is using HSA as investment vehicle worth the trouble?

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exigent
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is using HSA as investment vehicle worth the trouble?

Post by exigent » Wed Dec 27, 2017 9:09 am

Hi all,

We have around $50k sitting in an HSA (from maxing family contributions since 2010) that I've been planning on investing and holding until retirement. Unfortunately, I've never gotten around to do anything with that money, so it's just been sitting in cash. In the mean time, we've been paying for medical costs out-of-pocket.

For documentation, I've been accumulating our health insurance EOBs and trying to get an annual statement from the pharmacy each year (though I've fallen behind on that and need to catch up), plus keeping some big-ish statements related to orthodontia, etc. I've scanned several years worth of EOBs, but have a a big pile on my desk that needs to be dealt with. On top of that, I have to inventory them so I know our costs related to each one. I spent a few hours working on that last night. What I've learned is that it's kind of a pain in the butt to keep up with all of this.

I'm offering this all as background to a more general question: In your opinion, is using an HSA as an investment vehicle in this way (holding it, and keeping the necessary documentation, through retirement) worth the trouble? Because I'm really tempted to just get caught up enough on the documentation to cash it out, and then just use it as an in-and-out account to cover medical expenses going forward.

One additional downside to the investment angle is that the landscape of investment providers doesn't seem particularly stable. There's no big dog like Vanguard or Fidelity in the game, and the smaller providers keep changing the rules (fees go up, investment choices go away [e.g., recent TD Ameritrade changes], etc.). Thus, it seems like you have to be ever-vigilant in monitoring the provider and (possibly) moving funds on an ongoing basis.

Anyway, I appreciate your thoughts.

Thanks, exigent

jebmke
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Re: is using HSA as investment vehicle worth the trouble?

Post by jebmke » Wed Dec 27, 2017 9:13 am

I saved documents for a few years and then decided it was too much stuff to lay off on someone else if I became incapacitated or worse. So I cashed out the accumulation of receipts and now I reimburse myself once a year for the prior year. I start Medicare next year so we will be winding down our HSAs as time goes by.
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exigent
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Re: is using HSA as investment vehicle worth the trouble?

Post by exigent » Wed Dec 27, 2017 9:17 am

jebmke wrote:
Wed Dec 27, 2017 9:13 am
I saved documents for a few years and then decided it was too much stuff to lay off on someone else if I became incapacitated or worse. So I cashed out the accumulation of receipts and now I reimburse myself once a year for the prior year. I start Medicare next year so we will be winding down our HSAs as time goes by.
Thanks, that's a useful perspective. One thing I forgot to mention is that I'm currently 46, so there's a good bit of time to for the investments to grow, but also a good bit of time during which I need to maintain all that documentation. And little concerns, such as "what if pdf is no longer a standard file format at some point in the distant future" make me question the wisdom of trying to milk the HSA for all it's worth.

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Re: is using HSA as investment vehicle worth the trouble?

Post by aristotelian » Wed Dec 27, 2017 9:22 am

If you had invested it from the beginning, your $50k would probably be worth $150K now. The annual contribution basically gives us the equivalent of a third Roth IRA. It is worth it to me. If you plan to use it to cover future expenses and you already have an ample emergency fund, then you don't really need to keep the documentation for small expenses throughout the year.

Depending on your age, you might start drawing on it now to ensure you use the funds on eligible expenses.

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Tamarind
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Re: is using HSA as investment vehicle worth the trouble?

Post by Tamarind » Wed Dec 27, 2017 9:24 am

It sounds like it may not be worth it for you (esp not for many small transactions). You'll have to judge/guess whether the untaxed growth is worth your time and hassle and the risk that you lose documentation.

I have mine invested, but I intend to reimburse myself for my (rare, very small) medical costs as I go for the time being. The invested balance continues to grow as I spend far less than the contribution limit on medical each year. I might save up future large expenses that are well documented later and let those run, but I can't imagine trying to keep track of a $3 pharmacy receipt or hand scribbled dentist statement for 20 years.

If you are going to pay out of pocket and defer reimbursement, you really ought to get that money invested, though. If you don't bother to invest it, the benefit of untaxed growth is greatly reduced.

exigent
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Re: is using HSA as investment vehicle worth the trouble?

Post by exigent » Wed Dec 27, 2017 9:30 am

aristotelian wrote:
Wed Dec 27, 2017 9:22 am
If you had invested it from the beginning, your $50k would probably be worth $150K now. The annual contribution basically gives us the equivalent of a third Roth IRA. It is worth it to me. If you plan to use it to cover future expenses and you already have an ample emergency fund, then you don't really need to keep the documentation for small expenses throughout the year.

