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Old 11-28-2020, 12:58 PM   #101
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We started to contribute to HSA in 2006 - that is when HDHP+HSA was first offered to us through employer. Since then we have been maxing it out every year and never took anything out.

At the same time I have been tracking all our medical Out-of-pocket expenses that would qualify for reimbursement from HSA and keeping folders with receipts just in case.

So chart below represents how all that was shaping up for us over years - you can click on the picture to see it better.
  • Values for 2020 are as of today.
  • We have total 4 HSAs between 2 of us - 2 at our employers where we make contributions through payroll and 2 at HSABank where we move money every year and invest.
  • We did not start to invest in our HSAs till 2013 and all growth till that year was due to contributions and interest only.
  • Medical expenses are for 2 adults and 1 child till end of 2016, and 2 adults only after that
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Old 11-28-2020, 01:11 PM   #102
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Thatís correct. DH turned 65 in May, and signed up for Medicare a outlet of months ahead of time, and coverage started May 1. He made contributions for Jan thru April. So 1/3 of the annual allowed contribution.
You actually prorate anytime you begin or end. The contribution limits are monthly not yearly.

So if you begin a HDHP or end it, your HSA contribution limits will be prorated.
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Old 11-28-2020, 01:13 PM   #103
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We could invest it right through the HSA we have but I guess my thought was if we had big medical bills to pay and the market went down that might not be a good thing. I suppose maybe I should look into at least investing some of it.
My strategy is to have an AA plan across all investments, then allocate them for best tax advantage. Investment-wise, an HSA would be in the same class as a Roth, with all gains being tax-free. I'm more aggressive with my Roth and HSA than my tIRA.

If you did run into the situation above, you could sell any equities in the HSA (a non-taxable event) to pay the bills, and buy stocks in a different account to get your AA back where you want it.

Just a thought. I also had my HSA in cash for my first few years because my CU had no fees and a reasonable interest rates, while other places had high fees for a small balance. Once my balance got high enough for fees to be less significant I transferred it to an investment account, and later to Fido with no fees.
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Old 11-28-2020, 02:57 PM   #104
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.... At the same time I have been tracking all our medical Out-of-pocket expenses that would qualify for reimbursement from HSA and keeping folders with receipts just in case....
We were doing similar, contributing to the max and investing for growth but not taking any withdrawals and have built ups sizeable balances. But then I read something on how they are treated when the last of us dies and our kids inherit it... the entire balance is immediately taxable.

I was also skeptical that they will know what qualified expenses I have paid but not withdrawn for... so this year I made a withdrawal for all of our qualified expenses through the end of 2019 (we go on Medicare in 2020). Beginning in 2021, I'll make annual withdrawals for our qualified expenses but the HSAs should keep growing... at this point they will cover about a year of long-term care if needed.

I'm trying to balance keeping the HSAs healthy in case one of us ultimately needs nursing home care but at the same time avoiding a big tax bill for our kids.
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Old 11-28-2020, 03:10 PM   #105
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... so this year I made a withdrawal for all of our qualified expenses through the end of 2019 (we go on Medicare in 2020). Beginning in 2021, I'll make annual withdrawals for our qualified expenses ...
We plan to keep contributing till FIRE (targeting 2024) and then start using balances for ongoing medical expenses and let rest of it grow to cover medical in retirement. I really like your approach to take out sums that we already have receipts for, need to think how and when to do it.
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Old 11-28-2020, 03:12 PM   #106
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I'm very thankful that HSA's are available to those with HD health care plans.

HSAs were established as part of the Medicare Prescription Drug, Improvement, and Modernization Act, which included the enactment of Internal Revenue Code section 223, signed into law by President George W. Bush on December 8, 2003. They were developed to replace the medical savings account system.

Thank you to all involved.
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Old 11-28-2020, 03:43 PM   #107
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We plan to keep contributing till FIRE (targeting 2024) and then start using balances for ongoing medical expenses and let rest of it grow to cover medical in retirement. I really like your approach to take out sums that we already have receipts for, need to think how and when to do it.
You can still contribute after FIRE, any year you have a qualifying plan.
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HSA
Old 11-29-2020, 09:14 AM   #108
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HSA

Before Medicare I used HSA to pay medical costs. Now on Medicare, my out of pocket is very low and i now use the HSA to pay my long term care premiums. At age 70, I can spend whatís left like a Roth acct.
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Old 11-29-2020, 11:14 AM   #109
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Before Medicare I used HSA to pay medical costs. Now on Medicare, my out of pocket is very low and i now use the HSA to pay my long term care premiums. At age 70, I can spend whatís left like a Roth acct.
Not without qualified medical expenses you can't. You'll be taxed on the withdrawals without them.
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Old 12-01-2020, 08:05 AM   #110
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You can still contribute after FIRE, any year you have a qualifying plan.
Yes, I understand that, but we plan to live from FIRE date till 59.5 on taxable and convert every year pretax money to Roth up to ACA subsidy cliff.
I guess we can covert $7K more and then offset by HSA contributions to the cliff, is that correct?
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Old 12-01-2020, 09:23 AM   #111
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Yes, I understand that, but we plan to live from FIRE date till 59.5 on taxable and convert every year pretax money to Roth up to ACA subsidy cliff.
I guess we can covert $7K more and then offset by HSA contributions to the cliff, is that correct?
Yes. Unless you are really cash constrained, I can't see any reason not to contribute to an HSA if you have an HSA eligible plan. You have to evaluate all of the plans and the best one may not be HSA eligible, but in my evaluation I consider the HSA benefits as part of the evaluation.

