Bogleheads

[dgrdfd]

I have seen people write that it's a good idea to max out your HSA and pay for your medical expenses, if you can, out of your own pocket in order to let your HSA grow. My question is, why? Can you pay out of pocket up until they begin contributing instead of withdrawing from the HSA (80/20 or 100/0 or whatever your limits are)? I understand that you would see tax free growth of the HSA, but what do HSAs grow at anyway, around 4%? Can this HSA money be used to pay for retirement medical expenses in early retirement or retirement? Should younger investors think of HSAs differently than someone closer to retirement?

If anyone could link to past threads discussing HSAs I would really appreciate it. Thanks!

[allancoleman]

Here is a link to a message board , dgrdfd , that answers nothing but HSA questions :

http://benefitslink.com/boards....owforum=96

[dgrdfd]

[VictoriaF]

dgrdfd,

The logic is as follows:
If you have $100 that you can put into an IRA or a taxable account, which would you chose?
Now, if you have $100 already in an IRA and another $100 in a taxable account, which would you use to pay your expenses (assuming no penalties)?
If you look at HSA as an IRA, advantages of accumulating money in HSA become clearer.

Accumulating money within HSA also has other advantages. Initially, you may use the HSA provider selected by your health insurance plan. The more money you have in the account, the lower you fees will be. But once you accumulate significant sums, you can transfer some (or all) money, for example, to Vanguard. Furthermore, as HSA become more widely spread, there will more flexibility in investing them, but you will not be able to make up for insufficient contributions or withdrawals in previous years.

Regards,
_________________
TIPS, James TIPS.
Ian Fleming, revisited

[allancoleman]

And the link to the official federal government HSA site is :

http://www.treas.gov/offices/public-affairs/hsa

It's quite an extensive site and well worth spending time on cause you'll hear a lot about HSAs from folks who aren't totally aware of all the federal rules and regulations . The FAQ section on this site is very good .

I've had a HSA for years now and intend to open a seperate individual HSA for my wife when I go on Medicare next year ( 2009 ) . They are very similar to IRAs and will get more liberal and less restrictive in the future as most presidental candidates include them in their national health care solutions .

[allenmickers]

Ive been following HSAs for a couple years and this is what I believe to be true. Please correct me if I am wrong:

My understanding is that HSAs give you triple tax benefits. The contribution is tax-deductable, the interest grows tax free, and the withdrawls are tax-free.

I also believe that theres no time line to take a withdrawl from your HSA provided you keep the receipt. Such that if I spend $5k on medical bills this year, I can let the money grow tax free for 10 years, and then take the $5k withdrawl. I believe that you act as the administrator of your HSA in so much as that you arent mailing in receipts to anyone like in an FSA. The receipts you keep in case you are audited but really withdrawing the money is like withdrawing money from a regular checking account. So by maxing out your HSA each year, which is up to $2500 I believe, and buying medical things out of taxable accounts, you can really maximize the HSA tax benefits.

However there are several reasons why currently HSAs are not right for me:

1) I get "free" normal health insurance from my job that is probably worth about $5k / year. If I decline health insurance, I can get $100/month instead. Thats a pretty aweful deal for me. The only way I can be eligible for an HSA if I dont have normal regular insurance, and declining that, is going to cost me a lot more than I would be making in tax-free growth.

2) The HSAs I see have fees like $50/year which are quite substantial; considering the first year I would only have $2500 and the second $5000.

3) The HSAs are run by a bank I never heard of. I like simplicity in my financial life, and until VG actually administers an HSA on their own, I am not interested.

4) The investment choices are garbage. Who cares if theres a triple tax advantage if I am in the 15% tax bracket and the maximum earnings I can get from the HSA are 3 to 4%. Im better off putting stocks in a taxable account, paying 5% cap gains tax on my average 10% annual growth.

5) HSAs are new and I dont believe theres currently any creditor protection associated with them. While I plan to never default on any loan or be involved in any lawsuit, shit happens, and the more of my money thats protected from creditors, the better. Currently only 25% of my total net worth is accessible to creditors and this time next year, only 15% will be. What good is having money if you can get into a car accident and lose it all? (yes I have high insurance limits, but once someone finds out you have money, they will sue you for anything they can get)

[VictoriaF]

allenmickers,

I started high-deductible health plan (HDHP) only this year. In 2007, I had FSA with grace period until 15 March 2008. Therefore, for the first three months of 2008, I am covered by HRA, and in April I will start contributing to HSA.

