Use HSA money or pay out of pocket?

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miamivice
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Use HSA money or pay out of pocket?

Post by miamivice » Mon Jan 08, 2018 6:48 pm

I recently switched to a high deductible plan with an HSA. For 2018, I'm maxing out the HSA ($6500) plus receive a small employer contribution. I just set my investment preferences, and turns out, the fund options we can invest in are low cost passive funds, so I am really happy about that.

My question is, it is generally considered better to pay out of pocket for medical expenses under the deductible and invest/save the HSA money for the future, or to use the HSA money today?

Since the HSA money is triple tax benefitted, and most everyone will have a lot of medical expenses in retirement, my initial thoughts are it is better to use the HSA as an additional retirement account and pay out of pocket for medical expenses throughout the year, as long as we're financially able to do so.

jebmke
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Re: Use HSA money or pay out of pocket?

Post by jebmke » Mon Jan 08, 2018 6:52 pm

I think it depends how close you are to retirement (ie., what is the opportunity) and how much you want to deal with the administrative burden.

I saved paper for a few years but then later decided to just process it on a yearly basis and reimburse myself. I didn't want the administrative hassle down the road.
When you discover that you are riding a dead horse, the best strategy is to dismount.

miamivice
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Re: Use HSA money or pay out of pocket?

Post by miamivice » Mon Jan 08, 2018 6:54 pm

jebmke wrote:
Mon Jan 08, 2018 6:52 pm
I think it depends how close you are to retirement (ie., what is the opportunity) and how much you want to deal with the administrative burden.

I saved paper for a few years but then later decided to just process it on a yearly basis and reimburse myself. I didn't want the administrative hassle down the road.
Can you explain what you mean by "save paper" and "administrative burden"? I am new to HSAs, but was thinking that it'd accure in an account like retirement, and then later when I have expenses I reimburse myself later. I am not sure what you mean by administrative burden.

I'm between 17-27 years from retirement. At around $8000 a year, I figure I might be able to end up with $250,000 at time of retirement of HSA money, which might be overkill but also pretty sweet.

malabargold
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Re: Use HSA money or pay out of pocket?

Post by malabargold » Mon Jan 08, 2018 6:59 pm

We always invest ours in stock ETF’s for remote future use,
but it always comes down to what your’re invested in and how soon your need to start draw down will be

harvestbook
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Re: Use HSA money or pay out of pocket?

Post by harvestbook » Mon Jan 08, 2018 7:16 pm

We use ours as a current-expense fund but never really spend much of it so it keeps growing. I look at it as the best of both worlds-- saving certain tax-free money today while also saving some for uncertain spending ahead (I mean, I'd hate to die and never get to spend my HSA money!) But there are no real wrong ways to do it. As long as you take advantage of the max each year, you're winning, and only hindsight will reveal what would've been the best possible path.
I'm not smart enough to know, and I can't afford to guess.

J295
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Re: Use HSA money or pay out of pocket?

Post by J295 » Mon Jan 08, 2018 7:29 pm

We pay out of pocket and have a spreadsheet with expenses and a large envelop with documentation stuffed inside. Nothing fancy and easy for us to administer (and I suspect the risks of audit/hassles on an HSA are quite small). Will use funds later on if/when necessary. We us HSA bank and are invested in Vanguard Wellington.

WannabeBogleHead01
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Re: Use HSA money or pay out of pocket?

Post by WannabeBogleHead01 » Mon Jan 08, 2018 8:16 pm

In another HSA thread, a doctor commented (and I’m paraphrasing here)...

Knowing the “later in life” medical costs, I just keep adding to it, and pay current bills out of pocket. The HSA money will not be wasted.

Worked for me. Stopped saving receipts that day.

Pops1860
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Re: Use HSA money or pay out of pocket?

Post by Pops1860 » Mon Jan 08, 2018 8:39 pm

We only had access to HDHP/HSA option for a few years before we retired, so may not be best example, but here's what worked for us.

