HSA Security

[SecondCor521]

This has been a very informative thread!
I turn 65 in September 2023. It’s my understanding that I can contribute a prorated amount to my HSA next year.
So, $4,650/12x8= $3,100.
Does anyone know if I’m understanding correctly?
TIA.

That sounds correct assuming you have a qualifying HDHP next year with single (and not family) coverage.

The maximums are annual but it's really a monthly limit. You can go read the (quite complicated) rules in the instructions for Form 8889, especially the flowchart on page 4 relating to line 3. But the gist of it is exactly as you succinctly stated.

 

[Cobra9777]

Once the contributions are in, an HSA is like a Roth for us...

When our financial planning calls for Roth withdrawals (and it does eventually), we will withdraw from the HSA's first, up to whatever we can cover with our receipts. Hopefully we can drain them relatively quickly and avoid the receipt paperwork and inheritance problems.

+1

Roth and HSA are the same bucket in our withdrawal plan. When needed, plan is to use the HSA first, to the extent of past receipts.

Current HSA balance is $100K, and receipts are $30K. So hopefully we can consume that gap quickly to simplify things later... although if we don't, that's probably a good outcome as well.

 

[Jackietime]

We are including LTC premiums as medical expenses in terms of HSA reimbursements. I verified that LTC premiums are HSA eligible expenses.
This may already have been mentioned somewhere on this site.

 

[audreyh1]

For some reason, I was thinking you could not use HSA funds to pay those premiums. A discussion in the past here, I can't remember what thread. I just googled it and see you cannot pay the premiums for the part G plan (private insurance) from HSA.

Edit: I am the owner of our HSA. DH turns 65 after me so I can pay his part B and D premiums from the HSA. If he turned 65 before me, I could not use HSA funds to pay his premiums, although he is on the HSA.

DH and I each have our own HSA which solves that problem for us. But you’re right I’m not allowed to cover any of his Medicare premiums until I turn 65. Fortunately it looks like he won’t run out of HSA funds before then. I have the larger HSA simply because I’ve be able to contribute several more years.

 

[audreyh1]

This has been a very informative thread!
I turn 65 in September 2023. It’s my understanding that I can contribute a prorated amount to my HSA next year.
So, $4,650/12x8= $3,100.
Does anyone know if I’m understanding correctly?
TIA.

Yes, before the month you turn 65. DH had 4/12 months of contributions his last year.

We each did monthly contributions anyway so it kept that simple, and the Turbotax software figured it all out just fine.

 

[RobbieB]

I use my HSA every time I have a co-pay or Rx drugs or dental (no insurance)

It's just a cash account, same one my last employer set up for us all. I max the contribution (for wife only, I'm on Medicare) and we both pull from it as needed.

We keep no receipts, just charge and go. The bank (HSA Bank) keeps a rolling record of expenses and yes, they're all legit.

 

[Irishgirlyc58]

Thanks [mention]SecondCor521 [/mention] and [mention]audreyh1 [/mention]
That chart was very helpful.

 

[Montecfo]

I'm 53 and have only had an HSA for a few years.

At this point to fund my HSA I would need to sell from taxable, incurring capital gains and impacting my ACA subsidies and my kids' FAFSA. So right now I don't fund it that way.

I do redirect my cash back from my Fidelity 2% Visa to my HSA. That gives me full value of the points and results in a tax deductible HSA contribution.

I might have excess income in a few years and think I will fund it then.

Because HSA's don't inherit well, I plan to monitor my contributions and limit them to where I will be able to drain it to zero by age 80 just based on Medicare premiums and what expenses I've accumulated so far.

I'll drain it of accumulated expenses at age 65, then annually for Medicare premiums thereafter.

HSAs inherit well for spouses.

 

[SecondCor521]

HSAs inherit well for spouses.

Good point, but I am single and very likely to remain so.

 

[Phroig]

If he turned 65 before me, I could not use HSA funds to pay his premiums, although he is on the HSA.

Dang! I wasn’t aware of this, but I see it’s explicitly stated in Pub. 969. We aren’t there yet, but will be in a few years, so good to know.

 

[Montecfo]

Good point, but I am single and very likely to remain so.

No problem there. Just a point of clarification.

 

[FIREarly]

I don't see how it matters what you use it on as long as you have receipts, since you can reimburse yourself whenever. I just track and save all receipts, and have two numbers: my HSA balance, and the total of all unused receipts. When I withdraw, I'll be using it against that unused receipt number, and not worrying about whether it is for this month's Medicare or last month's dental or something 10 years ago.

+1

I have an excel sheet with tabs for each year and a total sheet at the beginning. Also, have folders for each year to save scanned/pics of receipts. A little extra work up-front makes it easier years later.

If you'd like a blank Excel template to use let me know. Writing from phone and it's on the computer. Possible
next step, save it to cloud to always have access to it.

 

[FIREarly]

Helpful HSA ideas*: https://youtu.be/yom2QOFCmIM

*This is not financial advice and I am not a financial advisor; please consult your CPA.

 

[jollystomper]

That sounds correct assuming you have a qualifying HDHP next year with single (and not family) coverage.

The maximums are annual but it's really a monthly limit. You can go read the (quite complicated) rules in the instructions for Form 8889, especially the flowchart on page 4 relating to line 3. But the gist of it is exactly as you succinctly stated.

One of the question I have, as I have looked over that form: I cannot find any examples of what your HSA contribution can be when (a) you have family coverage, and (b) one of your dependents (in this case my wife) on the HDHP plan turns 65 before the end of the year, but you do not.

From the form it seems like I can still take the full family coverage deductible, but since for single coverage one has to pro-rate when turning 65, it is not clear is, for example, I would have to pro-rate half of the family contribution for the year. I cannot find any mathematical examples for this situation. I should probably go play with my tax software and see what it generates, but will first be lazy to see what others have done in this situation .