POLL: Do you use your HSA funds to pay for medical expenses?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills

Do you currently use your HSA funds to pay for eligibles medical expenses?

Poll ended at Sat Jan 18, 2014 2:00 pm

No, I don't have an HSA.
28
20%
No, I have HSA funds, but I use taxable funds instead.
75
54%
Yes, I use my HSA funds, but I'm not investing in taxable anyway.
15
11%
Yes, I use my HSA funds, even though I'm also investing in taxable.
22
16%
 
Total votes: 140

User avatar
VictoriaF
Posts: 19500
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by VictoriaF »

stoptothink wrote:I have had an HSA for a little over 2yrs and have yet to have a single healthcare expense, so I guess I'll let you know. Depending on the expense I am definitely leaning towards not using HSA funds.
Even if you feel well, you should still do the annual physicals. With my HDHP (High-Deductible Health Plan), the physicals are free.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
an_asker
Posts: 2742
Joined: Thu Jun 27, 2013 2:15 pm

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by an_asker »

VictoriaF wrote:
stoptothink wrote:I have had an HSA for a little over 2yrs and have yet to have a single healthcare expense, so I guess I'll let you know. Depending on the expense I am definitely leaning towards not using HSA funds.
Even if you feel well, you should still do the annual physicals. With my HDHP (High-Deductible Health Plan), the physicals are free.

Victoria
I should probably ask this question on a standalone thread, but I sometimes wonder if my physician is ethical ... let me explain.

I have a couple of medical conditions such as low vitamin B-12 (vegetarian), vitamin D (indoor worker, so not enough exposure to sunlight), low grade hypertension (sedentary lifestyle). On the advice (and prescriptions) from the doctor, have been keeping the conditions in check.

I went to the doctor strictly for a routine annual physical that is supposedly covered by the HDHP, only to get a bill (after insurance) exceeding $100. The lady has charged me for the above conditions and made an office visit out of it.

What I don't know is whether it is ethical for her to:

a) to convert my physical to an 'office visit' because she had to add checks for the vitamins in the bloodwork paperwork
b) perform extra tests supposedly related to the hypertension onsite (also not covered by insurance under the general annual physical umbrella).

LadyGeek: If the above is outside the norms (though I am strictly asking it from the financial standpoint - actionable because maybe I should consider changing my physicians if most physicians would not charge the way she does), please go ahead and delete the entire post.
User avatar
tadamsmar
Posts: 9090
Joined: Mon May 07, 2007 12:33 pm

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by tadamsmar »

Spirit Rider wrote:
tadamsmar wrote:
pshonore wrote:
tadamsmar wrote: The executor move would move the money from the HSA to the estate. Sometimes that's a good move, but I don't know the details. In some cases, execution of the estate is the last opportunity to use the old qualified expenses to make tax-free withdrawals.

If the wife inherits the HSA, I don't know if she "inherits" all of the deceased's qualified expenses from the distant past. I would guess that she does.
There has been no guidance or rulings from the IRS regarding the inheritance of HSA accounts. This is what the law and regulations plain language say:

With a non-spouse beneficiary, the HSA stops being an HSA on the date of death. The entire balance is distributed as a non-qualified distribution, but there is no penalty. The beneficiary may claim qualified distributions for expenses incurred, but not yet paid. There is no provision for expenses paid, but not yet distributed. It is an open question.

With a spouse beneficiary, the HSA becomes the HSA of the spouse to treat as her own for future expenses. What is not clear, are expenses not paid or not distributed available for distribution? It would certainly seem that a spouse would have at least the rights of a non-spouse beneficiary and be able to submit qualified distributions for bills not paid at time of death. It would also seem, that a spouse should have more rights and be able to submit qualified distributions for expenses paid, but not yet distributed.

The only time an executor should get involved should be if the estate is named as the beneficiary or there is no beneficiary. There is precedence in IRAs to suggest that if the spouse is the only beneficiary of the estate that the spouse might be able to take ownership of the HSA in that case also.

Hopefully, the IRS will provide clear guidance or rulings on the HSA inheritance issue. It is certainly something to think about. Especially if you have a non-spouse beneficiary. It is also probably prudent if advance notice is available to submit all pending qualified distributions before death.
I was apparently wrong that the executor can make tax free withdrawals, but the beneficiary can:
The amount taxable to a beneficiary other than the estate is reduced by any qualified medical expenses for the decedent that are paid by the beneficiary within 1 year after the date of death.
http://www.irs.gov/publications/p969/ar02.html

Not sure if the spouse is limited to 1 year after death to use the qualified expenses of her deceased husband.

