HSA/Health Care saving for one in their 20s

[nptit]

Hello,

I am in my mid 20's and lucky enough to be able to max out my HSA each year. I have accumulated about 10K at this point and invest around 90% in a fidelity index fund.

I understand the HSA is a special vehicle regarding tax advantages, so I am definitely going to continue taking advantage of it. My question is more around how are people using/managing money in their accounts? I am young with very little medical expenses. Usually I would use ~300 a year from my HSA to give a ballpark figure.

Are people expecting their HSA to cover all their medical bills? To the more seasoned boglheads, do you find the HSA to be enough?

[MidwestEng]

I'm in my early 30s and max out my HSA (along with other retirement accounts) and can afford to cover my medical expenses with other money so I don't touch my HSA (see the Wiki on using an HSA but paying current expenses out of pocket).

[retiredjg]

Some people use their HSA account as a "stealth IRA". If you put those words in the google box in the upper right corner, you will find previous discussions on the subject.

[Spirit Rider]

Stealth IRA is the commonly used term, but it is not really descriptive of the most likely benefit potential. Very few people will need to make taxable withdrawals from their HSA after age 65. They will likely have more than enough Medicare premiums and medical expenses in retirement to take all withdrawals tax free.

A more descriptive term would be; "Stealth income/FICA tax deductible Roth-like IRA for retirement medical expenses." Not exactly a catchy phrase.

[retiredjg]

That's good information to know. Not sure I'll adopt the new name though.

[grabiner]

The term I use is "extension of your IRA". Both your IRA and your HSA are saving for expenses which you will have in retirement, so they should be invested as if they were part of the same portfolio. (You intend to use the HSA for medical expenses, so the investment will be tax-free, like a Roth IRA.)

One minor issue; if you live in AL, CA, or NJ, the HSA is not recognized by those states. TIPS are exempt from state tax, and thus should be in your HSA if you live in one of those states and they fit your investment needs. If TIPS don't fit your investment needs, use a tax-efficient stock index fund.

[TropikThunder]

I'm in my early 30s and max out my HSA (along with other retirement accounts) and can afford to cover my medical expenses with other money so I don't touch my HSA (see the Wiki on using an HSA but paying current expenses out of pocket).

That's what I do as well. And even better, I make those out-of-pocket payments with my Quicksilver rewards card.