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How are you (yes you) taking advantage of HSA?
Unread 11-20-2020, 08:56 PM   #1
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How are you (yes you) taking advantage of HSA?

I am considering switching to a HDHP HSA plan. I think I understand most of the pros/cons, but am particularly interested in the HSA as a savings vehicle. Specifically the scenario where you allow it to grow without using it for current or near-term medical expenses. I understand that in the future you can take HSA distributions based on previous medical bills - even from many years before the distribution.

I seem to be coming to the conclusion that HSAs are most advantageous for (probably rich) people who have large medical bills. They can effectively launder that money into a very tax advantaged account and use it to buy things later in life. If you currently have low medical expenses, then you won't be able to withdraw much tax free down the line.

Except for the case where an HSA turns into a tIRA at age 65 which is nice. Is that the primary reason people in this community would consider HSA? Am I missing something?
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Unread 11-20-2020, 09:08 PM   #2
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There are a bunch of threads you can search through. Main thing you are missing is that you can use it for Medicare (not all parts) premium payments, so most people probably can take advantage of the triple tax savings.

For those not well enough off to pay their medical bills out of pocket and bank their HSA contribution, they still get a tax break paying the bills with their HSA.

The only drawback I see is if you don't touch the HSA contributions, and die before taking the distributions. I don't remember the details (again, you can search) but I don't think HSAs are that attractive to leave to heirs.
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Unread 11-20-2020, 09:38 PM   #3
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We each invested in an HSA to take advantage of the nice tax savings. Now DH is spending his down to pay for Medicare premiums tax-free. I plan to do the same.
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Unread 11-20-2020, 09:38 PM   #4
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Originally Posted by RunningBum View Post
you can use it for Medicare (not all parts) premium payments, so most people probably can take advantage of the triple tax savings.
Ahh ok. I did see that, but did not fully consider it.
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Unread 11-20-2020, 09:41 PM   #5
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Originally Posted by audreyh1 View Post
We each invested in an HSA to take advantage of the nice tax savings. Now DH is spending his down to pay for Medicare premiums tax-free. I plan to do the same.
Ok, this makes sense.
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Unread 11-21-2020, 02:21 AM   #6
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Originally Posted by audreyh1 View Post
We each invested in an HSA to take advantage of the nice tax savings. Now DH is spending his down to pay for Medicare premiums tax-free. I plan to do the same.
I contributed to a HDHP HSA for many years while working, and spent it down on DW and I once I retired, zeroed out last year after 9 years. I did it for the tax savings, no mystery.
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Unread 11-21-2020, 04:20 AM   #7
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My HSA is second in line to my corporate RMSA program for paying medical/medicare premiums and expenses. Eventually both accounts will be depleted at which time I will probably begin to withdraw from Roth IRA's to continue tax free medical payments.
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Unread 11-21-2020, 06:24 AM   #8
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I've been contributing the max to an HSA since 2008. No distributions yet. It's invested 100% in equities and has grown to be a respectable component of the portfolio. I've been saving old medical receipts and enter these in a spreadsheet. The HSA balance is 3X the amount of past receipts. But that still provides a lot of flexibility in the future to use the HSA same as a Roth.

We are currently 59 and 60. At 65, we'll use it for Medicare premiums. Beyond that, we'll just continue accumulating receipts and use it for whatever we want. I expect our medical expenses will increase significantly as we age. So I'm not concerned that we'll have "too little" medical spending to get the money out tax-free. But wouldn't that be a nice problem to have?
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Unread 11-21-2020, 08:14 AM   #9
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Originally Posted by Cobra9777 View Post
I've been contributing the max to an HSA since 2008. No distributions yet. It's invested 100% in equities and has grown to be a respectable component of the portfolio. I've been saving old medical receipts and enter these in a spreadsheet. The HSA balance is 3X the amount of past receipts. But that still provides a lot of flexibility in the future to use the HSA same as a Roth.

We are currently 59 and 60. At 65, we'll use it for Medicare premiums. Beyond that, we'll just continue accumulating receipts and use it for whatever we want. I expect our medical expenses will increase significantly as we age. So I'm not concerned that we'll have "too little" medical spending to get the money out tax-free. But wouldn't that be a nice problem to have?
We have done the same and it's grown to a pretty big nut. If the sum of past and future qualifying medical are not enough to drain it, that would be very good news. No claims so far.
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Unread 11-21-2020, 08:24 AM   #10
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We are retired, I'm on medicare, wife has 4 years to go.

I haven't figured out how to use my HSA yet.
I have over $50k in it, I have about $11k of receipts waiting for reimbursement, saved up over 5 years.
I might use them next year so can get more into Roth conversions.