While still working/contributing, used HSA funds for current expenses, but never really spent much of it, so it kept growing (yes, thank you harvestbook for succinct wording to copy :) ). Then upon retirement, continued to draw down account for expenses. Then, when account was at point that 'minimum balance not maintained fees' would start accruing, we cashed out the complete remaining balance, as reimbursement for several years of Medicare premium payments (some, but not all, Medicare-related premiums are eligible for HSA reimbursement), which were documented very well, thank you, by the Fed Government itself in our SS tax forms (SSA-1099s).

We always saw the benefit of the HSA option as the tax-avoidance when using the HSA account for qualified medical expenses. So, maybe best suggestion is, whatever plan you follow, make sure it plans on using up the funds for qualified medical expenses before something happens and this benefit is lost. Thinking of HSAs primarily as retirement funds potentially risks missing this perspective, unless you mean 'retirement funds for medical expenses' while still around.

And maybe I'm mis-reading your original post, but make sure you check that the allowable HSA contribution limit each year includes employer contributions, not just your own personal contributions.

jebmke
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Re: Use HSA money or pay out of pocket?

Post by jebmke » Mon Jan 08, 2018 9:01 pm

miamivice wrote:
Mon Jan 08, 2018 6:54 pm
Can you explain what you mean by "save paper" and "administrative burden"?
By this I mean saving all the receipts from medical expenses over the years to cash in later.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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whodidntante
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Re: Use HSA money or pay out of pocket?

Post by whodidntante » Mon Jan 08, 2018 9:09 pm

I let mine grow for old age. I take pictures of receipts and save those. I might consider using it early during a long period of unemployment.

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Re: Use HSA money or pay out of pocket?

Post by nanoanalyzer » Mon Jan 08, 2018 9:22 pm

miamivice wrote:
Mon Jan 08, 2018 6:48 pm
For 2018, I'm maxing out the HSA ($6500) plus receive a small employer contribution.
Not sure where the $6,500 max number came from, but you might be on track to over-contribute. Employer and premium pass-through contributions count toward the $6,900 limit for family coverage. You may be eligible for the $1,000 catch-up after age 55.

https://www.shrm.org/resourcesandtools/ ... imits.aspx
miamivice wrote:
Mon Jan 08, 2018 6:48 pm
My question is, it is generally considered better to pay out of pocket for medical expenses under the deductible and invest/save the HSA money for the future, or to use the HSA money today?
The clear general consideration can be made when one contributes to taxable investment accounts. If you pull money out of an HSA to reimburse yourself for medical expenses, then turn around and make a taxable account contribution, whether it's a few months or minutes later, you have effectively moved money from the HSA to your taxable account. I think you could see why this is a bad idea.
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wander
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Re: Use HSA money or pay out of pocket?

Post by wander » Tue Jan 09, 2018 4:29 pm

I use HSA money for current medical expenses.

runner3081
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Re: Use HSA money or pay out of pocket?

Post by runner3081 » Tue Jan 09, 2018 5:37 pm

I am waiting to use ours and pay current expenses from cash flow. The longer the money sits in there, the more of a tax benefit we will see.

inbox788
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Re: Use HSA money or pay out of pocket?

Post by inbox788 » Tue Jan 09, 2018 8:33 pm

miamivice wrote:
Mon Jan 08, 2018 6:54 pm
Can you explain what you mean by "save paper" and "administrative burden"? I am new to HSAs, but was thinking that it'd accure in an account like retirement, and then later when I have expenses I reimburse myself later. I am not sure what you mean by administrative burden.

I'm between 17-27 years from retirement. At around $8000 a year, I figure I might be able to end up with $250,000 at time of retirement of HSA money, which might be overkill but also pretty sweet.
Good: About 3 years ago, I signed up for a HDHP/HSA and have been fully funding it.

Bad: Last couple of years, unexpected medical expenses have been high, so would have been better off with lower deductible plan. I paid the bills with monies that would have gone to a taxable account, so hopefully the HSA funds will grow enough to make up for it down the road.

