HSA 70k when would you start using it

[Hillview]

We are near retirement age (50s--60s years old) and have 70k in a HSA. What is/was your exit strategy for your HSA? How much do you spend in a year that you can expense? We have not been saving receipts.

[mhc]

I'm in your age range and retired. I still contribute to an HSA with about $300k in it. I plan to start spending it down around age 65. I think I have about $60k in receipts.

[02nz]

I tend to favor letting the HSA grow, because in the absolute worst (well best case really), with no eligible medical expenses, you can withdraw from it like a traditional IRA from age 65.

In case you weren't aware, you can pay Medicare premiums (including I believe IIRMA surcharges) out of the HSA.

A large HSA could be a good alternative to a LTC policy as well.

[Harmanic]

I take funds when expenses occur, but the balance grows anyway. However, you should be saving at least the larger receipts so that you never have to pay tax on the withdrawals, even if they are years in the future. I upload receipts to the HSA website, just in case I lose them. But since I spend as I go, I only need to keep a few years worth in case of an audit.

[Mike Scott]

We reimburse annual expenses and invest the remainder for future use.

[livesoft]

My HSA is invested in a Fidelity Freedom Index fund. I've decided to withdraw 3% to 4% per year now that I am retired. That amount will cover medicare payments which is basically 100% of my annual health care expenses. That is I don't have any receipts to save and use for reimbursement in the future.

[secondcor521]

I think it matters if you are married or single, since HSAs can be used for your spouse's medical expenses and the surviving spouse can inherit the HSA.

Since I am single, right now my kids would have to pay ordinary income tax on the balance of my HSA when I die. Therefore, my plan is to allow it to grow tax-free now, and then start draining it around age 65 or 70 for accumulated expenses and Medicare premiums (including IRMAA) so that it's gone by the time I reach 85 (approximately my life expectancy per SS, so 50/50 chance of being alive then).

In my particular case, I'd pass $70K on the accumulation side at about age 60, and on the decumulation side at about age 83.

[Artsdoctor]

We are near retirement age (50s--60s years old) and have 70k in a HSA. What is/was your exit strategy for your HSA? How much do you spend in a year that you can expense? We have not been saving receipts.

There's really no right answer here. Some people will use HSA money as the bills become due, some will begin using the money in retirement, some will simply save it for long-term care and donate the balance to a charity after they death.

However, the one thing you're always going to want is flexibility. HSA money can be used to reimburse you for what you've spent in the past. Since you don't have receipts, you don't have that option right now but you can have it going forward. Therefore, I would strongly suggest that you begin saving all of your receipts now in order to increase your flexibility with spending in the future.

[MoneyOCD]

We are both 55, have ~$250k in HSAs and about $45k of receipts.
I am concerned that we overfunded HSA because
--- simple compounding calculations assuming 5% growth per year till age 65 says that we will have $400k+ in HSA.
--- same as above but adding $8k/year contributions till age 65 - $500k+
--- by age of 80 when we will potentially need LTC HSA balance will be around $1mil
It would not be that bad but it is the worst account to inherit, as it becomes fully taxable for the heirs in the year of death, no step up as with taxable, no 10 year stretch as with TIRA.
So we do want to spend it before we will be spending any Roth money for example or taxable.
Plan is to fund HSAs till we retire in 2-3 years, at the point we will start to cash out receipts to get completely current on reimbursement by age of 65. At that point we will re-evaluate where we stand and see if that will be warranted to start spending HSA as TIRA.

For $70k balance I would start spending at age 65 on all medical expenses and see if account balance will continue to grow or start to decrease.
At that age I do not see the point to spend any of the other accounts on medical expenses.

[trees]

For me, some of the answer depends on what your current healthcare spending looks like, your desire for simplicity vs micro optimization, and overall financial picture. Personally, as someone who usually has very low healthcare spending and an HSA that also hit the 70s this year in my 40s, I’ve switched from not spending it to reimbursing for expenses if they’re over $100 or so (while also still contributing). I value simplicity too much to save decades of receipts for future reimbursement. I also decided to do two big “purchases” this year (lasik and Invisalign), and thanks to the market I’ve ended up just about even after that spending, which reinforced my belief that it was time to start using it.

