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Health Savings Accounts

9,936 Views | 82 Replies | Last: 7 yr ago by DonaldFDraper
YouBet
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AG
So, these are pretty awesome, little investment vehicles and I would argue they rival Roth IRAs especially if you are young. This is our first year to be able to use them and not only are they pre-tax and grow tax free but there is a third feature that I rarely see discussed:

You can continue paying your healthcare costs out of pocket instead of tapping into your HSA and reimburse yourself even years later if you keep the receipts. So, if you are lucky enough to have an HSA that also lets you invest the money in equities you can simply use it as another IRA, in effect, and let that money compound now.

Now, you probably want to be pretty conservative if you decide to invest HSA dollars considering the likelihood of having to use them later in life, but if you are young and have access to an HSA you could argue that you should max this first before maxing a Roth.

A simple investment plan with the advent of HSAs could then be the following where 2 and 3 are interchangeable:

1. Invest in 401k up to employer match
2. Max HSA -$3,350 / $6,750
3. Max Roth - $5,500 / $11,000
4. Max remaining 401k's
5. Taxable accounts (consideration for tax free munis to lower tax burden)

I wish these had been around when I started working!
Duncan Idaho
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Yeah it is bulls hit that this is tied to an employer. I had to option at my last employer and loved it.

Now it isn't an option and I am stuck with the useless fsa.
Hacker_2003
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AG
An HSA is actually better than a Roth because it is tax free going IN and tax free going OUT (as long as it is for medical). There is no other account that is tax free on both ends. If you don't have enough medical expenses to use it all (unlikely since medical costs generally go up as you age), then it is essentially just another 401k (pre-tax contributions, taxed on the way out).

I max out my HSA each year and always pay for medical out of pocket. I invest most of it in commission free index ETFs, so I can buy more each month without taking a hit.
LostInLA07
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AG
What documentation do you have to save? If I'm saving the explanation of benefits from my insurer showing what I owe, is that sufficient to withdraw the money tax free later?
jamaggie06
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AG
Yep. Great plan and great idea. I had one for four years when I first started working. Employer even contributed the first $500.

I had a few thousand bucks left when I changed jobs. Ended up using it on the then fiance now wife and myself over the next few years.

HSAs are what healthcare reform should be. High deductible, catostrophic type insurance and a tax free savings plan (limits should be higher IMO)
permabull
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AG
62strat
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AG
Don't you have to spend it or lose it? I have a daycare one. $5k a year tax free to pay for day care. Saves me $1k a year or so. Just found out my wife has it to, so can double that next time she can enroll.
TXTransplant
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quote:
Don't you have to spend it or lose it? I have a daycare one. $5k a year tax free to pay for day care. Saves me $1k a year or so. Just found out my wife has it to, so can double that next time she can enroll.


No, an HSA carries over year to year. The FSA or dependent care FSA (for childcare) is use it or lose it. My son is going to phase out of the dependent care FSA this year. I signed up for my company's HDHP this year and plan to transition my dependent care health care FSA contributions into the HSA so I can maintain that pre-tax deduction.

I can't use the HSA contributions for dependent care, but I can keep that money for long/term health care expenses.
AggiEE
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HSA's are also awesome because under most plans you're able to avoid paying FICA taxes. If you're in the 25% bracket, that adds an additional 7% in tax savings, so you're saving a third on what you contribute.
Hacker_2003
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AG
I save receipts for everything. I just scan them at the end of the month. I suppose an EOB would work as well, but there are some "medical" expenses that qualify for an HSA that you may not have an EOB for.
pasquale
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AG
So if you incur a big medical expense in 2016 and start a HSA in 2017 you can reimburse yourself for those expenses?

LostInLA07
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AG
I *think* it has to be an expense incurred after you open the HSA.
aggie028
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AG
Has to opened at time of expense is my understanding so no.
pasquale
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AG
Can a HSA only be opened during an open enrollment period?

Our insurance is thru my wife's work but open enrollment was back in November
Duncan Idaho
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quote:
Can a HSA only be opened during an open enrollment period?

Our insurance is thru my wife's work but open enrollment was back in November

Ype and only with an specific type of policy.
Zemira
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AG
quote:
Can a HSA only be opened during an open enrollment period?

Our insurance is thru my wife's work but open enrollment was back in November


Yes and only qualified high deductible plans.
Hacker_2003
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AG
No. In order to use HSA funds, you have to have the HSA (and qualifying high deductible health insurance) at the time the expense is incurred. You do not, however, have to pull the funds out of the HSA immediately. In fact, there is no time limit.
LostInLA07
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AG
You can open the HSA account whenever you want as long as you have a qualifying plan. The HSA account doesn't have to be through your employer.
Jackass2004
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AG
HSAs are bull****. Yet another reason to sock away too much money for ****ing health insurance.
Post removed:
by user
TXTransplant
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quote:
Don't you have to spend it or lose it? I have a daycare one. $5k a year tax free to pay for day care. Saves me $1k a year or so. Just found out my wife has it to, so can double that next time she can enroll.


Just looked closely at the bolded part of your post. You cannot double your contribution to $10k. You are capped at $5k, even with a second working spouse. Be careful with this, because if you make both elections at open enrollment, you will be hosed. Once you put that $ in there, you can't change your election (without a life changing event). If you and your wife work for two different employers, they aren't going to be talking to each other to warn you about this. They will let you do it, and then you will lose the extra $5k.
ac04
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HSAs are bull****. Yet another reason to sock away too much money for ****ing health insurance.

you sure about that?
Flaith
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AG
Oh boy, that's a hot take!
AccountantAg
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AG
quote:
quote:
Don't you have to spend it or lose it? I have a daycare one. $5k a year tax free to pay for day care. Saves me $1k a year or so. Just found out my wife has it to, so can double that next time she can enroll.