Depending on your age, you might start drawing on it now to ensure you use the funds on eligible expenses.
That $50k >>> $150k calculation makes a lot of assumptions about how it would have been invested. Also, it wasn't $50k from the start. It accrued gradually based on the annual contribution limits. But yes, as always, it would have been better to invest it as we went along. :-)

As for future vs. current expenses, I've wondered about that. How necessary is it to even keep documentation at this point, when my wife and I will likely have significant future medical expenses that will (probably) be sufficient to deplete the account?

Hmmm... This is a very good argument in favor of keeping it and investing it. I manage the billing for my mom's assisted living (among other things) and it seems that one could very easily deplete a huge amount of HSA funds in short order using ongoing expenses, as opposed to dredging up bills from the past.

Who is your HSA investment provider?

exigent
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Re: is using HSA as investment vehicle worth the trouble?

Post by exigent » Wed Dec 27, 2017 9:32 am

Tamarind wrote:
Wed Dec 27, 2017 9:24 am
If you are going to pay out of pocket and defer reimbursement, you really ought to get that money invested, though. If you don't bother to invest it, the benefit of untaxed growth is greatly reduced.
Yup, that's the plan. Either get it invested, or cash it out and... Get it invested.

Where are you investing your HSA, and do you recommend them? My employer's plan sucks. I moved a chunk out to HSA Bank in the past, but the TD Ameritrade changes hit before I got it invested.

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jhfenton
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Re: is using HSA as investment vehicle worth the trouble?

Post by jhfenton » Wed Dec 27, 2017 9:35 am

1. I save our annual credit card summaries that include a list of payments to medical providers. The large payments directly to medical providers have all the required information: date, amount, and provider. I don't worry about documenting tiny incidentals like medical supplies on which there might be some ambiguity in a credit card receipt. If we pay $3,000 to an orthodontist or $2,500 to a foot surgeon on our Amex, I see no issues claiming that for reimbursement later.

As for EOBs, I don't see the point in saving them. We are never reimbursed for medical expenses. We pay all bills after the fact or pay a fixed amount up front. (If it were to ever happen for some reason, I would keep documentation.)

2. Even if we don't ever rely on past expenses and saved receipts, I don't expect we'll have any problem spending our $48K (and growing) HSA on future medical expenses. There will be probably be a gap between retirement and Medicare to fund. Then there will be Medicare premiums, deductibles, and co-pays to pay.

3. Lively is new, and I agree that there's some provider risk. But at the moment, it seems like a compelling choice. If I have to move the account in a few years, it's no big deal.

I do have to deal with quarterly transfers from my employer-sponsored HSA to Lively, but at this point, it's 5 minutes per quarter to send an email to Lively requesting a new transfer.

Small Law Survivor
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Re: is using HSA as investment vehicle worth the trouble?

Post by Small Law Survivor » Wed Dec 27, 2017 9:40 am

I am troubled by this as well. We have close to $100,000 in our HSA account. We are in our mid-60s The money is invested via Ameritrade. I have saved our actual receipts and end-of-year pharmacy statements (for most years, not all), but I have not saved EOBs. The HSA commenced in 2009, so we have 9 years of records. The receipts are sitting in a box in our basement, organized by year.

And, since I'm still working, another $7500 will be added to this in 2018.

My "plan" (I can hear God laughing), is to let this money grow until we are mid-70s, roughly another 10 years, and then start using it for actual medical expenses (Medicare premiums, co-pays ....). And, at that point to start withdrawing some based on past year expenses/receipts. Our actual expenses are around $6,000/yr (most of that due to high deductible), so there should be $70,000+ in past expenses that we can reimburse ourselves for, maybe more based on future expenses.

However, this is all very complicated. If I'm not around my wife would need to retain an accountant to go through all these numbers and guide her on withdrawals. When I discuss our finances with my wife, I tell her that I've simplified everything, but not this.

Messy, very messy .....

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Tamarind
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Re: is using HSA as investment vehicle worth the trouble?

Post by Tamarind » Wed Dec 27, 2017 9:41 am

exigent wrote:
Wed Dec 27, 2017 9:32 am
Tamarind wrote:
Wed Dec 27, 2017 9:24 am
If you are going to pay out of pocket and defer reimbursement, you really ought to get that money invested, though. If you don't bother to invest it, the benefit of untaxed growth is greatly reduced.
Yup, that's the plan. Either get it invested, or cash it out and... Get it invested.