I believe you can use it for Medicare premiums, so for two people with one in 60s I’d probably plan on using it to pay for Medicare premiums as large part of drawdown plan.

[AnEngineer]

I want as much tax advantaged space as I can get, which may simplify my analysis. That means worst case I use it as a traditional IRA. I have no plans to withdraw until retirement.

I am keeping records necessary to reimburse myself later so I can get the most out tax free. I will prioritize HSA withdrawals over Roth as the latter is more flexible (so no money comes out of Roth unless all medical expenses have been reimbursed. If I ever had access to more Roth contribution space than I could use I would take money out of the HSA to make those contributions.

[Agent86]

I am in a similar situation to you, regarding age and HSA balance.

Having amassed a good set of receipts (~20K), the intention is to use the HSA funds to offset Medicare/IRMAA costs as needed in retirement. If it gets to where we need additional funds, or the HSA has grown beyond lifetime reasonable consumption levels, the accumulated receipts will be used to extract additional amounts, potentially to zero, depending on age and health situations. the extra funds will feed lifestyle needs or increase 'gifting' amounts.

[papiper]

I always paid bills out of pocket and let the HSA grow. Now that I'm retired I take money out of it before IRA's up to the amount of my saved receipts. We have enough to fund all our expected medical bills, but I don't want my kids to inherit it as ordinary income. So far it continues to outpace expenses.

[MoneyOCD]

I always paid bills out of pocket and let the HSA grow. Now that I'm retired I take money out of it before IRA's up to the amount of my saved receipts. We have enough to fund all our expected medical bills, but I don't want my kids to inherit it as ordinary income. So far it continues to outpace expenses.

Thank you for that comment, that resonates with my take on the usage of HSA.
Can you please share your age and average HC expenses per year if you are on Medicare?

[Perkunas]

If you still have earned income and you're within the Roth IRA income limits, you could potentially take distributions from the HSA to cover prior medical expenses then turn around and contribute the funds to a Roth IRA.

You may be able to access information about prior health care costs via your health care provider or from CC/bank statements.

[hoofaman]

We are near retirement age (50s--60s years old) and have 70k in a HSA. What is/was your exit strategy for your HSA? How much do you spend in a year that you can expense? We have not been saving receipts.

Might as well get in the habit of saving receipts now, at least when you have large expenses. We have 50k in HSA and a spreadsheet tracking our receipts and expense which is currently at 15k

[privateID]

Because of the ordinary income treatment for heirs, I view my HSA as slightly less favorable than my TDA and Roth accounts. Given I don't know when I'm going to die, I use my HSA for medical expenses every year. So far I've been fortunate and the HSA balance has still been growing. I currently have $44K in it with two years till retirement (age 58). I expect to use it for Cobra when I retire and expect to fully deplete by the time Medicare starts at 65 or around that time. My plan after that is to use my Roth if I have a large unexpected medical expense that would push me into IRMAA or a higher tax bracket and my TDA to help with any LTC down the road.

[papiper]

I always paid bills out of pocket and let the HSA grow. Now that I'm retired I take money out of it before IRA's up to the amount of my saved receipts. We have enough to fund all our expected medical bills, but I don't want my kids to inherit it as ordinary income. So far it continues to outpace expenses.

Thank you for that comment, that resonates with my take on the usage of HSA.
Can you please share your age and average HC expenses per year if you are on Medicare?

I'm 67.

My expenses have been close to zero except medicare parts B and D. My wife has had some issues though with dental and operations...

Expenses:
2024 - $9600
2023 - $10,400
2022 - $6700
2021 - $600
2020 - $3100

HSA balance sits at $238,000 now.... Like I mentioned, we funded it like crazy (in FZROX Total Stock Index) and withdrew for the first time - $25,000 this year . I still have almost $14,000 in past receipts but the rest has to wait for expenses to pile up again.

[Artsdoctor]

We are both 55, have ~$250k in HSAs and about $45k of receipts.
I am concerned that we overfunded HSA because
--- simple compounding calculations assuming 5% growth per year till age 65 says that we will have $400k+ in HSA.
--- same as above but adding $8k/year contributions till age 65 - $500k+
--- by age of 80 when we will potentially need LTC HSA balance will be around $1mil
It would not be that bad but it is the worst account to inherit, as it becomes fully taxable for the heirs in the year of death, no step up as with taxable, no 10 year stretch as with TIRA.
So we do want to spend it before we will be spending any Roth money for example or taxable.
Plan is to fund HSAs till we retire in 2-3 years, at the point we will start to cash out receipts to get completely current on reimbursement by age of 65. At that point we will re-evaluate where we stand and see if that will be warranted to start spending HSA as TIRA.