Worse: I kept some/most receipts for medical expenses, but it's highly disorganized and likely to get lost. Some paper, some electronic, all spread out in various places. It's a burden to organize it all. Additionally, my HSA is tied to my work account an the online system keeps changing. A while back, I could access a bunch of detailed information, which was good, but last year they did a change or update, and I lost access. I've yet to go directly to the HSA to create an account there, but that's what I think is going to be necessary.

The saving grace is that there is no deadline, and worst case is the claims go unfilled, and I save the HSA for retirement health expenses. If I can get my act together, I can supposedly file these claims anytime, so I will have a choice to take some money out (and forgo future tax free gains) or make the claims in 20 years or so if they still let me.

I doubt I'll get anywhere near that big sum in my HSA, and aside from a few restricted uses (i.e nursing home) or very high medical bills (hopefully not), I wouldn't know what to use it for to use it all up. Can't even use it for Medigap, so it might encourage you to skip that and use the HSA, which increases risk/variability at a time when you probably want to minimize it. It's overkill for Medicare premiums alone. On a big enough account, dividends and gains might be enough to pay the medicare costs. So while the account will never be enough for prolonged LTC, the odds are relatively low anyone needs more than a few months to years, so there is the problem of having too much HSA money.

I'm trying to find my age and maximum number when I will stop contributing and draw down, but maybe I'll take the recent expenses,simplify the accounting of the oldest claims and pare down the account a bit, and keep contributing a little longer.

nolesrule
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Re: Use HSA money or pay out of pocket?

Post by nolesrule » Tue Jan 09, 2018 9:04 pm

We reimburse our medical expenses, keep one year max out of pocket in cash in the HSA and invest the rest.

Of course, we live in NJ, so the invested money is in a Treasury Fund and part of our bond allocation. It's not going to grow much.

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Re: Use HSA money or pay out of pocket?

Post by jharkin » Wed Jan 10, 2018 8:28 am

inbox788 wrote:
Tue Jan 09, 2018 8:33 pm
so there is the problem of having too much HSA money.
I am new to HSAs as well this year. I thought I understood that, worst case, if you cant use it all up on medical; after age 65 you can take money out for any reason, you just have to pay regular income tax on withdrawals. i.e. in retirement it acts like a backdoor 401k/TIRA if you cant use it on medical.

From that perspective, if you have maxed every other available tax advantage vehicle and still have cashflow to invest there doesn't seem to be much downside to maxing it?

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Re: Use HSA money or pay out of pocket?

Post by exigent » Wed Jan 10, 2018 8:39 am

jebmke wrote:
Mon Jan 08, 2018 9:01 pm
miamivice wrote:
Mon Jan 08, 2018 6:54 pm
Can you explain what you mean by "save paper" and "administrative burden"?
By this I mean saving all the receipts from medical expenses over the years to cash in later.
I recently asked a similar question to OP’s and came to realize based in the ensuing discussion that it’s probably not even necessary to save receipts. Ongoing medical costs will almost certainly be more than enough to wipe out any reasonable HSA balance later in life.

investingdad
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Re: Use HSA money or pay out of pocket?

Post by investingdad » Wed Jan 10, 2018 8:51 am

miamivice wrote:
Mon Jan 08, 2018 6:48 pm
I recently switched to a high deductible plan with an HSA. For 2018, I'm maxing out the HSA ($6500) plus receive a small employer contribution. I just set my investment preferences, and turns out, the fund options we can invest in are low cost passive funds, so I am really happy about that.

My question is, it is generally considered better to pay out of pocket for medical expenses under the deductible and invest/save the HSA money for the future, or to use the HSA money today?

Since the HSA money is triple tax benefitted, and most everyone will have a lot of medical expenses in retirement, my initial thoughts are it is better to use the HSA as an additional retirement account and pay out of pocket for medical expenses throughout the year, as long as we're financially able to do so.
We have a high deductible by choice and have been maxing the HSA for a number of years now. We use it as a retirement vehicle. We'll draw on it in retirement. For now its invested 50/50 equity to bond.