Where are you investing your HSA, and do you recommend them? My employer's plan sucks. I moved a chunk out to HSA Bank in the past, but the TD Ameritrade changes hit before I got it invested.
Mine is still through my employer at HealthEquity. They put an extra fee on their very good selection of Vanguard mutual funds, but it works fine for now. They do have the added benefit for now of being connected to my employer insurance, so that most claims are imported automatically and I need only click to get reimbursed. When I change employers I'm sure I'll be researching again.

exigent
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Re: is using HSA as investment vehicle worth the trouble?

Post by exigent » Wed Dec 27, 2017 9:44 am

jhfenton wrote:
Wed Dec 27, 2017 9:35 am
As for EOBs, I don't see the point in saving them. We are never reimbursed for medical expenses. We pay all bills after the fact or pay a fixed amount up front. (If it were to ever happen for some reason, I would keep documentation.)

[...]

Even if we don't ever rely on past expenses and saved receipts, I don't expect we'll have any problem spending our $48K (and growing) HSA on future medical expenses. There will be probably be a gap between retirement and Medicare to fund. Then there will be Medicare premiums, deductibles, and co-pays to pay.

[...]

Lively is new, and I agree that there's some provider risk. But at the moment, it seems like a compelling choice. If I have to move the account in a few years, it's no big deal.
The EOB just gives a clear breakdown of our (patient) responsibility. It's not technically proof of payment, but it clearly shows our share of the bill for each visit.

Yeah, I'm starting to realize that current expenses are probably just a drop in the bucket, and we probably don't even need to bother tracking them to be sure we have enough to deplete the HSA in the future.

Re: Lively... Thanks for that tip, though I do see that they use the TD Ameritrade platform, so the options are much more limited than they used to be. Right? Though I guess I could pay the commission for periodic lump sum transactions and have a better selection.

Thanks.

exigent
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Re: is using HSA as investment vehicle worth the trouble?

Post by exigent » Wed Dec 27, 2017 9:51 am

Small Law Survivor wrote:
Wed Dec 27, 2017 9:40 am
I am troubled by this as well. We have close to $100,000 in our HSA account. We are in our mid-60s The money is invested via Ameritrade. I have saved our actual receipts and end-of-year pharmacy statements (for most years, not all), but I have not saved EOBs. The HSA commenced in 2009, so we have 9 years of records. The receipts are sitting in a box in our basement, organized by year.
To be clear, I don't think the EOBs are necessary, or even as good as a receipt. It's just a simple way for me to keep track of costs because our insurance company (BCBS/Anthem) provides a clear breakdown of provider vs. patient responsibility on the EOB so I can just sum up the patient portion for all EOBs in a given year and know what we spent on doctor's visits. If the IRS were to be aggressive and demand actual proof of payment, we'd be in trouble since I haven't been saving all of our credit card statements, etc.

And yeah, I shudder to think what someone else would do if faced with trying to make sense of all of this if/when I'm not able to do it myself.

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Re: is using HSA as investment vehicle worth the trouble?

Post by Mr.Wu » Wed Dec 27, 2017 9:51 am

One still needs to keep a few years of documentations in case of tax audit, even if he or she reimburse the medical cost every year, right?

aristotelian
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Re: is using HSA as investment vehicle worth the trouble?

Post by aristotelian » Wed Dec 27, 2017 9:52 am

exigent wrote:
Wed Dec 27, 2017 9:30 am

That $50k >>> $150k calculation makes a lot of assumptions about how it would have been invested. Also, it wasn't $50k from the start. It accrued gradually based on the annual contribution limits. But yes, as always, it would have been better to invest it as we went along. :-)

As for future vs. current expenses, I've wondered about that. How necessary is it to even keep documentation at this point, when my wife and I will likely have significant future medical expenses that will (probably) be sufficient to deplete the account?

Hmmm... This is a very good argument in favor of keeping it and investing it. I manage the billing for my mom's assisted living (among other things) and it seems that one could very easily deplete a huge amount of HSA funds in short order using ongoing expenses, as opposed to dredging up bills from the past.

Who is your HSA investment provider?
My assumption was mostly stocks. I was assuming gradual accumulation during the 10 year bull market since everyone has annual contribution limits. Other than that it was pure top of the head guesstimation.

Yes, one approach would be to just keep major receipts during your accumulation phase. Between Medicare premiums and LTC insurance, you will almost surely have eligible expenses in retirement.

I just got started with Lively as well and so far so good. They have plenty of ETF's to do a basic portfolio.

exigent
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Re: is using HSA as investment vehicle worth the trouble?