For $70k balance I would start spending at age 65 on all medical expenses and see if account balance will continue to grow or start to decrease.
At that age I do not see the point to spend any of the other accounts on medical expenses.

It's true that it's not a great account to inherit unless the spouse is the beneficiary. However, if you have any philanthropic goals, it's a perfect account to gift once the surviving spouse is gone. By doing that, you can then free up other accounts for your other beneficiaries.

[MoneyOCD]

We are both 55, have ~$250k in HSAs and about $45k of receipts.
I am concerned that we overfunded HSA because
--- simple compounding calculations assuming 5% growth per year till age 65 says that we will have $400k+ in HSA.
--- same as above but adding $8k/year contributions till age 65 - $500k+
--- by age of 80 when we will potentially need LTC HSA balance will be around $1mil
It would not be that bad but it is the worst account to inherit, as it becomes fully taxable for the heirs in the year of death, no step up as with taxable, no 10 year stretch as with TIRA.
So we do want to spend it before we will be spending any Roth money for example or taxable.
Plan is to fund HSAs till we retire in 2-3 years, at the point we will start to cash out receipts to get completely current on reimbursement by age of 65. At that point we will re-evaluate where we stand and see if that will be warranted to start spending HSA as TIRA.

For $70k balance I would start spending at age 65 on all medical expenses and see if account balance will continue to grow or start to decrease.
At that age I do not see the point to spend any of the other accounts on medical expenses.

It's true that it's not a great account to inherit unless the spouse is the beneficiary. However, if you have any philanthropic goals, it's a perfect account to gift once the surviving spouse is gone. By doing that, you can then free up other accounts for your other beneficiaries.

That is a valid point but at this time we are not considering any large gifts to the charity as we are not even sure that we will have enough for ourselves, and then if we do - our inclination is to leave majority of what left to the child. May be at age 70+ we can look at that again, but not right now, so kicking can down the road

[MoneyOCD]

Thank you for that comment, that resonates with my take on the usage of HSA.
Can you please share your age and average HC expenses per year if you are on Medicare?

I'm 67.

My expenses have been close to zero except medicare parts B and D. My wife has had some issues though with dental and operations...

Expenses:
2024 - $9600
2023 - $10,400
2022 - $6700
2021 - $600
2020 - $3100

HSA balance sits at $238,000 now.... Like I mentioned, we funded it like crazy (in FZROX Total Stock Index) and withdrew for the first time - $25,000 this year . I still have almost $14,000 in past receipts but the rest has to wait for expenses to pile up again.

Thanks for the additional information, that confirms my take on HSA spending. that I outlined above.

[TN_Boy]

My HSA is invested in a Fidelity Freedom Index fund. I've decided to withdraw 3% to 4% per year now that I am retired. That amount will cover medicare payments which is basically 100% of my annual health care expenses. That is I don't have any receipts to save and use for reimbursement in the future.

That's interesting. We have about 10k in receipts (scanned, on backed up hard drive) and one of us will be starting Medicare soon. The HSA itself is only about 30k (invested in a roughly 70/30 mix).

I've about decided to do what you are doing, start spending it on medicare costs, though that will be a lot more than 3% per year. But the HSA is not big enough to make a huge difference either way in our life, and spending it down to reduce the number of accounts we have is starting to look appealing.

Was simplicity part of your goal, or did you decide that with a large HSA (you have a lot bigger one than I), no point in letting it just sit there?

[WeakOldGuy]

We are near retirement age (50s--60s years old) and have 70k in a HSA. What is/was your exit strategy for your HSA? How much do you spend in a year that you can expense? We have not been saving receipts.

We are 66 and 65 years old. I'll be fully retired next month. Our HSA has about $113k in it. We have never spent out of the HSA. Our plan is to start to spend it on Medicare premiums in about 10 years. If one or the other of us run into an expensive health crisis before then, we may spend it sooner. My projections suggest that the HSA will then cover about 9 years of Medicare premiums. We will always be in the 2nd or 3rd IRMAA bracket.