I probably underestimate the benefit. I used 17.5% this year, 12% fed tax savings and 5.5% state. Really there's probably another 10% for the extra subsidy I would get, but I instead usually convert more, which also has a benefit. And last year I would've gone over the subsidy cliff without the HSA so it was really over 100% benefit for me in 2019. Even at 17.5% it seems foolish to pass up.
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Old 12-01-2020, 12:31 PM   #112
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RunningBum,
I was thinking more along lines of benefits to move cash from taxable to HSA when I have no income and live off taxable - I see almost none. No tax deduction, as taxes are zero, but then ending up with restricted use of money or pay taxes on it all over again, only benefit would be tax exempt growth. Now if I consider conversion of pretax to Roth - then it definitely worth it, thanks for the pointer.
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Old 12-01-2020, 02:30 PM   #113
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RunningBum,
I was thinking more along lines of benefits to move cash from taxable to HSA when I have no income and live off taxable - I see almost none. No tax deduction, as taxes are zero, but then ending up with restricted use of money or pay taxes on it all over again, only benefit would be tax exempt growth. Now if I consider conversion of pretax to Roth - then it definitely worth it, thanks for the pointer.
Do both... Roth conversion for the amount of your HSA contribution and a corresponding HSA contribution... your income is still zero and you have moved money from your taxable and tax-deferred pockets to your tax-free pocket.
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Old 12-01-2020, 05:01 PM   #114
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Do both... Roth conversion for the amount of your HSA contribution and a corresponding HSA contribution... your income is still zero and you have moved money from your taxable and tax-deferred pockets to your tax-free pocket.
Yep. If you can do free Roth conversions, that's a great situation.
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Quick HSA Question
Old 04-15-2021, 05:03 PM   #115
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Quick HSA Question

I just wanted to check my strategy with the forum in regards to my HSA.

I just got off Cobra and got onto an HSA and put in my $8200 for 2021 (Married, over 50). I read alot about HSAs and watched alot of YouTube on it and here is my strategy:

I am NOT going to run any medical expenses through my HSA or insurance but instead pay out of pocket for everything (I have the cash). This way my HSA will continue to grow via investment until I am 65 and I am not going to touch it except for continuing to drop $8200 (or more as the limits go up) into it each year.

I am keeping ALL receipts for every qualified HSA dollar I spend and will just pay myself back tax free when I hit 65. From what I read, this is perfectly legal in regards to the HSA to do this.

My wife and I are in very good health and dont take any meds etc., and our medical spending right now is pretty light. But if something major happens, I have the high deductible insurance to cover us plus cash for the deductible itself.

My wife is concerned about not running every expenditure through insurance to draw down the deductible, but I dont believe we will even get close to the deductible and if we do then I have the cash to cover it if we need to.

I also am very happy getting the 40% discount our doctor/clinic gives us for paying without going through the insurance company which I wouldnt get if I ran it through the deductible - plus I get the FF miles on the card which is an added benefit.

What am I missing? I just really like the idea of 9 years of tax free growth on my HSA plus the annual HSA top line tax write off and then paying myself back everything I spent tax free. Triple tax free benefit.

HSAs are AWESOME!

Thoughts?
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Old 04-15-2021, 05:19 PM   #116
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I just wanted to check my strategy with the forum in regards to my HSA.

I just got off Cobra and got onto an HSA and put in my $8200 for 2021 (Married, over 50). I read alot about HSAs and watched alot of YouTube on it and here is my strategy:

I am NOT going to run any medical expenses through my HSA or insurance but instead pay out of pocket for everything (I have the cash). This way my HSA will continue to grow via investment until I am 65 and I am not going to touch it except for continuing to drop $8200 (or more as the limits go up) into it each year.

I am keeping ALL receipts for every qualified HSA dollar I spend and will just pay myself back tax free when I hit 65. From what I read, this is perfectly legal in regards to the HSA to do this.

My wife and I are in very good health and dont take any meds etc., and our medical spending right now is pretty light. But if something major happens, I have the high deductible insurance to cover us plus cash for the deductible itself.

My wife is concerned about not running every expenditure through insurance to draw down the deductible, but I dont believe we will even get close to the deductible and if we do then I have the cash to cover it if we need to.