Looks like everyone with an HSA used for investing should make arrangements for their primary and secondary beneficiaries to be able to locate these records.

Note that the beneficiary does not (strictly speaking) need the records to make tax-free withdrawals, but they could be needed in a IRS audit.
Last edited by tadamsmar on Fri Dec 20, 2013 3:15 pm, edited 2 times in total.
User avatar
VictoriaF
Posts: 19500
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by VictoriaF »

an_asker wrote:
VictoriaF wrote:
stoptothink wrote:I have had an HSA for a little over 2yrs and have yet to have a single healthcare expense, so I guess I'll let you know. Depending on the expense I am definitely leaning towards not using HSA funds.
Even if you feel well, you should still do the annual physicals. With my HDHP (High-Deductible Health Plan), the physicals are free.

Victoria
I should probably ask this question on a standalone thread, but I sometimes wonder if my physician is ethical ... let me explain.

I have a couple of medical conditions such as low vitamin B-12 (vegetarian), vitamin D (indoor worker, so not enough exposure to sunlight), low grade hypertension (sedentary lifestyle). On the advice (and prescriptions) from the doctor, have been keeping the conditions in check.

I went to the doctor strictly for a routine annual physical that is supposedly covered by the HDHP, only to get a bill (after insurance) exceeding $100. The lady has charged me for the above conditions and made an office visit out of it.

What I don't know is whether it is ethical for her to:

a) to convert my physical to an 'office visit' because she had to add checks for the vitamins in the bloodwork paperwork
b) perform extra tests supposedly related to the hypertension onsite (also not covered by insurance under the general annual physical umbrella).

LadyGeek: If the above is outside the norms (though I am strictly asking it from the financial standpoint - actionable because maybe I should consider changing my physicians if most physicians would not charge the way she does), please go ahead and delete the entire post.
When I am going for an annual physical, my doctor sends me for a complete blood test. Once, one of the parameters was outside the recommended range and my doctor sent me for another test for the same chemical. The second time, the results were normal, and I was charged for that specific test. However, my initial physical was not converted into an "office visit" and my follow up communications with the doctor were via their messaging system.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
User avatar
wander
Posts: 3342
Joined: Sat Oct 04, 2008 9:10 am

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by wander »

VictoriaF wrote: Even if you feel well, you should still do the annual physicals. With my HDHP (High-Deductible Health Plan), the physicals are free.
Victoria
They charged me left and right for normal check up this year. I am healthy so I only need blood screening, but still have to pay few hundred dollars from my HSA account.
an_asker
Posts: 2742
Joined: Thu Jun 27, 2013 2:15 pm

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by an_asker »

wander wrote:
VictoriaF wrote: Even if you feel well, you should still do the annual physicals. With my HDHP (High-Deductible Health Plan), the physicals are free.
Victoria
They charged me left and right for normal check up this year. I am healthy so I only need blood screening, but still have to pay few hundred dollars from my HSA account.
First, call the insurance and ask them what specifically resulted in the charges. Then, confirm with them that those were not part of the normal annual physical ... and why!! Then, confront the doctor's office as to why they were out of the normal annual physical (ask them to resubmit with the proper codes).
an_asker
Posts: 2742
Joined: Thu Jun 27, 2013 2:15 pm

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by an_asker »

VictoriaF wrote:When I am going for an annual physical, my doctor sends me for a complete blood test. Once, one of the parameters was outside the recommended range and my doctor sent me for another test for the same chemical. The second time, the results were normal, and I was charged for that specific test. However, my initial physical was not converted into an "office visit" and my follow up communications with the doctor were via their messaging system.

Victoria
Well, that is different. In your case, before you first went, you were supposedly normal. In my case, she had diagnosed me as low on those two vitamins and the hypertension a year ago. So, my situation does not really match your example.
jlawrence01
Posts: 1660
Joined: Mon Feb 25, 2013 1:34 am
Location: Southern AZ

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by jlawrence01 »

VictoriaF wrote:As much as I like to think of myself as a contrarian, in this poll I am with the majority. My HSA plays the role of an after-tax/tax-deferred/tax-free-withdrawal IRA.

