How are you (yes you) taking advantage of HSA?

[RunningBum]

You may want to review the article at the link I’ve provided below.

The article explains how you can contribute the full amount to your HSA for 2021 if you meet the testing period requirement for the following year (2022).


https://hsastore.com/learn-mid-year-hdhp-enrollment.html

Thanks for the correction. I've updated my post.

 

[Out-to-Lunch]

But thanks to correcting me that there is nothing magical about 65 in regards to paying myself back tax free and I could do it anytime. That is helpful

Cool. That is essentially my plan, too, FWIW: pay for expenses now out-of-pocket, and let the HSA grow for some time. I don't know exactly when I will decide it is a good idea to draw that down!

 

[orchid55]

As far as lower negotiated prices with insurance coverage, we inadvertently conducted our own study on this concept. One year my husband's GP was in-network on our high deductible HSA ACA plan. The insurance discount was 60%. The next year my husband's GP was out-of-network with our high deductible HSA ACA plan. He continued to see the doctor and was given a 70% discount for being uninsured. So for us, we got a bigger discount "uninsured" than using in-network insurance.

 

[Time2]

I have $11,000 of medical receipts saved over 5 years. I'm also on medicare with an $1,800 yearly payment. I'm thinking about taking these from my HSA and having more room to do a larger Roth Conversion. This will be in December when I do Roth Conversions and withdrawals for next years income.



I have done all my major income production in December for the next year, for the two years we have been retired, it has worked out great so far. Just remember Dividends and interest come during the years so must be subtracted out when you produce your income.

 

[teetee]

To date I have around 30k in my HSA. I have been paying the copay and any health related charges out-of-pocket. What is the benefit for paying myself off when I am 65, comparing to using it for qualified medical/health expenses forward after 65?

My plan for my HSA balance is for any qualified health costs listed at
https://help.ihealthagents.com/hc/e...l-Expenses-I-Can-Pay-for-With-My-HSA-Account-

The costs of medicate and long term care (and all it is related expenses like hiring a private nurse) would probably deplete the balance in a few years unless by the time of withdraw The balance grows significantly.

 

[SecondCor521]

To date I have around 30k in my HSA. I have been paying the copay and any health related charges out-of-pocket. What is the benefit for paying myself off when I am 65, comparing to using it for qualified medical/health expenses forward after 65?

I plan to do both - reimburse myself around that age for all my accrued medical expenses, then use it for medical expenses going forward after that age.

The benefit is draining the account faster. Why is that a benefit, when one could continue to get tax free growth? The answer is that HSAs are great while you're alive, but are pretty lousy if you die with a balance. The latter is not discussed much in the blogosphere.

So my goal is to balance the tax free growth against trying not to die with an HSA balance. I have some metrics around that - basically since I know I want to deplete it by 75 or so, and I'll know what my Medicare premiums will be, and I'll know what my accumulated expenses are. At this point it looks like I should start draining it around age 65, maybe even a year or two before that.

 

[RunningBum]

To date I have around 30k in my HSA. I have been paying the copay and any health related charges out-of-pocket. What is the benefit for paying myself off when I am 65, comparing to using it for qualified medical/health expenses forward after 65?

I don't think there was any agreement that paying yourself off when 65 has a benefit. Heirs don't get a tax advantage on inherited HSAs, so ideally you let it grow tax free as long as you can, but use it before you die. That's not really possible to guarantee. My plan is to use it any time I need cash but don't want to generate taxable income, perhaps to avoid going over the ACA cliff or trigger a higher IRMAA level.

You definitely should withdraw from an HSA before a Roth. Once in your account, Roths and HSAs look about the same as far as growing tax free and tax free withdrawals when qualified, but inheriting a Roth is much better for your heirs than getting an HSA. I may never draw from my Roth, but unless I pass unexpectedly, I will try to drain my HSA.

 

[sengsational]

You definitely should withdraw from an HSA before a Roth. Once in your account, Roths and HSAs look about the same as far as growing tax free and tax free withdrawals when qualified, but inheriting a Roth is much better for your heirs than getting an HSA. I may never draw from my Roth, but unless I pass unexpectedly, I will try to drain my HSA.

This is good advice.

As far as lower negotiated prices with insurance coverage, we inadvertently conducted our own study on this concept. One year my husband's GP was in-network on our high deductible HSA ACA plan. The insurance discount was 60%. The next year my husband's GP was out-of-network with our high deductible HSA ACA plan. He continued to see the doctor and was given a 70% discount for being uninsured. So for us, we got a bigger discount "uninsured" than using in-network insurance.

Interesting data point. My perspective has been in alignment with what RunningBum was saying...run it through insurance to get the insurance-negotiated discount. But if I can get the a similar discount without running it through insurance, that would give me a lot more flexibility with getting true "health" care, rather than "sick" care, where the mega-practices are more concerned with coding diagnostic and procedure codes than they are in making me healthy. It would seem that your inadvertent experiment proves, for that year at least, the supposed price advantage I'd been taking for granted isn't necessarily a true advantage. That is, if you can find a practice that discounts for cash like the one you found.