I don't have yet the first-hand experience, but here are my reasons for going the HDHP/HSA route:
1. The triple-benefit you mentioned, i.e., tax-deductible contributions, appreciations and withdrawals.
2. I have extra cash, because I do not own a house.
3. Maximum annual contribution in 2008 for an individual is $2,900.
4. The bank associated with my HDPD (HSA Bank) waves the enrollment fee if I go through the HDPD provider (GEHA).
5. I do not need to pay any handling fees (e.g., I do not need a checkbook), if I just want to accumulate money in this account.
6. I am planning later to open an HSA account at Vanguard and transfer there most of my HSA money, leaving only the minimum at the HSA Bank.
7. As people gain experience with HDPD/HSA, I expect that more and better options will appear. When that happens, it will be easy to move money around, but impossible to make up for years of not contributing or for withdrawing.

[allenmickers]

[VictoriaF]

[allancoleman]

That's exactly how I am using my own HSA , VictoriaF . I'm " defending " it like an IRA , paying my current medical expenses from my retirement funds while I can afford to do so . And intend to use my taxfree HSA funds later if necessary when I may no longer have as much critical mass .

At this point my HSA is just a catastropic fund that could be used later . In the meanwhile it continues to grow taxfree . I'm sure at some point in time later it could be used for extended care or to pay medical premiums at a much later age .

[Sphinx]

[VictoriaF]

[Ken Schwartz]

[grabiner]

[allenmickers]

[allancoleman]

Yes , Victoria , I am paying my medical expenses from my " taxable " funds too just as you are , although I could elect at any time to pay any medical expenses from my " taxfree " HSA account if I so desired .

[Rookie]

I wonder how you contribute your money to the HSA account? Direct deposit or by check? My company can deposit the money to my HSA account for me and they will put the record on my paid statement; however, the insurance that I am with uses a third party manage the HSA account and the investment firm keeps the money. None of these three parties give me the routing number, without it, my company doesn't know where to deposit the money.

[allenmickers]

[billern]

[billern]

It may not satisfy the true diehard but Fidelity has rolled out a HSA account product that they offer to some third parties (I think to specific insurance companies). If you search their site, information on HSA accounts is starting to percolate into their various account disclosures and instructions.

I have asked CSRs about a timeline for releasing an HSA product and they say that there is no official date that they are giving for an HSA account offering to the general public but that there are plans for it.

Currently I have an HSA through hsabank.com (through my employer). I'm relatively happy with it. Investment options are offered through tdameritrade. I found a NTF small cap value fund that fits in my AA that isn't too obscenely expensive.

[Rookie]

Thanks for the replies. It seems I have to send them the checks. I don't know why I have to write down my SSN every time I send a check. I will look into the option to open an HSA account with an investment firm and leave my current HSA the way it is for medical spending. The good thing is the insurance company will give me money back; without having to send them any check, I will be credited $500 each year.

[Greenberry]

Regarding whether to pay expenses using HSA money or taxable money:

[MossySF]

I currently keep my HSA money at Patelco earning 5.12% APY. The calculations I've done say I need about $7500-$10000 balance range before all the ticky-tacky fees charged by existing HSA investment options get overcome. In my blog post about HSAs, I have a spreadsheet you can enter in the various fee schedules to calculate an overall expense ratio based on theoretical dollar amounts.
_________________
personalbizfinance.com

[tfb]

[VictoriaF]

[VictoriaF]

[VictoriaF]

[VictoriaF]

[MossySF]

[dgrdfd]

Thanks to everyone who replied. I apologize in advance if some of my terminology is incorrect. I really hate having to deal with and think about insurance especially medical. I just wish there was something I could pay $X a year to and any and all medical expenses were payed for. No copays and 100% payments up to X dollars and then 80/20 until Y dollars, then insurance pays 100% up until 1M, etc. Too much trouble to deal with, IMO.

My company switched over from some kind of "pay to participate" plan last year to offering HSAs this year. The plan last year worked something like this.

1. About $1,200 to participate
2. I pay the first $500 of any medical services
3. Then my insurance company splits 80/20 up to a max out of pocket of about $3,000


So if I needed no medical services I was still spending about $1,200 that I would never see again. If I did, then I would be spending about $1,700 no matter what before they began to put anything in.

HSAs seemed like a much better deal for me. I am single with no kids so I was the only consideration in this. I am pretty healthy, but I do play a lot of sports so an injury could happen in a blink of an eye. I have no regular prescriptions, etc. With an HSA I get to "roll" the money I don't use over. And I am earning interest on it. I get 3% interest at Lumenos which doesn't sound like a lot, but I pay no taxes on the gains so it's really equivalent to like 4% in a taxable money market and the money put in isn't taxed either so you can add about a third to my balance. Great deal for me.