[michaeljc70]

I'm 54 and have almost $200k in my HSA. Though I have some receipts, it doesn't total a whole lot (maybe $2k). It doesn't make sense to me to use it for such a small amount. I will probably start using it when I get on Medicare at age 65. Since you can use it for parts B/C/D I will have more eligible expenses.

At this point I typically go to the doctor once or twice a year. I am on a bunch of medications but they are all generics and pretty cheap.

[wander]

I have been using my HSA from day 1 but the account balance keeps rising. I do not like to keep track all the receipts until my retirement .

[sc9182]

We are growing our HSA as we are far from retirement, let alone Medicare ages.

If you never incurred big medical bills, generally in good health — yeah, understand that it’s a bit tricky to make use of monies stuck inside the HSA in most tax-efficient manner. Not sure (haven’t checked) - if going for one GLP drug approved treatment- likely not reimbursed by typical insurance., could one make use of HSA funds for it !? Do check ..

We are thinking (again, far from retirement ages) - HSA funds to us are like insurance bucket of monies to take care of any large medical needs (or any beta trials/procedures or such for which insurance/Medicare may not pay-out), any medical needs via medical tourism (esp., out of country) , and/or HSA reimbursable medical/insurance premiums. Also, paying for LTC needs/costs (we are not interested in LTC insurance) for either of us also comes to mind. Are dental costs, work taken care down the line !? (hey, what’s that nice sparkle when you smile?); can you use those funds for eyes work, nicer-pair of glasses/frame and/or contacts?

Can the funds be used to medically necessary home-improvement projects !? (handicap or wheelchair accessible modifications, updates to bathrooms and such !?)

Hopefully, there might be other-ways to make better use of HSA monies comes to marketplace and/or regulation — as HSA accounts start to grow bigger for larger set of population with time.

Then again - we will let it grow - and watch how things shape up in market place and in our own lives. Don’t have full set of answers yet.

[Dufus]

Be aware that an HSA is taxable to a non-spouse beneficiary.

[TN_Boy]

We are growing our HSA as we are far from retirement, let alone Medicare ages.

If you never incurred big medical bills, generally in good health — yeah, understand that it’s a bit tricky to make use of monies stuck inside the HSA in most tax-efficient manner. Not sure (haven’t checked) - if going for one GLP drug approved treatment- likely not reimbursed by typical insurance., could one make use of HSA funds for it !? Do check ..

We are thinking (again, far from retirement ages) - HSA funds to us are like insurance bucket of monies to take care of any large medical needs (or any beta trials/procedures or such for which insurance/Medicare may not pay-out), any medical needs via medical tourism (esp., out of country) , and/or HSA reimbursable medical/insurance premiums. Also, paying for LTC needs/costs (we are not interested in LTC insurance) for either of us also comes to mind. Are dental costs, work taken care down the line !? (hey, what’s that nice sparkle when you smile?); can you use those funds for eyes work, nicer-pair of glasses/frame and/or contacts?

Can the funds be used to medically necessary home-improvement projects !? (handicap or wheelchair accessible modifications, updates to bathrooms and such !?)

Hopefully, there might be other-ways to make better use of HSA monies comes to marketplace and/or regulation — as HSA accounts start to grow bigger for larger set of population with time.

Then again - we will let it grow - and watch how things shape up in market place and in our own lives. Don’t have full set of answers yet.

As discussed in a couple of other threads, if you have major LTC expenses (say a year or three in assisted living) you'd probably want to pay for that out of a traditional IRA, not an HSA, as the LTC expenses will be large and probably deductible on your federal income tax form. So pay that with taxable income, and deduct the expenses; you can wind up zeroing federal taxes that way.

We will not be able/willing to convert all our IRAs to Roths, so we will have IRAs to partially pay for LTC.

[michaeljc70]

We are growing our HSA as we are far from retirement, let alone Medicare ages.

If you never incurred big medical bills, generally in good health — yeah, understand that it’s a bit tricky to make use of monies stuck inside the HSA in most tax-efficient manner. Not sure (haven’t checked) - if going for one GLP drug approved treatment- likely not reimbursed by typical insurance., could one make use of HSA funds for it !? Do check ..

