should I save in a health savings account (HSA)?

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A Boglehead
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should I save in a health savings account (HSA)?

Post by A Boglehead » Thu Jan 07, 2016 7:28 pm

I am not working right now, and signed up for a high-deductible health insurance policy w/an HSA.

Is it worth saving in an HSA if I'm planning to be back on a regular insurance policy in the next 6 months or so?

My understanding is HSA dollars can't be spent on insurance premiums, and I spent $1,826 on medical & dental expenses in 2014.

When I had a Flexible Spending Account in the past, it was difficult for me to use up the money I saved in it.

Thanks!

mhalley
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Re: should I save in a health savings account (HSA)?

Post by mhalley » Thu Jan 07, 2016 8:07 pm

In your case you can use the hsa as a stealth Ira for medical expenses in the far future. You might consider using a hd plan in the future if you are healthy and can afford the deductable. Be sure not to over contribute if you will only have the hd plan for only six mos.

http://whitecoatinvestor.com/retirement ... ealth-ira/

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Tyr0ne
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Re: should I save in a health savings account (HSA)?

Post by Tyr0ne » Thu Jan 07, 2016 8:20 pm

As you know, unlike FSAs, HSA balances can be carried over indefinitely. HSAs are a bit underrated in my opinion. Remember that with an HSA, you are foregoing tax on those dollars entirely. With a 401k, you are merely deferring tax (which could actually hurt you if tax rates in this country shoot up). I read an article recently advocating for maxing out your HSA first, although I think the costs can be an important factor. The HSA maximum contribution limits are modest, and medical expenses can add up incredibly fast. Plus, in the end, if you really think you oversaved in the HSA, I believe you can just withdrawal from it at age 65 penalty-free, and pay income tax as if it were just an IRA.

Edit: in practice, the investment options in HSAs are probably always pretty pathetic, so I would never substitute an HSA for a retirement account over the long haul. HSAs are usually poor savings vehicles. So I suppose I would only contribute to the HSA to the extent you may use the funds in the near future. If your "regular insurance policy" is a really good one, it may not be worthwhile to contribute to an HSA at all.
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grabiner
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Re: should I save in a health savings account (HSA)?

Post by grabiner » Thu Jan 07, 2016 9:07 pm

Tyr0ne wrote:Edit: in practice, the investment options in HSAs are probably always pretty pathetic, so I would never substitute an HSA for a retirement account over the long haul. HSAs are usually poor savings vehicles. So I suppose I would only contribute to the HSA to the extent you may use the funds in the near future. If your "regular insurance policy" is a really good one, it may not be worthwhile to contribute to an HSA at all.
If you are eligible for an HSA, there are several providers who offer good investment options, such as Vanguard funds or discount brokerage accounts. Thus, if your HSA gets large enough to be worth investing, you can invest it at a very low cost, to save for health costs in retirement.
Wiki David Grabiner

terran
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Re: should I save in a health savings account (HSA)?

Post by terran » Thu Jan 07, 2016 9:51 pm

Be careful with how much you contribute. If you aren't enrolled in an HDHP the whole year you can't make a full contribution. The instructions for form 8889 should help: https://www.irs.gov/pub/irs-pdf/i8889.pdf

daveatca
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Yup

Post by daveatca » Fri Jan 08, 2016 12:11 pm

A Boglehead wrote:Is it worth saving in an HSA if I'm planning to be back on a regular insurance policy in the next 6 months or so?
Yes!

When you are an old fart like me, you will appreciate "For those over age 65 premiums for Medicare Part A or B, Medicare HMO can be paid from an HSA."

GMan82
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Re: should I save in a health savings account (HSA)?

Post by GMan82 » Fri Jan 08, 2016 12:32 pm

Tyr0ne wrote: Edit: in practice, the investment options in HSAs are probably always pretty pathetic, so I would never substitute an HSA for a retirement account over the long haul. HSAs are usually poor savings vehicles. So I suppose I would only contribute to the HSA to the extent you may use the funds in the near future. If your "regular insurance policy" is a really good one, it may not be worthwhile to contribute to an HSA at all.
Check out the White Coat Investor's site for some information on HSA providers with good options. Mine is through a university, hosted by PayFlex Direct. Most of the options are awful, but they have SWPPX (Scwhab 500 index fund ER 0.09) and VGTSX (VG total international), so I took those 2 options and remain 100% stock in my HSA. Plus the fee is $2/monthly and $1000 minimum in savings account before investing. I thought it a good deal.

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