Post by exigent » Wed Dec 27, 2017 9:56 am

Mr.Wu wrote:
Wed Dec 27, 2017 9:51 am
One still needs to keep a few years of documentations in case of tax audit, even if he or she reimburse the medical cost every year, right?
Yes, but it could be much worse than that if you accrue expenses over time and then use them in the future... For example, you might need to show that you didn't previously claim these expenses. So, for an expense incurred in (say) 2010, if you try to use it for withdrawal in 2040, do you have to provide tax returns for every year in between showing that you didn't claim it? In that case, I guess you'd have to substantiate any past claims against your HSA to show that the current claim doesn't overlap. This is probably an unrealistic concern, but it does illustrate the potentially large burden on the investor/taxpayer.

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Re: is using HSA as investment vehicle worth the trouble?

Post by letsgobobby » Wed Dec 27, 2017 10:02 am

I have calculated the tax drag on my typical index fund to be around 0.6%, or 60 basis points. On a $50,000 investment that is $300 per year. Figure out if the time and trouble it will take you next year is worth saving the $300.

I've waffled but currently stick with the HSA and keep paper receipts (current stack is 5 years or 16 inches high, so about 3 inches per year). In 35 years I'll have a ten foot stack of papers. Worst case scenario is that I lose all my receipts somehow and then rely on future health care expenses to use up my HSA. You'd have to be extremely fortunate to not have expenses later in life that would easily consume a typical HSA.

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Re: is using HSA as investment vehicle worth the trouble?

Post by jhfenton » Wed Dec 27, 2017 10:21 am

exigent wrote:
Wed Dec 27, 2017 9:44 am
Re: Lively... Thanks for that tip, though I do see that they use the TD Ameritrade platform, so the options are much more limited than they used to be. Right? Though I guess I could pay the commission for periodic lump sum transactions and have a better selection.
Not more limited, just different. Instead of core Vanguard and iShares ETFs, they have SPDR Portfolio core ETFs at dirt cheap expense ratios. The SPDR Portfolio ETFs are all recently renamed and rebranded with their new low expense ratios--they were essentially launched on TD Ameritrade's revamped commission-free line-up--so they don't have the assets or liquidity of Vanguard and iShares ETFs, but the ones I've looked at are more than good enough for buy and hold.

For example, I'm using SPEM (SPDR Portfolio Emerging Markets ETF) at 11 bp. It has nearly $1 billion in AUM and trades reasonably well. It is a perfectly fine replacement for Vanguard's VWO.

There are actually far more commission-free ETFs now than before (296 vs 101), but only 20-30 are worth considering.

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Re: is using HSA as investment vehicle worth the trouble?

Post by bling » Wed Dec 27, 2017 10:46 am

i keep it simple -- i use my HSA debit card for prescriptions, copays, etc. -- basically all the small stuff.

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Re: is using HSA as investment vehicle worth the trouble?

Post by Hukedonfonix4me » Wed Dec 27, 2017 10:46 am

You could try only keeping EOB receipts over $1000 or some other meaningful but arbitrary amount worth keeping track of paper records or a scanned file in case you need to reimburse yourself prior to needing the funds for medical care.

Otherwise, you could keep the money invested and use on qualified medical expenses as they crop up in 20+ years while paying current costs out of pocket.

According to some, healthcare will cost >$250K for a retired couple in todays dollars.*

Tack on a couple years of managed healthcare (nursing home) for one spouse or another at ~100k/year** and you should not have a problem of overfunding

Starting with 50k and contributing 562/month (6750/year) assuming a 5% interest rate over 20 years assuming .10% expense ratio is ~361,000


*https://www.fidelity.com/viewpoints/ret ... costs-rise

**https://health.usnews.com/health-news/b ... home-costs
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Tamarind
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Re: is using HSA as investment vehicle worth the trouble?

Post by Tamarind » Wed Dec 27, 2017 11:29 am

If you are so lucky/unlucky as to end up with more in an HSA than you can spend on current medical expenses in retirement, then it can simply be used as a tIRA+. More tax-deferred space and with no need to repay FICA if the contributions were made through an employer.

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Re: is using HSA as investment vehicle worth the trouble?

Post by bloom2708 » Wed Dec 27, 2017 12:01 pm

We have ~$15k in our HSA. Based on the amounts, I decided it wasn't worth doing the investment part of our HSA. That amount and the gain/loss isn't going to make or break our retirement.

We use it for our medical expenses. I don't want to see it drop by 30%. I also don't really care if I miss the run up because the amount is not material compared to our portfolio value.

I don't envision getting our HSA to $100k or some number where it might make sense.
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Re: is using HSA as investment vehicle worth the trouble?