Victoria
We do too.

I think that we have $35k saved up already.
User avatar
VictoriaF
Posts: 19500
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by VictoriaF »

an_asker wrote:
VictoriaF wrote:When I am going for an annual physical, my doctor sends me for a complete blood test. Once, one of the parameters was outside the recommended range and my doctor sent me for another test for the same chemical. The second time, the results were normal, and I was charged for that specific test. However, my initial physical was not converted into an "office visit" and my follow up communications with the doctor were via their messaging system.

Victoria
Well, that is different. In your case, before you first went, you were supposedly normal. In my case, she had diagnosed me as low on those two vitamins and the hypertension a year ago. So, my situation does not really match your example.
I agree that it's not a very good match. But here are some questions:
1. If your doctor has diagnosed you with some conditions, does it mean that you are not eligible for free checkups?
2. If your conditions disappear would she still consider your checkups "office visits" because she would be watching out for these conditions?
3. Can you (meaning your insurance and doctor) decouple the general check up and the specific conditions?

One easy fix is to authorize a free blood test and then charge only for second tests of the vitamins you are deficient in. I gave my own example to illustrate this possibility.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
User avatar
wander
Posts: 3342
Joined: Sat Oct 04, 2008 9:10 am

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by wander »

an_asker wrote: First, call the insurance and ask them what specifically resulted in the charges. Then, confirm with them that those were not part of the normal annual physical ... and why!! Then, confront the doctor's office as to why they were out of the normal annual physical (ask them to resubmit with the proper codes).
I called the Insurance company, but they didn't back me up. They said that they were at no position to reject a doctor's or lab's claim and told me to talk with my doctor. I didn't want to argue much with the doctor over it but I will be careful from now on or just switch to a different doctor.
aw82
Posts: 114
Joined: Fri Oct 25, 2013 3:40 pm

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by aw82 »

We don't treat my HSA as an investment vehicle (we're not currently maxing our other tax-advantaged space). My employer contributes $1,200 per year to my HSA and we use a fair amount of it for medical expenses (multiple sick visits per year for two young children). We also contributed our own money prior to the birth of each of our children in order to get the deduction. Our total medical expenses are below the deductible threshold, so this seems like the best way to minimize taxes.

My old job's HSA was through Wells Fargo, which started charging me $4/mo maintenance after I left the job (like another poster's experience). I was glad I hadn't socked away tons of money in it.
Spirit Rider wrote:It doesn't have to be all or nothing. You could pay small bills with the HSA and large bills with taxable. This minimizes the number of receipts to keep long term, while deferring the majority of the assets long term.

For someone who doesn't have the funds to contribute to their HSA and also pay all qualified medical expenses out of pocket, they can do the opposite. Pay the large bills with the HSA and the small bills with taxable. This might allow them to maximize the tax/FICA benefits and use those savings to defer some amount.

Or any other scheme that might fit someone's goals. Remember, not everyone can afford to make the max contribution and not everyone can then afford to pay all expenses out of taxable.

This forum has the tendency to advocate taking the maximum advantage of all tax deferred opportunities. We need to keep in mind that not everyone has the resources to do so. However, the tax/FICA benefit is so great, that should be the first priority, with long term accrual for those with the resources and willingness to do so.
Interesting. I guess I don't know enough about my HSA to fully understand what you are talking about, though, or how to apply it in my situation.
User avatar
torius71
Posts: 275
Joined: Sun Apr 24, 2011 10:39 pm

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by torius71 »

natureexplorer wrote:
LH wrote:I have a single credit card that I use for all medical expenses, (its not the HSA card). I save all medical bills each year, staple then together, and then put them in a box, along with the year end credit card reciept.
That sounds like a good strategy, thanks for sharing. But what safe guard do you have towards losing those receipts? Houses burn down I imagine.

Losing $10,000 worth of medical receipts would translate to a loss of $2,500 loss if the HSA withdrawal is done while in the 25% tax bracket. I imagine some families will accumulate much more than that over decades of medical expenses. It seems like there is quite a bit of risk in return for a strategy that is only likely to save a relatively small amounts.
Assuming we're referring to 10,000 in today's dollars, correct? Wouldn't inflation erode the deduction value of medical expenses incurred early in ones lifetime?
Last edited by torius71 on Fri Dec 20, 2013 9:04 pm, edited 1 time in total.
"A new truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it."-MP
stoptothink
Posts: 8458
Joined: Fri Dec 31, 2010 9:53 am

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by stoptothink »

VictoriaF wrote:
stoptothink wrote:I have had an HSA for a little over 2yrs and have yet to have a single healthcare expense, so I guess I'll let you know. Depending on the expense I am definitely leaning towards not using HSA funds.
Even if you feel well, you should still do the annual physicals. With my HDHP (High-Deductible Health Plan), the physicals are free.

