HSA Advice?

[stephenson]

Hi All,

Just started thinking about this ...

Retired from megacorp in 2017, retired military, turn 65 in March 2019, wife turns 65 in May 2019.

Will have secondary coverage from Tricare when Medicare kicks in.

I have six figure retired income and significant capital gains and interest income each year.

Wife and I in good physical shape with nothing more than a few joints to be replaced

What are some criteria that relate to whether funding an HSA makes sense?

 

[erkevin]

Came across this:
HSAs and Medicare
When it comes to making contributions to your HSA when you reach age 65, things can get a little tricky. This is due to the interaction of the HSA rules with Medicare. To be eligible to contribute to an HSA, you must have a High Deductible Health Plan (HDHP). You cannot have coverage under another plan that is not an HDHP. Because Medicare is not an HDHP, you cannot contribute to your HSA if you are enrolled in Medicare. Enrollment in any Medicare coverage (Parts A, B, C, D, or Medigap) will end HSA eligibility. Keep in mind that if you apply for Social Security benefits at age 65, you will automatically be enrolled in Medicare Part A.

You lose your eligibility to make an HSA contribution as of the first day of the month you turn age 65 and enroll in Medicare. You can make a pro-rated contribution for the year to your HSA for the months before you became ineligible due to your enrollment in Medicare. This contribution can be made until the HSA contribution deadline, which is generally April 15, of the following year.

 

[USGrant1962]

Considerations are taxes, eligibility, and fund choices.

IF you have HSA-eligible health insurance, funding the HSA pretty much always makes sense because it is the only totally tax free savings plan available. You contribute pre-tax and gains are tax free when used for medical expenses. I've let mine build up as a reserve fund for any substantial medical expense in the future.

BUT, the 2019 ACA plans for my state just popped up and the HSA-eligible plans are terrible, so I'll probably not pick one of those. So my to-date fund will just ride.

Finally, I'm not finding the HSA fund choices to be that great because they all seem to charge various administrative fees that you don't get with normal investment accounts. My HSA has Vanguard funds, but they add on a 0.4% surcharge. From what I've seen some other HSA providers are better, but not great.

 

[gauss]

Once on Medicare, you are no longer able to legally purchase a HDHP (high deductible health plan) which is a requirement to make HSA contributions.

Before you turn age 65, what are you doing for health insurance?

-gauss

 

[stephenson]

I have Tricare now with a secondary plan.

Can I contribute now, prior to being 65? Only one year?

 

[gauss]

If the Tricare is not High Deductible then you do not have an option to contribute to an HSA.

-gauss

 

[bingybear]

you have to be a little careful with the term HDHP. There are plans in the ACA and off the market place that have higher deductibles than my HSA compatible plan, but are not HSA compatible.
Really should use the term HSA compatible.

A quick search makes it sound like Tricare is not hsa compatible. Note that your secondary plan could also invalidate any HSA compatible plan.

Check with you insurer about HSA compatibility.

There are people who buy an HSA compatible plan, but get cost sharing to a point that the resulting plan is not HSA compatible any longer.

It is hard to answer questions correctly without knowing all the data and understanding what it all means. People often figure it out the hard way.

 

[gauss]

^ Yes - To be HSA compatible the plan must be a HDHP but also the out of pocket maximum must not exceed the yearly threshold.

HDHP is a necessary but not sufficient condition to be HSA compatible.

Good catch!

 

[Happyrick]

What medical expenses are you thinking are not going to be covered by Medicare and Tricare for life? My DW had joints replaced, prior to Medicare and one after and it was all covered, including prescriptions except for small copays (like $20 for office visits).

 

[gauss]

Medicare part B premiums? At least that is my plan.

Note I do NOT have access to TRICARE.

 

[Sue J]

BUT, the 2019 ACA plans for my state just popped up and the HSA-eligible plans are terrible, so I'll probably not pick one of those. So my to-date fund will just ride.

Where did you see 2019 plans? I'd like to check for my state.

 

[USGrant1962]

Where did you see 2019 plans? I'd like to check for my state.

I"m in Maryland, which has its own exchange.

 

[Gotadimple]

What medical expenses are you thinking are not going to be covered by Medicare and Tricare for life? My DW had joints replaced, prior to Medicare and one after and it was all covered, including prescriptions except for small copays (like $20 for office visits).

Medicare Part B premiums can be covered by an HSA*
Copays and Deductibles can be covered by an HSA*
Other out of pocket medical expense not covered by insurance but recommended by your doctor (i.e., special ankle braces, canes, etc.)*


* Except if you include any of these expenses in your medical expenses when filing a Schedule A with your income tax. In a year where you don't claim medical expenses, these expenses are eligible for HSA reimbursement.


Note that some people make HSA contributions but hold off on claiming reimbursement. Most HSA's offer a debit card that can be used at the point of service to pay for co-pays, or when billed by a provider.


- Rita

 

[Fedup]

What medical expenses are you thinking are not going to be covered by Medicare and Tricare for life? My DW had joints replaced, prior to Medicare and one after and it was all covered, including prescriptions except for small copays (like $20 for office visits).

Dental implants. That’s what I’m saving my HSA for. They are expensive and even with good dental insurance, you still have to pay a large chunk.

 

[Mulligan]

Considerations are taxes, eligibility, and fund choices.

IF you have HSA-eligible health insurance, funding the HSA pretty much always makes sense because it is the only totally tax free savings plan available. You contribute pre-tax and gains are tax free when used for medical expenses. I've let mine build up as a reserve fund for any substantial medical expense in the future.

BUT, the 2019 ACA plans for my state just popped up and the HSA-eligible plans are terrible, so I'll probably not pick one of those. So my to-date fund will just ride.

Finally, I'm not finding the HSA fund choices to be that great because they all seem to charge various administrative fees that you don't get with normal investment accounts. My HSA has Vanguard funds, but they add on a 0.4% surcharge. From what I've seen some other HSA providers are better, but not great.

That is another thing I can thank ACA for...Had a nice little robust HSA offering prior to this...Not only did my premiums go up 5X in last 2 years since I lost my underwritten plan of 6 years, but I had no HSA option either this year.