I also am very happy getting the 40% discount our doctor/clinic gives us for paying without going through the insurance company which I wouldnt get if I ran it through the deductible - plus I get the FF miles on the card which is an added benefit.

What am I missing? I just really like the idea of 9 years of tax free growth on my HSA plus the annual HSA top line tax write off and then paying myself back everything I spent tax free. Triple tax free benefit.

HSAs are AWESOME!

Thoughts?
See if you can get an HSA that offers investment options you are looking for. Some provide more, some less options.

I signed up for Lively HSA and am very happy with it!
It says it's the #1 rated HSA... per the site

+1 HSAs are AWESOME!!
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Old 04-15-2021, 05:28 PM   #117
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I just got off Cobra and got onto an HSA and put in my $8200 for 2021 (Married, over 50).
If you really just got off Cobra in the middle of 2021, you can't make a full $8200 contribution. You have to prorate it for the months where you have an HSA eligible plan.EDIT: From the link Accidental Retiree included in post 121, you can make a full contribution in a partial year as long as you have an HSA-eligible plan next year.
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I am NOT going to run any medical expenses through my HSA or insurance but instead pay out of pocket for everything (I have the cash). This way my HSA will continue to grow via investment until I am 65 and I am not going to touch it except for continuing to drop $8200 (or more as the limits go up) into it each year.
At 65 you will be on Medicare, which does not have HSA eligible plans, so you won't be continuing to make contributions.
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I am keeping ALL receipts for every qualified HSA dollar I spend and will just pay myself back tax free when I hit 65. From what I read, this is perfectly legal in regards to the HSA to do this.
Yes, perfectly legal. I am doing this. I keep good records of those expenses just in case I am ever audited.
Quote:
My wife and I are in very good health and dont take any meds etc., and our medical spending right now is pretty light. But if something major happens, I have the high deductible insurance to cover us plus cash for the deductible itself.

My wife is concerned about not running every expenditure through insurance to draw down the deductible, but I dont believe we will even get close to the deductible and if we do then I have the cash to cover it if we need to.

I also am very happy getting the 40% discount our doctor/clinic gives us for paying without going through the insurance company which I wouldnt get if I ran it through the deductible - plus I get the FF miles on the card which is an added benefit.
Are you sure that the insurance company would not be negotiating better prices from your doctors/clinics? I run everything through my insurance, and when I get the bill after insurance I almost always see a greatly reduced fee from the original bill.

I think your wife is right, that you should run things through insurance to get their rates on procedures, etc., AND to use against your deductible. I used to be bullet proof with few or no medical expenses most years, then I tore up my knee which required expensive surgery, and developed a condition that has costs me some non-trivial amount of money every year. I don't think you can use expenses against your deductible unless you file, though maybe you can file later. You can still use your credit card to pay the fees that the insurance company doesn't pay before deductible.
Quote:

What am I missing? I just really like the idea of 9 years of tax free growth on my HSA plus the annual HSA top line tax write off and then paying myself back everything I spent tax free. Triple tax free benefit.

HSAs are AWESOME!

Thoughts?
YES! I'm back to agreeing with you. Make sure you have an HSA eligible health insurance plan, look into insurance company rates, and keep saving those receipts and get that triple tax benefit!

The only other thing to consider it to try to use the HSA against your past and current expenses in your lifetime, because HSAs are not treated favorably when inherited. The beneficiary of the account must take the HSA balance as taxable income in the year they inherited it. The good news is that part of your medicare policy premium can also be used against your HSA.
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Old 04-15-2021, 05:34 PM   #118
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I thought I’d let my HSA ride until later in life. It’s from my job and I can’t contribute any longer. However, it’s in 100% stocks and it’s gone up very nicely of late. Combine that with spending $1,200 at the dentist today and I’m thinking of taking some of the gains off the table by paying for my dental work from my HSA. It’s not large enough to make a big difference so it doesn’t really matter what I do.
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Old 04-15-2021, 06:00 PM   #119
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I thought Iíd let my HSA ride until later in life. Itís from my job and I canít contribute any longer. However, itís in 100% stocks and itís gone up very nicely of late. Combine that with spending $1,200 at the dentist today and Iím thinking of taking some of the gains off the table by paying for my dental work from my HSA. Itís not large enough to make a big difference so it doesnít really matter what I do.


Im planning on letting mine ride too. I didnt get an HSA until I retired 10 years ago. Its been spotty on exchange as several years I wasnt offered one as a choice on the exchange. I got built up over $50k now through stock trading. I hope this is my last HSA, as next year I will give up my $680 a month POS exchange insurance and $6500 deductible with HSA and join my GFs work plan. $175 a month, $200 yearly deductible including dental and vision. Bye bye HSA and ACA exchange!
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Old 04-15-2021, 06:01 PM   #120
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Still working with double low-deductible coverage, so unable to. I can get the same low deductible low out-of-pocket plan for DW and I for $1095 in retirement, so not likely to ever use an HSA, and I recognize that as a bummer really. They rock!
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