Post by eye.surgeon » Wed Dec 27, 2017 12:06 pm

I'm not that bothered keeping current receipts. I know enough about health care to know that my medical costs in retirement will be sufficient to use all my HSA savings without the need of receipts for current expenses while working, and I don't spend any of my HSA money currently.
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Re: is using HSA as investment vehicle worth the trouble?

Post by runner3081 » Wed Dec 27, 2017 12:12 pm

Valid point, but for me, it makes sense and is worth the trouble. I happen to be organized so this really adds very little time to my routine.

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Re: is using HSA as investment vehicle worth the trouble?

Post by Small Law Survivor » Wed Dec 27, 2017 3:13 pm

exigent wrote:
Wed Dec 27, 2017 9:51 am
If the IRS were to be aggressive and demand actual proof of payment, we'd be in trouble since I haven't been saving all of our credit card statements, etc.
I haven't saved credit card statements either - I've assumed, rightly/wrongly, that the bill/invoice is sufficient.

What concerns me is the IRS audits and says: "how do we know you didn't get reimbursed for that expense? That you didn't find a a coverage error and get reimbursed?" This has occurred once in a while - we've paid a doctor, I've realized that there was an error and it should have been covered, BC/BS paid the doc, and the doc reimbursed me. How can you prove that didn't occur?

I'm pretty confused about how this will work as a practical matter ten+ years from now, if challenged by IRS.

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Re: is using HSA as investment vehicle worth the trouble?

Post by exigent » Wed Dec 27, 2017 3:43 pm

Small Law Survivor wrote:
Wed Dec 27, 2017 3:13 pm
exigent wrote:
Wed Dec 27, 2017 9:51 am
If the IRS were to be aggressive and demand actual proof of payment, we'd be in trouble since I haven't been saving all of our credit card statements, etc.
I haven't saved credit card statements either - I've assumed, rightly/wrongly, that the bill/invoice is sufficient.

What concerns me is the IRS audits and says: "how do we know you didn't get reimbursed for that expense? That you didn't find a a coverage error and get reimbursed?" This has occurred once in a while - we've paid a doctor, I've realized that there was an error and it should have been covered, BC/BS paid the doc, and the doc reimbursed me. How can you prove that didn't occur?

I'm pretty confused about how this will work as a practical matter ten+ years from now, if challenged by IRS.
Interestingly, I ran across a couple of cases last night while sorting EOBs where something that had originally been denied by insurance (and was thus listed as being 100% our responsibility) was later re-processed and honored as a valid claim, thereby reducing our burden. IIRC, this had nothing to do with intervention on my end, but rather the provider sent it back through again, perhaps with more/better justification.

I suppose that the existence of a few of those cases might buy some credibility with the auditor. After all, I could've just "lost" the second EOB and used the full amount to support withdrawals, but instead I'm adjusting for the fact that it ultimately wound up getting covered by insurance. Such cases should be captured in the collection of EOBs because those docs are generated whenever they consider (or re-consider) a claim.

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Re: is using HSA as investment vehicle worth the trouble?

Post by Bacchus01 » Wed Dec 27, 2017 4:11 pm

bloom2708 wrote:
Wed Dec 27, 2017 12:01 pm
We have ~$15k in our HSA. Based on the amounts, I decided it wasn't worth doing the investment part of our HSA. That amount and the gain/loss isn't going to make or break our retirement.

We use it for our medical expenses. I don't want to see it drop by 30%. I also don't really care if I miss the run up because the amount is not material compared to our portfolio value.

I don't envision getting our HSA to $100k or some number where it might make sense.
We don’t use our HSA, meaning withdraw from it. We pay everything out of pocket. We have about $40K in ours now. IF the current laws stay as they are, I could see us with more than $500K in our HSA over the next 20 years.

So yeah, I invest it.

As for receipts, we do like others have suggested in that we keep everything over $1K. I expect to have enough expenses and future needs that it is probably enough.

If w head to dig into ito it fast due to an emergency, we have every expense recorded in a quicken and could go back and match those payments to our EOB. Will the IRS take that as a “receipt?” Not sure, but I’d be willing to go with it.

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Re: is using HSA as investment vehicle worth the trouble?

Post by Olemiss540 » Wed Dec 27, 2017 4:18 pm

Tamarind wrote:
Wed Dec 27, 2017 9:24 am
It sounds like it may not be worth it for you (esp not for many small transactions). You'll have to judge/guess whether the untaxed growth is worth your time and hassle and the risk that you lose documentation.