Victoria
It depends on the person, for me it is pointless. A physical with a full blood panel every 5yrs, absolutely, but a normal annual physical where a PA spends 5mins weighing and taking my blood pressure, then asking a handful of questions about my lifestyle and aches & pains is a waste of time. I am young (32), extremely healthy, preventive medicine is my career, and can do everything performed during a conventional physical myself. I had a mandatory physical when I started my new job 2yrs ago and my GP (a friend and professional colleague) thought it was funny.
User avatar
VictoriaF
Posts: 19500
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by VictoriaF »

stoptothink wrote:
VictoriaF wrote:
stoptothink wrote:I have had an HSA for a little over 2yrs and have yet to have a single healthcare expense, so I guess I'll let you know. Depending on the expense I am definitely leaning towards not using HSA funds.
Even if you feel well, you should still do the annual physicals. With my HDHP (High-Deductible Health Plan), the physicals are free.

Victoria
It depends on the person, for me it is pointless. A physical with a full blood panel every 5yrs, absolutely, but a normal annual physical where a PA spends 5mins weighing and taking my blood pressure, then asking a handful of questions about my lifestyle and aches & pains is a waste of time. I am young (32), extremely healthy, preventive medicine is my career, and can do everything performed during a conventional physical myself. I had a mandatory physical when I started my new job 2yrs ago and my GP (a friend and professional colleague) thought it was funny.

I understand your point. I like my physicals because my doctor's office is in the Foggy Bottom area of D.C. (affiliated with the GWU hospital), and I combine my visits with some other activities. I like my doctor; last time we talked about Behavioral Economics. But most of all, I like being found healthy.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
tbradnc
Posts: 1524
Joined: Wed Apr 02, 2008 8:30 am

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by tbradnc »

What a great thread, thanks everyone. I've already created an account at HSA Bank and will fully fund it ($7550 with spouses $1000 catchup contribution) on January 2, 2014. 100% of the funds are in the bank account / debit card option to get started.

As for the poll, we'll also be using HSA funds to pay medical expenses in the current year while investing in taxable. The way I understand it there are 2 money saving/earning components to an HSA- the first it the immediate tax deduction for contributions and the second is the tax deferred growth of the funds over time.

I'm happy to accept only the tax deductibility aspect while we're getting started but it would be great to have long streak of good health so the funds could grow.. :)
tbradnc
Posts: 1524
Joined: Wed Apr 02, 2008 8:30 am

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by tbradnc »

There's probably a more appropriate thread for this but one thing I learned about HSA's is that we can't use the funds for our children we insure but no longer claim as dependents on our return.

So, if my 20 year old college student daughter who is on our insurance policy has a $3500 procedure ($3500 is her deductible with our HDHP) we can't use a penny of the HSA money as an allowed expense if we don't claim her on our return.
User avatar
hoppy08520
Posts: 2164
Joined: Sat Feb 18, 2012 11:36 am

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by hoppy08520 »

aw82 wrote:We don't treat my HSA as an investment vehicle (we're not currently maxing our other tax-advantaged space). My employer contributes $1,200 per year to my HSA and we use a fair amount of it for medical expenses (multiple sick visits per year for two young children). We also contributed our own money prior to the birth of each of our children in order to get the deduction. Our total medical expenses are below the deductible threshold, so this seems like the best way to minimize taxes.

My old job's HSA was through Wells Fargo, which started charging me $4/mo maintenance after I left the job (like another poster's experience). I was glad I hadn't socked away tons of money in it.
Spirit Rider wrote:It doesn't have to be all or nothing. You could pay small bills with the HSA and large bills with taxable. This minimizes the number of receipts to keep long term, while deferring the majority of the assets long term.

For someone who doesn't have the funds to contribute to their HSA and also pay all qualified medical expenses out of pocket, they can do the opposite. Pay the large bills with the HSA and the small bills with taxable. This might allow them to maximize the tax/FICA benefits and use those savings to defer some amount.