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Re: Use HSA money or pay out of pocket?

Post by aristotelian » Wed Jan 10, 2018 9:28 am

I view every expense that I pay out of pocket as a contribution to a Roth IRA for future health expenses.

If you have the ability to keep the funds invested, I don't understand the logic of withdrawing. It would be like paying for groceries out of your Roth IRA. You can do it, but why would you?

The only time it makes sense is if you are retired and need to start spending your funds down.

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Re: Use HSA money or pay out of pocket?

Post by soccerrules » Wed Jan 10, 2018 9:37 am

I am starting year 2 of an HSA. My plan is to not use the money for current medical expenses and have it available to cover anticipated medical needs as I age (post retirement). I plan to retire at 60 and will potentially use some of the HSA funds to cover medical premiums/expenses from 60-65.

I am trying to take advantage of the $2000/year my company offers for us to be on the HDQP. We also have Vanguard funds in our HSA. Bingo!

Or at least that is my plan now.
Don't let your outflow exceed your income or your upkeep will be your downfall.

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Re: Use HSA money or pay out of pocket?

Post by onourway » Wed Jan 10, 2018 9:44 am

aristotelian wrote:
Wed Jan 10, 2018 9:28 am
I view every expense that I pay out of pocket as a contribution to a Roth IRA for future health expenses.

If you have the ability to keep the funds invested, I don't understand the logic of withdrawing. It would be like paying for groceries out of your Roth IRA. You can do it, but why would you?

The only time it makes sense is if you are retired and need to start spending your funds down.
In our case between two professional jobs, one in academia, we have something like $90k+ of tax advantaged space available to us. We also have 3 kids and a lot of medical expenses. Paying out of pocket for the medical would likely mean giving up on a bit of the other, more flexible tax-advantaged space, while HSA investment options are the worst of those available to us. So we just max the HSA and use it now.

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Re: Use HSA money or pay out of pocket?

Post by Da5id » Wed Jan 10, 2018 9:53 am

I agree with the above posts that while still working IF you can afford it it is a win to just accumulate HSA money. It is the best of all worlds, deductible (including FICA if employer withholds for you) when you contribute and also tax free at withdrawal -- basically a combined 401k/Roth IRA for health in terms of tax treatment. Assuming you live a decently long life, unless you somehow have a truly vast HSA, you will have medical expenses that qualify for HSA. Including some Medicare insurance payments, that will exhaust the HSA prior to your death. And can also use for COBRA if you use that in early retirement to partially bridge towards Medicare age.

Some risks of not spending HSA is if you are either
1) forced by dire circumstances to withdraw it for non-medical expenses and pay penalties (so make sure your other reserves are adequate). But in those dire circumstances you can use it for COBRA perhaps?
2) you die with a big HSA (and no spouse), also a tax loss for estate

If the HSA is smallish may not be worth your while to do this, and HSA fees can really hurt for small accounts if your HSA provider is nickle and diming you.

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Re: Use HSA money or pay out of pocket?

Post by masteraleph » Wed Jan 10, 2018 9:55 am

I would add one thing to the discussion- HSAs can be a serious pain to deal with if the owner dies. So they're very useful, and I'd hold onto the money, but I'd also use it when possible early in retirement and certainly before any Roth IRAs in retirement.

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Re: Use HSA money or pay out of pocket?

Post by deltaneutral83 » Wed Jan 10, 2018 10:32 am

exigent wrote:
Wed Jan 10, 2018 8:39 am
I recently asked a similar question to OP’s and came to realize based in the ensuing discussion that it’s probably not even necessary to save receipts. Ongoing medical costs will almost certainly be more than enough to wipe out any reasonable HSA balance later in life.
I am young, and have made two visits for medical care the last few years, and were very inexpensive. I kept the print out of the receipt from my insurance company of the summary of coverage provided and placed into a vanilla folder with "HSA" written on it in my "life" 4 drawer filing cabinet. This was a time consumption of about 7 seconds. I can only hope I will be as fortunate to have left over unused HSA monies in my old age, hoping I even make it to old age. The likelihood of health care costs being high is certainly great, but it is very little effort to maintain receipts in a folder in case I do make withdrawals because of a "too large" HSA balance. In fact, it's the preferred scenario and a good "problem" for me to have.

inbox788
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Re: Use HSA money or pay out of pocket?