I have mine invested, but I intend to reimburse myself for my (rare, very small) medical costs as I go for the time being. The invested balance continues to grow as I spend far less than the contribution limit on medical each year. I might save up future large expenses that are well documented later and let those run, but I can't imagine trying to keep track of a $3 pharmacy receipt or hand scribbled dentist statement for 20 years.

If you are going to pay out of pocket and defer reimbursement, you really ought to get that money invested, though. If you don't bother to invest it, the benefit of untaxed growth is greatly reduced.
This exactly.

(To the OP) I am at Optum and invested in target date funds. I like it but fees are paid by employer, so you would have to research on how they compare fee wise.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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Re: is using HSA as investment vehicle worth the trouble?

Post by supersecretname » Wed Dec 27, 2017 4:25 pm

Those keeping ppaer receipts, you really should scan them. Ink fades, not to mention fire or other loss risks.

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Re: is using HSA as investment vehicle worth the trouble?

Post by meens888 » Wed Dec 27, 2017 4:32 pm

I am planning on keeping the amount of my max out of pocket for the year in cash and I invest the rest in stocks and ETFs. I scan all receipts and decide at the end if I want to reimburse myself or not. I don’t keep scanned receipts for more than 2-3 years at a time as it becomes an organizational liability.

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Re: is using HSA as investment vehicle worth the trouble?

Post by flamesabers » Thu Dec 28, 2017 9:50 am

OP,

I think it depends on your financial circumstances. If say you already max out your other tax-advantaged vehicles, I think that's a good reason to put up with the headache of keeping a close eye on your HSA, assuming your provider isn't gouging you with fees and abysmal investment choices. If you aren't maxing out your other tax-advantaged vehicles, I would agree with your idea of just using your HSA as an in-and-out account to pay your medical bills.
Small Law Survivor wrote:
Wed Dec 27, 2017 3:13 pm
What concerns me is the IRS audits and says: "how do we know you didn't get reimbursed for that expense? That you didn't find a a coverage error and get reimbursed?" This has occurred once in a while - we've paid a doctor, I've realized that there was an error and it should have been covered, BC/BS paid the doc, and the doc reimbursed me. How can you prove that didn't occur?
How can you be expected to prove a negative in this sort of situation? When you paid for a legitimate expense and the healthcare provider has no documentation that you were reimbursed, why would the IRS suspect otherwise when there is no smoking gun?

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Re: is using HSA as investment vehicle worth the trouble?

Post by Blister » Thu Dec 28, 2017 10:04 am

Since I paid off the mortgage and other deductions are minor I have not itemized in a few years. And with the new tax law will be even less likely to itemize. So our HSA is in a MMF with a debit card. Have been using it to pay copays etc past few years Will probably be empty in about 4 years. Using it with a debit card was much easier than saving all those receipts and reimbursing myself once yearly.
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Re: is using HSA as investment vehicle worth the trouble?

Post by neilpilot » Thu Dec 28, 2017 10:08 am

bloom2708 wrote:
Wed Dec 27, 2017 12:01 pm
We have ~$15k in our HSA. Based on the amounts, I decided it wasn't worth doing the investment part of our HSA. That amount and the gain/loss isn't going to make or break our retirement.
I stopped HSA contributions when I retired in Aug 2015, and was late to the HDHP game so only had $16,150 in my account. I've always paid for medical out of pocket, and put most of the HSA account in a S&P 500 index fund. I just looked and the account is currently at $21,375. Of course this fund is not an integral part of my retirement, but the $5k bump up is still a nice bonus.

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Re: is using HSA as investment vehicle worth the trouble?

Post by bloom2708 » Thu Dec 28, 2017 10:17 am

neilpilot wrote:
Thu Dec 28, 2017 10:08 am
bloom2708 wrote:
Wed Dec 27, 2017 12:01 pm
We have ~$15k in our HSA. Based on the amounts, I decided it wasn't worth doing the investment part of our HSA. That amount and the gain/loss isn't going to make or break our retirement.
I stopped HSA contributions when I retired in Aug 2015, and was late to the HDHP game so only had $16,150 in my account. I've always paid for medical out of pocket, and put most of the HSA account in a S&P 500 index fund. I just looked and the account is currently at $21,375. Of course this fund is not an integral part of my retirement, but the $5k bump up is still a nice bonus.
Yep. I hear you. If we go through another 07-09 span, you might end up with $10,500. That is fine. With three kids we fill it and use it during the year and the balance grows some each year. If the balance keeps growing, I might invest a portion. You have to keep 25% in the HSA. So 75% is invest-able.
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Re: is using HSA as investment vehicle worth the trouble?

