T
TromboneAl
Guest
I sent in my first HSA investment today, and I thought I'd summarize my research and findings for others who are considering it.
Conclusion: Having an HSA is a Good Idea.
With a trad IRA you deduct your contribution, but your withdrawals are taxable. With a Roth, you pay taxes on your contributions.
With an HSA you never pay tax on the money, as long as you use it for medical expenses at some point in your life. Even if you don't, there's no penalty after age 65, and there are no RMD's.
Also, I believe you can contribute even if you have no earned income.
HSA's were designed to help people with medical expenses, but in fact, their real value is as a retirement account. That is, I think the legislators planned to have people put money in their account, and use it every time they go to the doctor, thus getting a n% discount (where n is their tax rate) on medical expenses. But people who aren't living hand to mouth can let their HSA account compound tax free.
Conclusion: HSA Compatible Health Plans Are Good
If you're healthy, take care of yourself, and have enough money to absorb non-catastrophic medical costs, an HSA compatible plan is probably cheaper than other plans, even if you don't use an HSA account. My plan is 19% cheaper than the roughly comparable non-HSA plan.
Conclusion: If you shop around, the fees and hassles aren't too bad.
The main drawback to an HSA account is that the fees are generally higher, and the investment choices more limited than is the case for an IRA.
95% of HSA administrators just give you a bank account, with interest such as 1%. The remainder give you the ability to invest in some mutual funds, and you usually incur extra brokerage fees if you choose this. There are a few who make it easy to invest in mutual funds.
The fees are usually around $50-70/year.
Conclusion: The company Health Savings Administrators is a good choice.
This company seemed far better than others I investigated. You can invest in one of 20 different Vanguard funds, and doing so is as easy as selecting a fund on the enrollment form. Every time I phone their 800 number I got a knowledgeable rep immediately. They have online access to your account info.
They have a $20 setup and a $35 annual fee, plus they charge 0.5% above the Vanguard expense ratio.
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Overall Conclusion: HSA Accounts make a good retirement account, although many people don't even know about them.
Conclusion: Having an HSA is a Good Idea.
With a trad IRA you deduct your contribution, but your withdrawals are taxable. With a Roth, you pay taxes on your contributions.
With an HSA you never pay tax on the money, as long as you use it for medical expenses at some point in your life. Even if you don't, there's no penalty after age 65, and there are no RMD's.
Also, I believe you can contribute even if you have no earned income.
HSA's were designed to help people with medical expenses, but in fact, their real value is as a retirement account. That is, I think the legislators planned to have people put money in their account, and use it every time they go to the doctor, thus getting a n% discount (where n is their tax rate) on medical expenses. But people who aren't living hand to mouth can let their HSA account compound tax free.
Conclusion: HSA Compatible Health Plans Are Good
If you're healthy, take care of yourself, and have enough money to absorb non-catastrophic medical costs, an HSA compatible plan is probably cheaper than other plans, even if you don't use an HSA account. My plan is 19% cheaper than the roughly comparable non-HSA plan.
Conclusion: If you shop around, the fees and hassles aren't too bad.
The main drawback to an HSA account is that the fees are generally higher, and the investment choices more limited than is the case for an IRA.
95% of HSA administrators just give you a bank account, with interest such as 1%. The remainder give you the ability to invest in some mutual funds, and you usually incur extra brokerage fees if you choose this. There are a few who make it easy to invest in mutual funds.
The fees are usually around $50-70/year.
Conclusion: The company Health Savings Administrators is a good choice.
This company seemed far better than others I investigated. You can invest in one of 20 different Vanguard funds, and doing so is as easy as selecting a fund on the enrollment form. Every time I phone their 800 number I got a knowledgeable rep immediately. They have online access to your account info.
They have a $20 setup and a $35 annual fee, plus they charge 0.5% above the Vanguard expense ratio.
------------------------
Overall Conclusion: HSA Accounts make a good retirement account, although many people don't even know about them.