Post by inbox788 » Wed Jan 10, 2018 12:51 pm

jharkin wrote:
Wed Jan 10, 2018 8:28 am
inbox788 wrote:
Tue Jan 09, 2018 8:33 pm
so there is the problem of having too much HSA money.
I am new to HSAs as well this year. I thought I understood that, worst case, if you cant use it all up on medical; after age 65 you can take money out for any reason, you just have to pay regular income tax on withdrawals. i.e. in retirement it acts like a backdoor 401k/TIRA if you cant use it on medical.

From that perspective, if you have maxed every other available tax advantage vehicle and still have cashflow to invest there doesn't seem to be much downside to maxing it?
Acting like a tIRA isn't a terrible worst case, but that was the expected outcome, it wouldn't be so appealing (losing triple tax free benefit; better to go find those lost medical receipts from 25 years ago -- now worth it's weight in tax!). If you're maxing out HSA, you are likely dealing with too much deferred, Roth Conversions when beneficial and other reductions to RMDs that take you to higher tax brackets.

I was planning on stopping HSA at some point, but on this point, it appears that it might be even better than 401k/tIRA since it's not subject to RMDs. So you might want to max out HSA before you max out 401k/tIRA. Any drawbacks?

lakpr
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Re: Use HSA money or pay out of pocket?

Post by lakpr » Wed Jan 10, 2018 1:13 pm

inbox788 wrote:
Wed Jan 10, 2018 12:51 pm
I was planning on stopping HSA at some point, but on this point, it appears that it might be even better than 401k/tIRA since it's not subject to RMDs. So you might want to max out HSA before you max out 401k/tIRA. Any drawbacks?
At the time of your death, if there are any $ left in your HSA account,
- if the beneficiary is your spouse, then she can treat it as her own HSA
- if the beneficiary is anyone other than your spouse, they will inherit the HSA and will be taxable income to them. They do have the option of hunting down receipts of your past medical expenses and reimburse themselves from the account balance. But after that everything in the account becomes taxable income to them, which could push them into high tax bracket(s). Unlike an IRA/401-k, there is no option to have life-expectancy based RMDs which could minimize tax bite.

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Re: Use HSA money or pay out of pocket?

Post by furikake » Wed Jan 10, 2018 2:33 pm

We're not organized enough to keep receipts, and the HSA money is so little anyway, we just use the HSA debit card whenever we use medical care.

exigent
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Re: Use HSA money or pay out of pocket?

Post by exigent » Wed Jan 10, 2018 4:52 pm

deltaneutral83 wrote:
Wed Jan 10, 2018 10:32 am
exigent wrote:
Wed Jan 10, 2018 8:39 am
I recently asked a similar question to OP’s and came to realize based in the ensuing discussion that it’s probably not even necessary to save receipts. Ongoing medical costs will almost certainly be more than enough to wipe out any reasonable HSA balance later in life.
I am young, and have made two visits for medical care the last few years, and were very inexpensive. I kept the print out of the receipt from my insurance company of the summary of coverage provided and placed into a vanilla folder with "HSA" written on it in my "life" 4 drawer filing cabinet. This was a time consumption of about 7 seconds. I can only hope I will be as fortunate to have left over unused HSA monies in my old age, hoping I even make it to old age. The likelihood of health care costs being high is certainly great, but it is very little effort to maintain receipts in a folder in case I do make withdrawals because of a "too large" HSA balance. In fact, it's the preferred scenario and a good "problem" for me to have.
Sure, sticking a piece of paper in a file cabinet takes 7 seconds. The bigger issue is doing it in such a way that it's not a nightmare to assemble it all at some point in the distant future when making the claims. But all kinds of things can be reimbursed from an HSA. For example, premiums for LTC insurance, if you ever purchase such a policy. Or the costs associated with assisted living arrangements. That alone can add up to thousands of dollars per month. Having watched my parents as they've aged and incurred such expenses, I have little doubt that my wife and I will be able to spend down our HSA when the time comes.