HSAs were putting the power in my hands. So I signed up for the HSA and decided to put about $1,500 since that is what I was already contributing to my "pay to participate" plan the previous year.

So I guess my situation I am debating on is whether it's a good idea to up that to the maximum amount (from ~$1,500 to $2,900). I am currently maxing out my Roth IRA and traditional 401k. I am currently saving about $1,150 each month in a taxable money market for a home. I guess I still don't know what I am going to do. Maxing the HSA out would only cost about an extra $100 a month so I may do it.

Some of the other young single guys I work with (all of us under 27 with no kids) were talking about how you could put the money in until you get to that $3,000 threshold and then essentially get "free" health insurance each year since you would be completely covered and already have the max you would have to pay for the year saved up. Obviously you would need to add the next year what you spent the previous year though. It seems like this is a bad idea since you should continue dropping money in there because of all the tax benefits and you could really look at this as retirement/early retirement healthcare savings.

Thanks for sharing the info guys.

[MWCA]

Since we are discussing HSAs. Could one of you in the know help me out please. My wife and I are due to retire early. So we will be purchasing our own health care and plan to go the HSA route. Can you move money from a tax deferred IRA right into the HSA? Thus avoiding the tax completely?

[Rookie]

MWCA,
I am using a quote from Kiplinger web site. :"You'll be able to make the rollover only once in your life, and the rollover amount is limited to the HSA maximum contribution for the year, minus any contributions you've already made. If you have an individual plan, for example, you can contribute only $2,850 to an HSA in 2007, which would also be the limit on the amount of money you could transfer from an IRA to an HSA. If you've already contributed $1,000 to the HSA this year, then you can roll over only $1,850 from the IRA."
The limit amount is different this year ($2900 instead of $2850)
You can find the article at the web site.

[MWCA]

[markpa]

I recently opened up an hsa BROKERAGE account which is on the Fidelity platform. It requires an hsa checking account through thebancorphsa dot com. There's a $3/month fee which is waived if you have a recurring deposit, which you can setup as an ACH as low as $5/month. I'm funding 99% of the HSA in the 1st month then splitting up the remainder of the yearly allowed contribution into $5/month increments.

There is no minimum balance and trades are $4.95 each.

The login for the brokerage is through mystreetcape dot com. Fidelity/National Financial runs the platform so the look/feel on the site/account # and statements are nearly identical. Unfortunately it doesn't show up on my fidelity dot com login as an Advisor managed account (the Fidelity rep I talked to thought it might). The reason turns out it's titled as Bancorp FBO firstname_lastname.

I transferred my patelco/usbank hsa accounts into this new one which went without a hitch.

[ChgoBob]

An interesting find by IBD yesterday.

By INVESTOR'S BUSINESS DAILY | Posted Wednesday, July 15, 2009 4:20 PM PT

Congress: It didn't take long to run into an "uh-oh" moment when reading the House's "health care for all Americans" bill. Right there on Page 16 is a provision making individual private medical insurance illegal.

<snip>

So we can all keep our coverage, just as promised — with, of course, exceptions: Those who currently have private individual coverage won't be able to change it. Nor will those who leave a company to work for themselves be free to buy individual plans from private carriers.

<snip>

What wasn't known until now is that the bill itself will kill the market for private individual coverage by not letting any new policies be written after the public option becomes law.

[political remarks removed]

Link prohibited since I don't post much, but the editorial is easy to find.

[Sphinx]

Hello, ChgoBob. Welcome to Bogleheads.

[billern]

[ChgoBob]

[dave.d]

[moneyman11]

[dave.d]

I got mine from Aetna, and got family coverage for my wife and kids from Anthem, which is the Blue Cross affiliate in our state. We were able to apply for both online.

We found we had to research our health history more than we expected, to be sure we were answering all the application questions accurately. We had to go through enough to see all the questions before we knew exactly what we had to figure out (e.g., did some particular medical event happen more than 10 years ago).

[Jack]

[ChgoBob]

[ChgoBob]

[Sphinx]

[ChgoBob]

[epicahab]

I had been considering my HSA money over the annual deductible a "war chest" for future health needs, but I'm dismayed to learn that they might not have carryover into future years if the laws change.

I guess if that ever happens I'll be buying a thousand bottles of Ibuprofin!

[ChgoBob]

[CodeMaster]

Hi,

What happens if say I have 100k saved in HSA and I'm 65 and say theorically I just cant rack up enough receipts to send in to HSA to withdrawl my 100k. What exactly happens at this point. is there some point where I can get my money out or does it just go to HSA and I'm a loser?

[kramer]