Post by neilpilot » Thu Dec 28, 2017 10:31 am

bloom2708 wrote:
Thu Dec 28, 2017 10:17 am
You have to keep 25% in the HSA. So 75% is invest-able.
That must be specific for your HSA. In my Fidelity HSA, over 90% of the balance is invested.

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Re: is using HSA as investment vehicle worth the trouble?

Post by DLEmerg » Thu Dec 28, 2017 11:16 am

I was under the impression that if you don't use it for medical after age 65 you can withdraw money like a 401(k), so regardless it should be a nice investment vehicle, obviously better for medical expenses so you won't pay any taxes, but if you're limited with tax deferred options, HSA is a great way to save.

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Re: is using HSA as investment vehicle worth the trouble?

Post by exigent » Thu Dec 28, 2017 11:28 am

DLEmerg wrote:
Thu Dec 28, 2017 11:16 am
I was under the impression that if you don't use it for medical after age 65 you can withdraw money like a 401(k), so regardless it should be a nice investment vehicle, obviously better for medical expenses so you won't pay any taxes, but if you're limited with tax deferred options, HSA is a great way to save.
Yes, but non-medical distributions at that point are taxable, while those supported by documentation of medical expenses are not taxable.

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Re: is using HSA as investment vehicle worth the trouble?

Post by akpataego » Thu Dec 28, 2017 11:35 am

It's not a hassle at all to me. I just recently started one. I use it like a 401K/IRA and it's a great tax-deferred investment that I don't plan on touching.

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Re: is using HSA as investment vehicle worth the trouble?

Post by J295 » Thu Dec 28, 2017 11:50 am

Definitely worth it for us.

We just enter the information on a spreadsheet as we periodically incur expenses, and put the documentation in a large folder. It takes no time at all doing it periodically.


I’m guessing the chance of an audit on this type of situation are quite low. I’m comfortable with our records in an audit.

HSA Bank has been very easy to work with, and all of our funds are in Wellington

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Re: is using HSA as investment vehicle worth the trouble?

Post by exigent » Thu Dec 28, 2017 11:53 am

akpataego wrote:
Thu Dec 28, 2017 11:35 am
It's not a hassle at all to me. I just recently started one. I use it like a 401K/IRA and it's a great tax-deferred investment that I don't plan on touching.
Are you saving current medical bills to support future withdrawals? That's the only place that the hassle comes in. Otherwise, it's pretty much the same as any other investment account. But I'm starting to realize that I probably don't need to bother with documenting current expenses b/c future expenses will be more than enough to deplete the account.

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Re: is using HSA as investment vehicle worth the trouble?

Post by aj76er » Thu Dec 28, 2017 7:20 pm

I keep the required amount in cash ($2000) and invest the rest in an S&P500 fund.

I pay for co-pays and out-of-pocket expenses from the cash balance (via debit card). Then once or twice a year I log in and invest any excess cash.

The only optimization I've done is to pay out-of-pocket with a points rewards credit card, and then immediately reimburse myself from the HSA.

When first starting the HSA account a few years ago, I thought about doing what you do (eg. keeping receipts for future tax-free withdrawals) but the complexity of record keeping combined with potential Inflation erosion in purchasing power didn't seem worth it to me.
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Re: is using HSA as investment vehicle worth the trouble?

Post by ImUrHuckleberry » Thu Dec 28, 2017 7:36 pm

I just started our HSA last year. Our plan is to keep the family annual out-of-pocket max (about $6000) in cash + medium term bonds and invest the rest in a total market equity index.

We plan to cash flow our relatively cheap expected medical expenses, but want to have the full out-of-pocket amount available in the event we have any high cost medical problems. We are considering this to be another tier of our emergency fund.

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Re: is using HSA as investment vehicle worth the trouble?

Post by edge » Thu Dec 28, 2017 10:32 pm

I use it for current medical expenses and invest the rest.

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Re: is using HSA as investment vehicle worth the trouble?

Post by lynneny » Fri Dec 29, 2017 12:41 am

I max out my HSA contributions every year, and am saving it all for retirement. As a single person who didn't get an HSA-eligible health plan until I was in my 50s, I don't think I'll end up with such a huge balance that I can't spend it all on healthcare in retirement. To minimize paperwork, I just save a few of the biggest receipts for later reimbursement. This year I'll only keep one, for my $1,000 share of a crown at the dentist. My HSA offers low-cost index funds, and for the last few years, my investment earnings have exceeded my contributions.

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Re: is using HSA as investment vehicle worth the trouble?