Or any other scheme that might fit someone's goals. Remember, not everyone can afford to make the max contribution and not everyone can then afford to pay all expenses out of taxable.

This forum has the tendency to advocate taking the maximum advantage of all tax deferred opportunities. We need to keep in mind that not everyone has the resources to do so. However, the tax/FICA benefit is so great, that should be the first priority, with long term accrual for those with the resources and willingness to do so.
Interesting. I guess I don't know enough about my HSA to fully understand what you are talking about, though, or how to apply it in my situation.
For your situation, if you're not maximizing contributions to all your tax-advantaged accounts, then there's a good argument to be made that you should invest in this priority order:

1. Contribute to 401(k) plan(s) up to the point you get the maximum employer match(es).
2. If you can save more, then contribute to the HSA until you max it out.
3. If you can contribute more, then either:
3a. Contribute more to 401(k) if you want to prioritize pre-tax contributions, or
3b. Contribute to Roth IRA if you want to prioritize Roth contributions (and if you're eligible)

See this for more:
Why Fund an HSA Instead of an IRA or 401k

For example, suppose you are contributing $100 to retirement accounts in this manner, and also spending $50 for medical expenses:

Option A: Spend down HSA and contribute to Roth IRA
+$50 to HSA
-$50 from HSA to pay medical bills
+$100 to Roth IRA
NET: $100 in IRA, $0 in HSA

Option B: Spend down HSA and contribute to 401(k) (similar to Option A)
+$50 to HSA
-$50 from HSA to pay medical bills
+$100 to 401(k)
NET: $100 in 401(k), $0 in HSA

Instead, do this:
Option C: Prioritize HSA over IRA/401(k) and pay medical bills with cash:
+$100 to HSA, but leave it there - don't reimburse yourself for medical bills
-$50 to pay for medical bills, from regular cash flow and NOT from HSA reimbursement
NET: $0 in IRA/401(k), $100 in HSA

Option C (HSA) is better than Option A (Roth) because when you direct your contributions to your HSA over the Roth IRA, you get to lower your taxes today and you still get all the same benefits of the Roth IRA, which is tax-free distributions (if used for medical expenses).

Option C (HSA) is also better than Option B (401(k)) because HSA contributions lower your FICA income whereas 401(k) contributions do not. This makes the HSA better than a 401(k) on the contribution-side. On the withdrawal side, the HSA is better than a 401(k) because HSA withdrawals are tax-free (if used for medical expenses) whereas 401(k) (and traditional IRA) withdrawals are taxable income.

Here's how HSA lowers your FICA income. We pay 6.2% FICA tax on wages up to a limit of $113,700 (2013 tax year). If you can lower your FICA income by $5,450 (lets assume employer kicks in $1,000) with HSA contributions, then you don't have to pay 6.2% on $5,450, which is $337. If, instead, you directed that $5,450 to your pre-tax 401(k), then you will pay FICA tax on that amount. Either way, your AGI and taxable income will be lower by $5,450 in both cases.

Bottom line, if you're not maximizing all your tax-advantaged space, the first account you should maximize is your HSA (but only after you've made sure to get the maximum 401(k) employer match, if any).
aw82
Posts: 114
Joined: Fri Oct 25, 2013 3:40 pm

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by aw82 »

hoppy08520 wrote: Bottom line, if you're not maximizing all your tax-advantaged space, the first account you should maximize is your HSA (but only after you've made sure to get the maximum 401(k) employer match, if any).
Thanks for your response!

Does your answer change if my HSA has no investment options--only a 0.05% savings option?
User avatar
hoppy08520
Posts: 2164
Joined: Sat Feb 18, 2012 11:36 am

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by hoppy08520 »

aw82 wrote:
hoppy08520 wrote: Bottom line, if you're not maximizing all your tax-advantaged space, the first account you should maximize is your HSA (but only after you've made sure to get the maximum 401(k) employer match, if any).
Thanks for your response!

Does your answer change if my HSA has no investment options--only a 0.05% savings option?
Aw82 you can still do HSA even if your employer has a bad or limited HSA plan. Open a second HSA wherever you like. Search threads on this site for suggestions for other custodians preferred by Bogleheads. Then, once a year, transfer the balance from your employment-based HSA to your preferred HSA. This is not a taxable event. Read here for more: http://www.fivecentnickel.com/2010/10/2 ... custodian/.
jds13
Posts: 7
Joined: Mon Mar 03, 2014 2:50 pm

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by jds13 »

Like the majority of respondents here, I use my HSA as a tax-deferred savings account and pay my very modest medical expenses from taxable funds.