We are thinking (again, far from retirement ages) - HSA funds to us are like insurance bucket of monies to take care of any large medical needs (or any beta trials/procedures or such for which insurance/Medicare may not pay-out), any medical needs via medical tourism (esp., out of country) , and/or HSA reimbursable medical/insurance premiums. Also, paying for LTC needs/costs (we are not interested in LTC insurance) for either of us also comes to mind. Are dental costs, work taken care down the line !? (hey, what’s that nice sparkle when you smile?); can you use those funds for eyes work, nicer-pair of glasses/frame and/or contacts?

Can the funds be used to medically necessary home-improvement projects !? (handicap or wheelchair accessible modifications, updates to bathrooms and such !?)

Hopefully, there might be other-ways to make better use of HSA monies comes to marketplace and/or regulation — as HSA accounts start to grow bigger for larger set of population with time.

Then again - we will let it grow - and watch how things shape up in market place and in our own lives. Don’t have full set of answers yet.

As discussed in a couple of other threads, if you have major LTC expenses (say a year or three in assisted living) you'd probably want to pay for that out of a traditional IRA, not an HSA, as the LTC expenses will be large and probably deductible on your federal income tax form. So pay that with taxable income, and deduct the expenses; you can wind up zeroing federal taxes that way.

We will not be able/willing to convert all our IRAs to Roths, so we will have IRAs to partially pay for LTC.

The 2025 standard deductions for a couple 65+ is $33k. Then medical expense deductions are only deductible if they exceed 7.5% of AGI. That's a pretty high bar for most people. And then you have to pay tax on the tIRA distribution.

[TN_Boy]

As discussed in a couple of other threads, if you have major LTC expenses (say a year or three in assisted living) you'd probably want to pay for that out of a traditional IRA, not an HSA, as the LTC expenses will be large and probably deductible on your federal income tax form. So pay that with taxable income, and deduct the expenses; you can wind up zeroing federal taxes that way.

We will not be able/willing to convert all our IRAs to Roths, so we will have IRAs to partially pay for LTC.

The 2025 standard deductions for a couple 65+ is $33k. Then medical expense deductions are only deductible if they exceed 7.5% of AGI. That's a pretty high bar for most people. And then you have to pay tax on the tIRA distribution.

With LTC costs easily 5k to 8k a month (skilled nursing even more), it is not hard to rocket past the 7.5% threshold unless income is really high. And once over that threshold, you can start deducting Medicare premiums, vision costs, dental visits, co-pays .....

[Exchme]

Keeping money in a tax protected account is a good thing, so in general you want to collect receipts and wait. Not so sure folks should really accumulate multiple hundreds of thousands in an HSA though, you may never have medical expenses that total up to that - but $70K is not too much to hold.

We discovered keeping receipts over long periods of time required more thought than we had been giving it. Many paper receipts are printed on thermal paper and fade with time. We discovered that taping loose receipts to a piece of paper can cause a reaction between the tape and the printing, making the print unreadable Doctors, pharmacies, dentists and the like may only keep payment records for a few years. Items like vitamins bought at a grocery store need the itemized receipts that we never managed to keep. So downloaded everything we could (don't forget on-line retailers like Amazon), scanned all the paper receipts we had, went through and reconciled to total things up and eliminate duplicates, things that had been refunded, etc. and put the whole thing on a cloud drive.

[jebmke]

We were banking our HSA for a while. At one point, I came to the conclusion that the total wasn't a significant impact on our wealth and decided to flush it all over a 2-3 year period. I didn't want to leave this administrative work to my feeble old age or to my surviving spouse. This year I discovered I had overlooked her "makeup HSA" so we flushed that and gave the proceeds to the local food bank. One less pile of paper to be concerned with.

[Running Bum]

I'm 63, with a little over $100K balance, and receipts for about half that. I will take what I have receipts for next year to help pay for new windows next year. I'll use the other half similarly as I have expenses they can be used for, planning to have it fully drained by 70 or 75 because of how unfavorable it is for heirs.

[TN_Boy]

We were banking our HSA for a while. At one point, I came to the conclusion that the total wasn't a significant impact on our wealth and decided to flush it all over a 2-3 year period. I didn't want to leave this administrative work to my feeble old age or to my surviving spouse. This year I discovered I had overlooked her "makeup HSA" so we flushed that and gave the proceeds to the local food bank. One less pile of paper to be concerned with.