Post by akpataego » Fri Dec 29, 2017 11:40 pm

exigent wrote:
Thu Dec 28, 2017 11:53 am
akpataego wrote:
Thu Dec 28, 2017 11:35 am
It's not a hassle at all to me. I just recently started one. I use it like a 401K/IRA and it's a great tax-deferred investment that I don't plan on touching.
Are you saving current medical bills to support future withdrawals? That's the only place that the hassle comes in. Otherwise, it's pretty much the same as any other investment account. But I'm starting to realize that I probably don't need to bother with documenting current expenses b/c future expenses will be more than enough to deplete the account.
I believe that after age 65 you can use it for non-medical expenses without the 20% penalty, but you will have to pay income tax (just like withdrawing from a 401K, tIRA etc). That's what I plan on doing. :D I don't plan to use it on medical expenses at all but we'll see where life takes me!

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Re: is using HSA as investment vehicle worth the trouble?

Post by Dottie57 » Fri Dec 29, 2017 11:59 pm

I wish I had started with an HSA earlier. I started in 2012, so just have 21k. Investing has been helpful and added $ to the account. Definitely use this as an investment account.

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Re: is using HSA as investment vehicle worth the trouble?

Post by exigent » Sat Dec 30, 2017 7:47 am

akpataego wrote:
Fri Dec 29, 2017 11:40 pm
exigent wrote:
Thu Dec 28, 2017 11:53 am
akpataego wrote:
Thu Dec 28, 2017 11:35 am
It's not a hassle at all to me. I just recently started one. I use it like a 401K/IRA and it's a great tax-deferred investment that I don't plan on touching.
Are you saving current medical bills to support future withdrawals? That's the only place that the hassle comes in. Otherwise, it's pretty much the same as any other investment account. But I'm starting to realize that I probably don't need to bother with documenting current expenses b/c future expenses will be more than enough to deplete the account.
I believe that after age 65 you can use it for non-medical expenses without the 20% penalty, but you will have to pay income tax (just like withdrawing from a 401K, tIRA etc). That's what I plan on doing. :D I don't plan to use it on medical expenses at all but we'll see where life takes me!
Correct, but if you can support withdrawals with medical documentation, then it’s tax free, too. That’s a huge benefit.

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Re: is using HSA as investment vehicle worth the trouble?

Post by Small Law Survivor » Sat Dec 30, 2017 10:03 am

flamesabers wrote:
Thu Dec 28, 2017 9:50 am
How can you be expected to prove a negative in this sort of situation? When you paid for a legitimate expense and the healthcare provider has no documentation that you were reimbursed, why would the IRS suspect otherwise when there is no smoking gun?
It is possible to prove a negative with a reasonable degree of confidence. The IRS could say: "We see these invoices, but please give us a record of your bank account and credit cards statements, so we can confirm you weren't reimbursed for any of these expenses."

Not saying this would happen, but it still leaves question of the taxpayer's "burden of proof" with some uncertainty.

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Re: is using HSA as investment vehicle worth the trouble?

Post by spankasmurf » Sat Dec 30, 2017 10:54 pm

I see this question being posed about every month. The rules are clear. Either you are willing to go to the trouble of saving/scanning receipts and/or using a spreadsheet to keep records of your health expenses OR it's too much a pain in the ass. To each his own. Not even going to tell y'all what I'm doing, cause it doesn't matter to the next guy who has to do his own thing.

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Re: is using HSA as investment vehicle worth the trouble?

Post by monsterid » Sat Dec 30, 2017 11:37 pm

My employer funds 100% of the HSA limit each year as standard when you choose the HDHP, so it's a bit of a no-brainer for me as my expected medical OOP is less than the HSA yearly cap. Anything I don't use is literally pre-tax free money in an at worst tax deferred account.

It's literally a small 401k with no match, just a company contribution.

I get the complexity, but we are BH's, this is what we do =)

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Re: is using HSA as investment vehicle worth the trouble?

Post by exigent » Sun Dec 31, 2017 11:37 pm

spankasmurf wrote:
Sat Dec 30, 2017 10:54 pm
I see this question being posed about every month. The rules are clear. Either you are willing to go to the trouble of saving/scanning receipts and/or using a spreadsheet to keep records of your health expenses OR it's too much a pain in the ass. To each his own. Not even going to tell y'all what I'm doing, cause it doesn't matter to the next guy who has to do his own thing.
Actually, I've come to realize that the decision might be even more simple... Future medical expenses are likely to be high enough that there may be no need to save/scan/whatever your medical expenses right now, as you'll have more than enough expenses in the future (assuming you keep it through retirement/old age) to cash it all in.

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