Just looked closely at the bolded part of your post. You cannot double your contribution to $10k. You are capped at $5k, even with a second working spouse. Be careful with this, because if you make both elections at open enrollment, you will be hosed. Once you put that $ in there, you can't change your election (without a life changing event). If you and your wife work for two different employers, they aren't going to be talking to each other to warn you about this. They will let you do it, and then you will lose the extra $5k.


I'm pretty sure you can start and end contributions at any time. In fact I know this is the case because my open enrollment was November but I started contributing in January as my wife is pregnant so I wanted to get some tax savings on those expenses.
YouBet
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AG
You probably were able to start outside of open enrollment because you had a life event happen I.e. got pregnant.

We are open enrollment only unless you have a major life event happen.
TXTransplant
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quote:
quote:
quote:
Don't you have to spend it or lose it? I have a daycare one. $5k a year tax free to pay for day care. Saves me $1k a year or so. Just found out my wife has it to, so can double that next time she can enroll.


Just looked closely at the bolded part of your post. You cannot double your contribution to $10k. You are capped at $5k, even with a second working spouse. Be careful with this, because if you make both elections at open enrollment, you will be hosed. Once you put that $ in there, you can't change your election (without a life changing event). If you and your wife work for two different employers, they aren't going to be talking to each other to warn you about this. They will let you do it, and then you will lose the extra $5k.


I'm pretty sure you can start and end contributions at any time. In fact I know this is the case because my open enrollment was November but I started contributing in January as my wife is pregnant so I wanted to get some tax savings on those expenses.


My comment was directed toward the poster's question about the dependent care FSA, not the HSA. Dependent care FSA contributions cannot be changed after the open enrollment period unless there is a life-changing event. If you realize after the fact that you are over-contributing to a dependent care FSA, you forfeit the excess funds.

This is one of many links that confirms it
https://www.wageworks.com/employees/dependent-care-fsa/dependent-care-flexible-spending-account/changing-your-election-amounts-midyear.

I know several people who have gotten burned on this.

I hated to take the thread off topic, since we are mainly discussing HSAs and not FSAs, but that poster will be making a huge mistake if he tries to increase his $5k dependent care FSA contribution to $10k.
Chappy
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AG
quote:
You probably were able to start outside of open enrollment because you had a life event happen I.e. got pregnant.

We are open enrollment only unless you have a major life event happen.

You can probably only start an HSA through your employer via payroll deduction during open enrollment (or after a life event), but you can always start an HSA through an outside source.

Many investment companies, banks, insurance companies offer HSA account options.
Bassmaster
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AG
I thought that you can use the HSA funds even if you no longer have a HDHP. For example, I had an HSA last year and maxed it out. Due to some health issues with my son, I switched over to a PPO this year, but I have a good sum left in the HSA from last year. I was under the impression I could use those funds in the HSA for my son's care incurred this year. Is that inaccurate? It really wouldn't make sense if I couldn't. Those funds would just sit until I'm 65 for whatever the trigger age is?
DriftwoodAg
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AG
quote:
I thought that you can use the HSA funds even if you no longer have a HDHP. For example, I had an HSA last year and maxed it out. Due to some health issues with my son, I switched over to a PPO this year, but I have a good sum left in the HSA from last year. I was under the impression I could use those funds in the HSA for my son's care incurred this year. Is that inaccurate? It really wouldn't make sense if I couldn't. Those funds would just sit until I'm 65 for whatever the trigger age is?
I believe that you can spend it, you just can't contribute money to it pre-tax
Flaith
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AG
What hot-rod said.

Also, as mention, HSA isn't tied to your employer at all except for payroll deduction and Medicare/SS deduction. If you have a HDHP and your employer doesn't offer a HSA, you can open one through an outside company (e.g. HSA bank) and just claim the contributions on your taxes to get the deduction.

I don't think it is Med/SS deductible if you do it that way, however.
Bassmaster
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AG
Thanks, I agree. Can no longer contribute if not enrolled in HDHP, but I can spend what is already there.
Ewok It Out08
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AG
Is it possible for a relative to make a pre tax contribution to your HSA account or would any contribution from a friend or relative to someone else's HSA be After tax?
YouBet
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AG
I vote Jackass2004 for living up to his name on this thread and simultaneously being the biggest dumbass of 2016. Change your handle!
beerag04
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AG
quote:
Is it possible for a relative to make a pre tax contribution to your HSA account or would any contribution from a friend or relative to someone else's HSA be After tax?
That would be after tax. Only the primary insured under the high deductible health insurance plan can contribute to the HSA.

For instance, my wife and I must have separate HSA accounts, because we are covered by different health insurance plans. We cannot contribute to each other's plans (That's a technicality though since all the money comes from the same place). I am limited to the $3,350 yearly max for an individual plan and she to the ~$6,500 family plan limit. However, we can use any of the money in either account for me, her or our kids.
DonaldFDraper
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AG
Great info!

Bumping this old thread to ask a couple questions...

I am eligible for a HSA through my employer through UMB Healthcare Services. It looks like the $2.50 monthly fee is waived after my deposit is $3,000 or more. It looks like the offer Vanguard funds, which is nice, but there is a $3 per month "Investment Fee".

Is that fee pretty standard? Still worth maxing out vs. contributing to a brokerage account (maxed Roth IRA, no 401k offered)?
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