knee surgeries. Two years ago, I decided to draw down on my HSA and pay for current LTCi premium payments. Last year, I reimbursed myself for a few other current expenses -- I still have $36K in unreimbursed medical expenses.

I'm glad to have this problem. But I'm thinking that I'm going to hasten the reimbursement process for us. I'd hate to leave files of saved receipts for someone else (my spouse or children) to seek reimbursement later, in case I'm not around.

 

[audreyh1]

Really? I once thought that with current payments for LTCi premiums, Medicare -Part B, when I get 65, and other medical expenses that I would easily exhaust my HSA in my 80's. We now have $75K in our HSAs before making this year's maximum family and catch-up contribution and have around $41K in qualified medical expenses, which includes $18K in LTCi premiums and major dental care and replacement knee surgeries. Two years ago, I decided to draw down on my HSA and pay for current LTCi premium payments. Last year, I reimbursed myself for a few other current expenses -- I still have $36K in unreimbursed medical expenses.

I'm glad to have this problem. But I'm thinking that I'm going to hasten the reimbursement process for us. I'd hate to leave files of saved receipts for someone else (my spouse or children) to seek reimbursement later, in case I'm not around.

Can't your spouse use it for their own medical expenses if you aren't around? (and for paying children's expenses as well if they are dependents)

If my HSA got that big I'd use it too. But we just now have HSA compatible insurance, and DH is only 5 years from Medicare and me 10. So we don't have that long to accumulate tax-deferred savings to apply against future medical expenses.

 

[kaneohe]

No big tragedy, I suppose, if you end up w/ excess funds after age 65. You can always burn the excess but just pay ordinary income rates on non-medical expenses like a TIRA. Still it seems a bit of a waste paying those taxes when they could be used for qualified medical expenses tax free. Past 65, it is possible that the only expenses you can reimburse (medical) are for Medicare (now perhaps 2.5K for pt B and perhaps another 1K for pt D for a couple). Yes , you might get old and feeble but w/ a good supplement plan (like F), there may be not be any out of pocket charges to be reimbursed.

Seems like a bit tricky walking the middle path between too much and too little w/o a crystal ball...........................

 

[ChrisC]

Can't your spouse use it for their own medical expenses if you aren't around? (and for paying children's expenses as well if they are dependents)

If my HSA got that big I'd use it too. But we just now have HSA compatible insurance, and DH is only 5 years from Medicare and me 10. So we don't have that long to accumulate tax-deferred savings to apply against future medical expenses.

My spouse would be able to absorb my HSA into her HSA if I'm 6 feet under, but not sure she's going to be able to exhaust the HSA as well. (We have no other dependents now, though my 95 year old MIL might be moving in with us sometime this year -- though she fiercely wants to keep her independent living lifestyle and so it's not a done deal that she'll ever be our dependent.) I have 4 more years of HSA eligibility and my wife has another 2 years (but she's drafting on my HDHP and only makes catch-up contributions). I'm thinking that I need to eliminate the saved receipts issue that could plague my spouse. I have receipts dating back to 2008, when we first started the accounts. And we're switching HSA custodians in which I have all of my receipts stored electronically on its management tools.

 

[sengsational]

Even though I didn't scan anything, I have spent way too much time this year keeping HSA eligible expense receipts and maintaining a spreadsheet. I printed the spreadsheet, punched holes in all of it, and am going to buy an Acco report cover and stick it on the shelf. No scanning for me...too much time. I'll back-up the spreadsheet and if the place burns down and I get audited (a real unlucky guy, n'est-ce pas?), I'll just bring the spreadsheet from the backup to the audit, along with a picture of the smothering reckage, and hope for the best.

One more thing...the spreadsheet is NOT just for HSA purposes...it's also for tracking medical expenses so that I can model various health insurance options. The expenses are identified as medical, dental, rx, preventive, which family member, etc. If one presumes that past experience is a decent indication of future medical utilization, then having quick access to these totals means being a more effective health insurance shopper.

 

[travelover]

My spouse would be able to absorb my HSA into her HSA if I'm 6 feet under, but not sure she's going to be able to exhaust the HSA as well.........

If I die with too much money, I die happy. The money in my HSA has been untaxed while I'm living, so that will have made sure that I had the maximum amount of money available, if I or DW needed it. Beyond that, screw it............

 

[MichaelB]

We itemize our medical expenses so we keep the receipts together with tax return and will toss them when cleaning out the returns. Once Medicare starts I'm not sure if we will have enough to itemize so HSA withdrawal becomes a possibility.