Question: Since I can use the HSA to pay Medicare premiums, can I save the receipts for those Medicare premiums and get reimbursed later? Only ask because I started Medicare in March and haven't been using the HSA to pay the premiums.
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Unread 11-21-2020, 08:30 AM   #11
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Originally Posted by clobber View Post
I seem to be coming to the conclusion that HSAs are most advantageous for (probably rich) people who have large medical bills. They can effectively launder that money into a very tax advantaged account and use it to buy things later in life. If you currently have low medical expenses, then you won't be able to withdraw much tax free down the line.
When I was working I used the HSA as an additional pre-tax savings vehicle. Company matched some funds too which was nice.

Now that I'm retired, I've used it for actual medical expenses. Not hard to have large bills and any level of wealth, especially if you have a high deductible. I can also use it for dental expenses which aren't covered by health insurance. You get a crown or implant here and there and it can add up fast. And you can use it for COBRA premiums.

Yes, you can save the records and reimburse yourself later, whenever you have the need and then use the cash for other things, but that's just a matter of timing, not gaming. If I currently had no expenses it would just sit there. The thing about getting old is, eventually, we'll all have them, so I'm not worried about being unable to withdraw in the future.

Not sure where the "laundering" idea comes in to play.
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Unread 11-21-2020, 08:34 AM   #12
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Originally Posted by Time2 View Post
Question: Since I can use the HSA to pay Medicare premiums, can I save the receipts for those Medicare premiums and get reimbursed later? Only ask because I started Medicare in March and haven't been using the HSA to pay the premiums.
My understanding is yes, as long as you have receipts.

Quote:
Originally Posted by audreyh1 View Post
We each invested in an HSA to take advantage of the nice tax savings. Now DH is spending his down to pay for Medicare premiums tax-free. I plan to do the same.
This brings up a question for me. Are HSA accounts "Individual"? In other words, can I use my account to pay for DW's expenses and (later) premiums?
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Unread 11-21-2020, 08:39 AM   #13
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My understanding is yes, as long as you have receipts.
I'd feel fine without actual paperwork if it was only equal or less than legit medicare premiums.
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Originally Posted by Trooper View Post
This brings up a question for me. Are HSA accounts "Individual"? In other words, can I use my account to pay for DW's expenses and (later) premiums?
You can have separate or a single account, and sharing is allowed.
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Unread 11-21-2020, 08:47 AM   #14
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We have a bit over $50K in ours and the idea is to have it available for long term care or other significant medical expenses as we age. If not, we have medical expense to deduct. The other benefit is for the past couple of years, the HSA deduction has allowed us to qualify for ACA subsidies as we were right on the threshold a few times.
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Unread 11-21-2020, 08:47 AM   #15
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I understand that in the future you can take HSA distributions based on previous medical bills - even from many years before the distribution.
Just to clarify - you can take them from bill many years before the distribution, *but* the bill must be after you opened the HSA. So if you open one this year, only future bills can be used for distribution.

I have had a HSA since 2017, Megacorp gave us an incentive (matching funds) to open one. So far I have used it primarily to reduce taxes. Due to doing Roth conversions my retirement "income" is high (22% bracket) so it helps with the taxes.

It is a family HSA, so I can use it for DW bills, as well as bills for DS from 2017 until he came off our insurance. We will probably start taking distributions from it next year, for our 2017 bills. Its growth, along with lower than expected medical costs in retirement so far, is larger than we planned. Not complaining about it.
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Unread 11-21-2020, 10:52 AM   #16
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We did not have an HSA option, it was only FSA, with use it or lose it in one year.
DH and I did participate in that, figuring out each year how much we had spent the year before, then figuring out who much to have taken out.
Used it up every year by November.
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Unread 11-21-2020, 05:28 PM   #17
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Not sure where the "laundering" idea comes in to play.
Admittedly, my knowledge of money laundering is limited to what I see on Ozarks and Narcos. My analogy was based on the fact that you can invest money in the HSA and later use it to buy a Porsche. You do this by taking distributions and claiming the expense is medical. All perfectly legal right now, but still feels a bit like laundering from a dirty (taxable) account to clean (triple tax free).
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Unread 11-21-2020, 05:36 PM   #18
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Using HSA funds to pay medical insurance premiums is tricky.
You really need to read the rules about 5 times.
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Unread 11-21-2020, 05:58 PM   #19
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Quote:
Originally Posted by clobber View Post
Admittedly, my knowledge of money laundering is limited to what I see on Ozarks and Narcos. My analogy was based on the fact that you can invest money in the HSA and later use it to buy a Porsche. You do this by taking distributions and claiming the expense is medical. All perfectly legal right now, but still feels a bit like laundering from a dirty (taxable) account to clean (triple tax free).
If you (yes you) say so. To me, it's the discipline of paying for a medical expense out of pocket while keeping the HSA money invested, then taking a withdrawal later based on the expense receipt you saved. Doesn't sound anything like laundering since you made a tax legal contribution to the HSA.
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Unread 11-21-2020, 06:43 PM   #20
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We've been maxing it out for a while now and plan to use it for ticky tack stuff as it comes. We haven't had a big event yet so it's been great for us.
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