Also, if they were faced with a file cabinet full of miscellaneous paperwork to substantiate their withdrawals, it would be completely overwhelming to them. This is likely true even if they had done something more than just "sticking a piece of paper in a file cabinet." Of course, you could always just keep the paperwork and bequeath it to your heirs, along with the remainder of your HSA, and let them deal with it. :-)

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Re: Use HSA money or pay out of pocket?

Post by blw87 » Wed Jan 10, 2018 5:03 pm

exigent wrote:
Wed Jan 10, 2018 4:52 pm
deltaneutral83 wrote:
Wed Jan 10, 2018 10:32 am
exigent wrote:
Wed Jan 10, 2018 8:39 am
I recently asked a similar question to OP’s and came to realize based in the ensuing discussion that it’s probably not even necessary to save receipts. Ongoing medical costs will almost certainly be more than enough to wipe out any reasonable HSA balance later in life.
I am young, and have made two visits for medical care the last few years, and were very inexpensive. I kept the print out of the receipt from my insurance company of the summary of coverage provided and placed into a vanilla folder with "HSA" written on it in my "life" 4 drawer filing cabinet. This was a time consumption of about 7 seconds. I can only hope I will be as fortunate to have left over unused HSA monies in my old age, hoping I even make it to old age. The likelihood of health care costs being high is certainly great, but it is very little effort to maintain receipts in a folder in case I do make withdrawals because of a "too large" HSA balance. In fact, it's the preferred scenario and a good "problem" for me to have.
Sure, sticking a piece of paper in a file cabinet takes 7 seconds. The bigger issue is doing it in such a way that it's not a nightmare to assemble it all at some point in the distant future when making the claims. But all kinds of things can be reimbursed from an HSA. For example, premiums for LTC insurance, if you ever purchase such a policy. Or the costs associated with assisted living arrangements. That alone can add up to thousands of dollars per month. Having watched my parents as they've aged and incurred such expenses, I have little doubt that my wife and I will be able to spend down our HSA when the time comes.

Also, if they were faced with a file cabinet full of miscellaneous paperwork to substantiate their withdrawals, it would be completely overwhelming to them. This is likely true even if they had done something more than just "sticking a piece of paper in a file cabinet." Of course, you could always just keep the paperwork and bequeath it to your heirs, along with the remainder of your HSA, and let them deal with it. :-)
Hey everyone, new to the forum here but not new to BH principles. Thanks for this great forum and all your contributions to it! I keep a running spreadsheet of all my out of pocket expenses. Every time I have an expense I make a photo copy of the receipt, put said copy into a file folder, and input the data into the spreadsheet, which of course has formulas to auto-update the figures. Works great for me.

WhiteMaxima
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Re: Use HSA money or pay out of pocket?

Post by WhiteMaxima » Wed Jan 10, 2018 5:29 pm

I can use HSA money as emergency fund. Use saved receipt to get a check from HSA. Or use it during early retirement before medicare. In general, Plan to accumulate more when young an depelete it before too old.

ChrisC
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Re: Use HSA money or pay out of pocket?

Post by ChrisC » Wed Jan 10, 2018 5:43 pm

It's not that much of a pain to keep the paperwork, though some HSA custodians with electronic recordkeeping applications make it easy if they continue as your custodian. I keep paper records and have a spreadsheet documenting qualified medical expenses since 2008. I started reimbursing myself in 2014, clearing out the years 2008-2011. And starting paying my LTCi premiums on a monthly basis in 2014 as well. I became concerned about having stale medical expenses that might be difficult to follow if my spouse had to pick up the pieces one day.