The big annoyance for me is that California (like New Jersey and Alabama) taxes HSAs as ordinary savings accounts - which means that I have to pay taxes on the annual interest and dividends, and I have to keep track of the taxable basis. The strategy makes sense but the hassle is out of proprotion to the size of the account.

Stanford Federal Credit Union offers no-fee HSAs. If you also open checking or savings with automatic deposit, they pay 1.51% per annum on the account.

Great thread - thanks!
letsgobobby
Posts: 12073
Joined: Fri Sep 18, 2009 1:10 am

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by letsgobobby »

jds13 wrote:Like the majority of respondents here, I use my HSA as a tax-deferred savings account and pay my very modest medical expenses from taxable funds.

The big annoyance for me is that California (like New Jersey and Alabama) taxes HSAs as ordinary savings accounts - which means that I have to pay taxes on the annual interest and dividends, and I have to keep track of the taxable basis. The strategy makes sense but the hassle is out of proprotion to the size of the account.

Stanford Federal Credit Union offers no-fee HSAs. If you also open checking or savings with automatic deposit, they pay 1.51% per annum on the account.

Great thread - thanks!
Interesting tip. For someone using a family plan whose income excludes the SS max, it's probably worth switching to SFCU because while you'll give up the 1.45% Medicare tax avoidance = $100 more or less, you also earn 1.5% on the total (say $6550) = $100. Plus you avoid all the nuisance fees which a place like HSA Bank charges; $36 per year in my case. On the other hand I don't believe there's another way to access TD Ameritrade's HSA program unless you go through HSA bank, so this would only work for someone planning to leave their HSA money in a low risk savings account.
Code Commit
Posts: 138
Joined: Mon Mar 04, 2013 11:42 am

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by Code Commit »

letsgobobby wrote:On the other hand I don't believe there's another way to access TD Ameritrade's HSA program unless you go through HSA bank, ..
http://thefinancebuff.com/best-hsa-prov ... money.html and follow-up http://thefinancebuff.com/elfcu-hsa-setup.html

Disclosure: I still use the HSA Bank / TDAM setup.
User avatar
Hub
Posts: 437
Joined: Fri Jul 13, 2012 8:56 am

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by Hub »

I'm trying to wrap my head around using the HSA for expenses for someone maxing all tax advantaged space and investing everything else in taxable. Basically, every bill I pay out of pocket pre-pays my federal and FICA taxes while simultaneously preventing me from investing the bill amount in taxable.

The calculation of what would be ideal hurts my head a bit, but I tend to err on the side of deferring the payment of taxes whenever possible as a general rule. For the record, I'm a few years in to maxing my HSA and haven't ever used it, but I'm thinking I need to look at this more closely.
Sagenick48
Posts: 339
Joined: Sat Nov 02, 2013 8:22 am

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by Sagenick48 »

To answer the initial question, I follow the strategy, keep the receipts, which in my case are less than $1000 a year, even with seemingly annual visits to the neighborhood clinic for some minor cut, infection, or wood tick bite, but in my case the amount in the account is not enough to justify keeping track if I wasn't so anal about record keeping.
The market goes up, the market goes down.
User avatar
Hexdump
Posts: 1621
Joined: Fri Oct 10, 2008 7:28 am
Location: Houston, Texas

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by Hexdump »

What I plan to do and it's still open for discussion is to pay any medical expenses up to the yearly budgeted amount. I figured that those have been accounted for and that it will be anything over $5,000 that we will withdraw from the HSA. We do plan on maxing out the HSA contribution each year.
This is only the 2nd year that we have had an HSA.
aw82
Posts: 114
Joined: Fri Oct 25, 2013 3:40 pm

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by aw82 »

Regarding FICA, can I only avoid FICA if the contributions are payroll deductions? Stated differently, if I make a contribution from my savings account to my HSA, is there any way to recover FICA taxes?
davebarnes
Posts: 542
Joined: Wed Jan 02, 2008 7:06 pm
Location: Berkeley, Denver, Colorado USA