This is kinda where I'm leaning now. It's not enough money to really make a difference, and getting rid of it is one less thing to worry about later. I didn't have access to an HSA for enough years to build it up.

[michaeljc70]

We were banking our HSA for a while. At one point, I came to the conclusion that the total wasn't a significant impact on our wealth and decided to flush it all over a 2-3 year period. I didn't want to leave this administrative work to my feeble old age or to my surviving spouse. This year I discovered I had overlooked her "makeup HSA" so we flushed that and gave the proceeds to the local food bank. One less pile of paper to be concerned with.

This is kinda where I'm leaning now. It's not enough money to really make a difference, and getting rid of it is one less thing to worry about later. I didn't have access to an HSA for enough years to build it up.

I put $28k in my HSA mostly in 2005-2013. It is invested in equities and is now approaching $200k. I was only eligible to add to it once in the last 10 years. I suspect when I am 65 in 11 years it will be a pretty big chunk of change.

Obviously for some people a low deductible/low co-pay insurance plan makes more sense.

[Nver2Late]

Similar age, transitioning to early retirement, 72K in HSA, 57K in saved receipts. We're waiting to use it, but it is available if we need sudden, tax free income.

Since we're retiring prior to 59-1/2 and most of our funds are in tax-deferred, the HSA may have a role here. We also need to be cognizant of limiting taxable income recognized to maximize ACA subsidies (think large long-term capital gains). I think the HSA may be the easy button to help navigate this transition period.

[NYHawkeye]

DW and I will both be going on Medicare in 2025 and unfortunately/fortunately will be in a high IRMAA bracket. We have ~$90K in our HSA and plan to start using it to cover Part B, Part D, and IRMAA. We didn't really understand the magnitude of IRMAA until we started looking into Medicare so at least the HSA takes a bit of the sting away.

[ModifiedDuration]

I would suggest using the HSA once you are on Medicare.

I am retired, on Medicare, and have a six-figure HSA (my spouse is not on Medicare yet).

It can be used for Medicare Part B and D premiums (including IRMAA), deductibles, copays, coinsurance, dental, vision, hearing, long-term care, long-term care insurance (up to IRS limits), and some over-the-counter items.

However, the HSA cannot be used for Medicare Supplement plans, which leads many with high HSA balances to Plan G-HD, which then acts as catastrophic insurance.

[michaeljc70]

I would suggest using the HSA once you are on Medicare.

I am retired, on Medicare, and have a six-figure HSA (my spouse is not on Medicare yet).

It can be used for Medicare Part B and D premiums )(including IRMAA), deductibles, copays, coinsurance, dental, vision, hearing, long-term care, long-term care insurance (up to IRS limits), and some over-the-counter items.

However, the HSA cannot be used for Medicare Supplement plans, which leads many with high HSA balances to Plan G-HD, which then acts as catastrophic insurance.

That is my plan. Not only can I use my HSA for the out of pocket expenses, but I am hoping that the rate increases will be lower than a plan that covers more. Based on what I've seen happen to relatives, Medigap premiums can really soar over time and you have little recourse if you have pre-existing conditions in my state. But maybe that is just wishful thinking.

[ModifiedDuration]

I would suggest using the HSA once you are on Medicare.

I am retired, on Medicare, and have a six-figure HSA (my spouse is not on Medicare yet).

It can be used for Medicare Part B and D premiums )(including IRMAA), deductibles, copays, coinsurance, dental, vision, hearing, long-term care, long-term care insurance (up to IRS limits), and some over-the-counter items.

However, the HSA cannot be used for Medicare Supplement plans, which leads many with high HSA balances to Plan G-HD, which then acts as catastrophic insurance.

That is my plan. Not only can I use my HSA for the out of pocket expenses, but I am hoping that the rate increases will be lower than a plan that covers more. Based on what I've seen happen to relatives, Medigap premiums can really soar over time and you have little recourse if you have pre-existing conditions in my state. But maybe that is just wishful thinking.

Plan G-HD premiums tend to go up just $2 or $3 a month each year, it is a healthy pool and the annual increase in the maximum out-of-pocket helps to keep premiums low.