I wonder if I called the billing department and asked "how do your cash prices compare to the negotiated prices for XYZ insurance company?" if I'd get an honest/accurate answer.

 

[qwerty3656]

So if you are at a point where you are drawing down some money from retirement accounts for living expenses (but before age 65), should you continue to fund an HSA? I saw some reference to pulling out money from regular IRA (taxable income) but then funding HSA (tax deduction) - basically like a Roth conversion, right?

Edit: but better than Roth, because of tax deduction?

 

[RunningBum]

Yes, it's like a free Roth conversion. Unless you have some serious cash flow issue, I would always max out the HSA contribution if you are eligible.

 

[Animorph]

I have $11,000 of medical receipts saved over 5 years. I'm also on medicare with an $1,800 yearly payment. I'm thinking about taking these from my HSA and having more room to do a larger Roth Conversion. This will be in December when I do Roth Conversions and withdrawals for next years income.



I have done all my major income production in December for the next year, for the two years we have been retired, it has worked out great so far. Just remember Dividends and interest come during the years so must be subtracted out when you produce your income.

Your HSA is essentially a Roth account once the contributions are in it. It's just a bit more restrictive on withdrawals.

Using HSA withdrawals to support Roth conversions is almost like using Roth withdrawals to support Roth conversions. Kind of a wash. How does your total HSA+Roth balance look before and after that conversion? Maybe a little benefit if you don't have enough medical expenses in the future to drain the account.

 

[Time2]

Your HSA is essentially a Roth account once the contributions are in it. It's just a bit more restrictive on withdrawals.

Using HSA withdrawals to support Roth conversions is almost like using Roth withdrawals to support Roth conversions. Kind of a wash. How does your total HSA+Roth balance look before and after that conversion? Maybe a little benefit if you don't have enough medical expenses in the future to drain the account.

Hmm, I think you have a point. I think. I was hoping to get the tax free income for expenses so I would need as much income form elsewhere. But I see I'm just raiding one tax free fund to fund another tax free fund. I'm confused, I have been selling LTCGs in the 0% tax bracket for expenses, so what is the difference. It's all tax free. Numbers are easy, it's how to use them that's hard.

 

[RunningBum]

Hmm, I think you have a point. I think. I was hoping to get the tax free income for expenses so I would need as much income form elsewhere. But I see I'm just raiding one tax free fund to fund another tax free fund. I'm confused, I have been selling LTCGs in the 0% tax bracket for expenses, so what is the difference. It's all tax free. Numbers are easy, it's how to use them that's hard.

If you don't have any other use for that tax space (like more Roth conversions), I would take full advantage of 0% LTCGs. You never know when that 0% rule or the stepped up inheritance base might go away.

 

[jldavid47]

Ah, maybe you caught something here. I must have misinterpreted one of the things I read.

I believe my goal would be to not take anything out of my HSA to allow it to keep growing until 65 and then I would reinburse myself as my Medicare kicks in. Any medical expense, I would just pay for now out of my cash. That was my line of thinking.

Maybe I was incorrectly keying off 65 when in reality I could take out and reiburse myself now, but in my strategy that would defeat the purpose of just letting it grow tax free.

And after 65, my goal would be to keep using it for medical related expenses such as Medicare supplement etc., which I believe would still be tax free.

I dont care about heirs as I dont have any

But thanks to correcting me that there is nothing magical about 65 in regards to paying myself back tax free and I could do it anytime. That is helpful

You cannot pay Medicare supplement premiums out of your HSA and have them be tax free. In certain circumstances (I am in one of those now) you can't even use it for Part B premiums.


After age 65, you can take withdrawals and they would be treated the same as any other IRA distribution, i.e. taxable income. But if you use the money for medical expenses the withdrawal is always tax free.


There are a lot of rules surrounding HSAs. You need to look at Publication 969 to see all of them. I suggest a strong cup of Irish coffee before reading it.

 

[harllee]

If you have any interest in moving into a CCRC (Continuing Care Retirement Community) someday, a portion of the entrance fee and monthly payments is considered a medical expense and can be paid from your HSA. I have accumulated a large HSA and plan to use it for my CCRC expenses. In my mind my HSA is like long term care insurance.

If you have no interest in a CCRC you most likely will have a lot of dental expenses after age 65 you can use the HSA for (I have).

 

[FIREarly]

If you have any interest in moving into a CCRC (Continuing Care Retirement Community) someday, a portion of the entrance fee and monthly payments is considered a medical expense and can be paid from your HSA. I have accumulated a large HSA and plan to use it for my CCRC expenses. In my mind my HSA is like long term care insurance.

If you have no interest in a CCRC you most likely will have a lot of dental expenses after age 65 you can use the HSA for (I have).

If you do not want to go or need to go to CCRC and have lots of previous medical bills saved up you can use the money for virtually anything. You qualify the spending as repaying your previous medical expenses and use the money as you see fit.