Sometimes

Post by davebarnes »

I did not until I won the Colon Cancer Lottery.
Now using the HSA for the $5K in expenses.
A nerd living in Denver
User avatar
mhc
Posts: 4192
Joined: Mon Apr 04, 2011 10:18 pm
Location: NoCo

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by mhc »

aw82 wrote:Regarding FICA, can I only avoid FICA if the contributions are payroll deductions? Stated differently, if I make a contribution from my savings account to my HSA, is there any way to recover FICA taxes?
Must be payroll deductions to avoid FICA taxes on the money.
derringer
Posts: 48
Joined: Fri Dec 05, 2008 2:47 pm

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by derringer »

I think the record keeping is exaggerated. I keep a single file folder with all of the receipts for that tax year and a single piece of paper printed from an Quicken/excel spreadsheet with the itemized totals. This year I am going to take a few hours and scan them all in and backup the files offsite, to account for the possibility of a fire, etc.

But, realistically, your looking at a few hours a year. The benefits of having money you can pull out at any time earn investment return for you over a number of years + the avoidance of FICA taxes is well worth it. Heck, I figure the avoidance of FICA pays for the record keeping time, and the inherent benefits of the account over other retirement containers is gravy.
jds13
Posts: 7
Joined: Mon Mar 03, 2014 2:50 pm

Re: Sometimes

Post by jds13 »

davebarnes wrote:I did not until I won the Colon Cancer Lottery.
Now using the HSA for the $5K in expenses.
I'm very sorry to read about your illness and hope things have gone well for you.

I recently fell of my bike and have $11,000 in uninsured dental repairs for 2015. Fortunately, I can afford to pay this out of other savings so I'm leaving my HSA money in the account and deducting medical expenses on my 2015 Form 1040. For the medical expense deduction you can include health insurance premiums, which (sadly) puts the total well over 10% of AGI. The effect is that I'm paying the dental expenses with tax-deductible dollars, an effect similar to using HSA money (but California-deductible, too, unlike the HSA! And California cuts it off at 7.5%.).

I plan to take steps to minimize AGI, like making a deductible IRA contribution and asking my employer to defer some compensation. I'll also shop for prescription sunglasses and get in all those doctor visits my significant other has been nagging me about.

I have a high degree of confidence I'll need the HSA money at some point in the future so I will let it accumulate tax-free in the meantime.
555
Posts: 4955
Joined: Thu Dec 24, 2009 7:21 am

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by 555 »

Question: For retirees, how much are you spending per year on reimbursable medicare insurance?

To the OP's question, I would not withdraw anything pre-retirement, but after retirement I think I will drain it as soon as I can with qualified expenses.
User avatar
Noobvestor
Posts: 5650
Joined: Mon Aug 23, 2010 1:09 am

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by Noobvestor »

letsgobobby wrote:It increases our Roth IRA space by more than 50% per year. Not going to waste that on medical expenses if I don't have to.
I'm confused - does an HSA have both the best properties of a tax-deferred and a post-tax account? I.e. You don't pay taxes on the money you put in and you don't pay taxes when you take it out?
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
User avatar
grabiner
Advisory Board
Posts: 28205
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by grabiner »

Noobvestor wrote:
letsgobobby wrote:It increases our Roth IRA space by more than 50% per year. Not going to waste that on medical expenses if I don't have to.
I'm confused - does an HSA have both the best properties of a tax-deferred and a post-tax account? I.e. You don't pay taxes on the money you put in and you don't pay taxes when you take it out?
That is exactly its advantage. Contributions are tax-deductible (or tax-free if made from payroll deduction), and withdrawals for medical expenses are not taxed.
Wiki David Grabiner
jebmke
Posts: 11626
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by jebmke »

grabiner wrote:That is exactly its advantage. Contributions are tax-deductible (or tax-free if made from payroll deduction), and withdrawals for medical expenses are not taxed.
About as close to money laundering as you can legally get.
When you discover that you are riding a dead horse, the best strategy is to dismount.
DFrank
Posts: 474
Joined: Thu Mar 20, 2014 10:44 pm
Location: North Idaho

Re: POLL: Do you use your HSA funds to pay for medical expen

Post by DFrank »

I have not been using my HSA to pay for medical expenses. I've not had any large medical costs, and as long as that is the case my plan is to save my HSA funds for that possibility down the road.
Dave
Post Reply