The increase in the Plan G-HD maximum out-of-pocket (which is usually rarely reached) is directly tied to CPI.

The small annual increase in Plan G-HD premiums and the maximum out-of-pocket usually leads to lower long-term costs than for Plans G and N (whose premiums usually increase each year significantly more than the CPI).

I have been saving about $1,500 a year with Plan G-HD vs. Plan G.

It’s a great option for those with a significant HSA balance.

[Tamal]

Our HSA is ~150K invested in wellington fund. Plan to retire within next year at age 59.

We will be on Cobra/ACA for a few years before Medicare and plan to use the HSA as needed to cover medical expenses. Whatever is left can help during Medicare years. I have no previous receipts saved and am not concerned at all about using up this HSA.

My plan during ACA coverage is to get the HSA-compatible plan from BCBS and contribute the max to the HSA while retired. My understanding is this will reduce income for ACA subsidy calculation. I don't want to derail the thread with ACA comments, but for coverage in Austin Texas area this seems to be good for us, and wanted to point out that for us it makes sense to even continue HSA contributions into early part of retirement.

[Artsdoctor]

I would suggest using the HSA once you are on Medicare.

I am retired, on Medicare, and have a six-figure HSA (my spouse is not on Medicare yet).

It can be used for Medicare Part B and D premiums )(including IRMAA), deductibles, copays, coinsurance, dental, vision, hearing, long-term care, long-term care insurance (up to IRS limits), and some over-the-counter items.

However, the HSA cannot be used for Medicare Supplement plans, which leads many with high HSA balances to Plan G-HD, which then acts as catastrophic insurance.

Or, if you happen to have receipts from years gone by, you can even reimburse yourself for those past expenses roughly at the same amount as your current supplemental premiums. It's mental accounting, to be sure, but it can be satisfying nonetheless.

Also, in 2019, the expenses that can be eligible for HSA reimbursement for non-prescription items were loosened up quite a bit. So you can easily pay for medical items out of the HSA that would not qualify for medical expenses if you itemize (Publication 502).

And if you have home modifications that are necessary, those qualify as well--unless you'd prefer to add them to the cost basis of your home.

[ModifiedDuration]

Or, if you happen to have receipts from years gone by, you can even reimburse yourself for those past expenses roughly at the same amount as your current supplemental premiums. It's mental accounting, to be sure, but it can be satisfying nonetheless.

I did chuckle at that last sentence.

My Plan G-HD premium is a big $45 a month, so I don’t bother with using old receipts to cover it, despite how satisfying that might be.

[Hebell]

As discussed in a couple of other threads, if you have major LTC expenses (say a year or three in assisted living) you'd probably want to pay for that out of a traditional IRA, not an HSA, as the LTC expenses will be large and probably deductible on your federal income tax form. So pay that with taxable income, and deduct the expenses; you can wind up zeroing federal taxes that way. ...

What excellent advice! I honestly hadn't thought about HSAs in this light. My husband is going to have tremendous nursing and assisted living expenses coming up 4 to 10 years from now. But in the near term, assuming the ACA subsidies continue, I am going to need more CASH in 2026 and 2027 and don't want it to be income, so as to not reduce my subsidies. Pulling from his HSA (we stored receipts) is the perfect answer!! And yes, he will be able to offset IRA withdrawal (income) in later years, with all those medical deductions. Thanks for helping me get a plan for the best way to create cash in 2026 and 2027.

[WeakOldGuy]

As discussed in a couple of other threads, if you have major LTC expenses (say a year or three in assisted living) you'd probably want to pay for that out of a traditional IRA, not an HSA, as the LTC expenses will be large and probably deductible on your federal income tax form. So pay that with taxable income, and deduct the expenses; you can wind up zeroing federal taxes that way. ...

What excellent advice! I honestly hadn't thought about HSAs in this light. My husband is going to have tremendous nursing and assisted living expenses coming up 4 to 10 years from now. But in the near term, assuming the ACA subsidies continue, I am going to need more CASH in 2026 and 2027 and don't want it to be income, so as to not reduce my subsidies. Pulling from his HSA (we stored receipts) is the perfect answer!! And yes, he will be able to offset IRA withdrawal (income) in later years, with all those medical deductions. Thanks for helping me get a plan for the best way to create cash in 2026 and 2027.