Nonetheless, we've been retired since late 2013; have unreimbursed medical expenses, which now includes a year of Medicare Part B premiums, of around $56k, and combined HSA balances of $122k. I'm sure we'll blow thru our HSAs in the next 15-20 years should we live so long.

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Re: Use HSA money or pay out of pocket?

Post by Traveler » Wed Jan 10, 2018 8:57 pm

I have had an HSA for years and max it out every year. For a couple years I was paying for expenses out of the account and I think here on Bogleheads I realized I should be letting it ride for the triple tax savings. So that is what I do now - pay for expenses out of pocket and let the account grow. I don't have more than a few hundred dollars in expenses each year so it doesn't impair my regular cash flow. I haven't been saving receipts to cash in later, but at some point when I'm closer to retirement, I probably will start a file folder for the receipts, just in case.

am
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Re: Use HSA money or pay out of pocket?

Post by am » Wed Jan 10, 2018 9:56 pm

I’d rather take the tax savings at high bracket and pay expenses now. I don’t want to complicate things with years old receipts. It’s a relatively small amount which shouldn’t matter much.

Hogan773
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INVEST OR NOT?

Post by Hogan773 » Thu Jan 11, 2018 5:47 pm

So I have been in HSA for a few years and max the heck out of it for the tax benefit.

I am of the mind that I should just let it accrue rather than use it. I save any MEANINGFUL medical receipts in a filing cabinet presuming I can use them later to draw out of the HSA. I don't bother saving small stuff like a $10 receipt for pills from Walgreens.

So on the INVESTMENT side, I haven't yet. But I just looked and it appears I can set it up to sweep anything above $1000 into an investment account, and while that account has a lot of expensive crap mutual funds, it does have an Ishares S&P500 and Ishares International, with ERs of 4bp and 14bp respectively. I am TOLD that there are no additional fees - hard to believe but apparently the case.

Any reason I shouldn't just let it invest in a 75/25 mix of the above? I am mid 40s so could let it ride for awhile.

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Re: Use HSA money or pay out of pocket?

Post by ImaBeginner » Thu Jan 11, 2018 9:42 pm

I scan in my receipts worth over 500, and name them with value-date. Figure if I somehow get hard up for spending the funds down I can just print from the most expensive down till I run out of money.

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willthrill81
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Re: Use HSA money or pay out of pocket?

Post by willthrill81 » Fri Jan 12, 2018 2:06 am

masteraleph wrote:
Wed Jan 10, 2018 9:55 am
I would add one thing to the discussion- HSAs can be a serious pain to deal with if the owner dies. So they're very useful, and I'd hold onto the money, but I'd also use it when possible early in retirement and certainly before any Roth IRAs in retirement.
I'm inclined to agree that hanging on to a big HSA would be disadvantageous to non-spousal heirs. That being said, I don't think that many people will ever get really big HSAs; it's too difficult to get money into them, compared to traditional and Roth IRAs. If you maxed out an HSA at $6,900 annually and didn't spend any of it, a 7% return (generous I'd say) over 20 years would be worth ~$283k. That's certainly not chump change for most of us, but it doesn't compare to the million+ IRA balances held by many. Combined with the high likelihood of being able to spend a significant portion of that balance before death, plus the potential ability of a surviving spouse to spend the remaining balance, I'd say that it doesn't seem likely that HSAs will cause a big tax problem for heirs.

That being said, I think that filling one's tax-free space in retirement with HSA withdrawals (non-medical) from age 65 and beyond, rather than IRAs, would be wise.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

afan
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Re: Use HSA money or pay out of pocket?

Post by afan » Fri Jan 12, 2018 10:46 am

miamivice wrote:
Mon Jan 08, 2018 6:48 pm

Since the HSA money is triple tax benefitted, and most everyone will have a lot of medical expenses in retirement, my initial thoughts are it is better to use the HSA as an additional retirement account and pay out of pocket for medical expenses throughout the year, as long as we're financially able to do so.
Our thoughts exactly. Plus we want to maximize the amount of time we have tax favored investments. Preferably decades rather than months.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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