It is great advice however, as has been noted, you can only deduct expenses that exceed 7.5% of your AGI. Since the MFJ standard deduction for seniors is $33,200 next year, itemized deductions need to exceed that amount before they really are valuable. Assuming you have the $10k SALT deduction, then that leaves $23,200 of headroom. This can be filled with charitable contributions or mortgage interest in many cases, but if not, that means that you would have to have $23,200 of eligible medical deductions before you would exceed the standard deduction. So if your AGI is $100k, the first $7,500 of your medical expenses aren't eligible for a deduction. So you would need to pay $23,200 + $7,500 = $30,700 in unreimbursed medical expenses before that next dollar would be tax deductible.

So the extent to which medical expenses will be tax deductible depends on your AGI, and what other tax deductions you may have.

[krisSA]

It is great advice however, as has been noted, you can only deduct expenses that exceed 7.5% of your AGI. Since the MFJ standard deduction for seniors is $33,200 next year, itemized deductions need to exceed that amount before they really are valuable. Assuming you have the $10k SALT deduction, then that leaves $23,200 of headroom. This can be filled with charitable contributions or mortgage interest in many cases, but if not, that means that you would have to have $23,200 of eligible medical deductions before you would exceed the standard deduction. So if your AGI is $100k, the first $7,500 of your medical expenses aren't eligible for a deduction. So you would need to pay $23,200 + $7,500 = $30,700 in unreimbursed medical expenses before that next dollar would be tax deductible.

So the extent to which medical expenses will be tax deductible depends on your AGI, and what other tax deductions you may have.

That means, per your example, expenses above $30,700 would be tax deductible and one can pay from tIRA balance and reimburse the first $30,700 from HSA balance, isn't it?

[JohnDoh]

Instead of thinking of "how to use HSA?" I prefer to think of "how to 'convert' HSA into Roth?" where it can be spent on anything (not just medical) without documentation (i.e. never get asked for proof of expenditure).

The way I've done/doing it -- I am 64, single, with c. $115K in HSA -- is that I've accumulated c. $50K in receipts over the years and am spending about $5K per year now on medical. Between age 65-69 I will be taking lump sum reimbursements for past expenses (starting with oldest) to facilitate Roth conversions from IRA. E.g. $20K HSA reimbursement funds living expenses for $0 tax hit and I convert $20K from IRA to Roth. Net result is my total tax-exempt space remains the same.

Once I've "caught up" to the present (around age 69), I'm going to fund all current medical expenses from HSA to deplete it as soon as possible because I don't want (even the shadow of) the recordkeeping hassle. (The IRS can always ask you to justify an HSA withdrawal. Even if that's easy to do, I don't want to have to think about it.)

That also helps with my ongoing goal of simplifying my finances.

Good luck.

[AnEngineer]

That means, per your example, expenses above $30,700 would be tax deductible and one can pay from tIRA balance and reimburse the first $30,700 from HSA balance, isn't it?

Short answer: no. You can't deduct expenses reimbursed from your HSA. You also can't withdraw from your HSA against expenses that you deducted on your taxes.

(I think the way it's phrased, I think you may be able to take the $7500 from the HSA in a later year because you didn't deduct it, but that's a pretty aggressive read. You certainly can't withdraw based on expenses from $7500 to $30700.)

[dcabler]

We are near retirement age (50s--60s years old) and have 70k in a HSA. What is/was your exit strategy for your HSA? How much do you spend in a year that you can expense? We have not been saving receipts.

Similar amount in ours. Ages 63/64.
- We have all of the old receipts but no plans to reimburse ourselves after the fact for those.
- Instead, our plan is to reimburse ourselves for Medicare Part B/D premiums and, possibly, that portion of LTCi that the IRS indicates is reimbursable via HSA. We'll monitor the balance over time and if it looks like the reimbursements aren't doing a good enough job spending down the HSA, we'll add more things for reimbursement.

Cheers.

[keystone]

Currently age 50 with about $80K in the HSA. I have about $15k saved up in receipts so far and plan to contribute the family max to the HSA for the foreseeable future while continuing to stockpile scanned receipts. My child will most likely be attending college in about 8 years at which point I think it might be a good time to make a withdrawal to cover a semester or more.