Early 60's, first time option to use HSA. Some Q.

[mjs2013]

Hello - My husband and I have been using high deductible ACA insurance plans since 2013. We live in a rural area with limited insurance options. For the first time, an HSA plan is available.

Me: 60 retired, small dividend income (accts at TD and Schwab)
Husband: 63, self-employed
Income/Debts: floats between 50-60k/yr, no debts, no mortgage
General: Rural, frugal lifestyle & typically very low medical costs, largest expense are eyeglasses for both and safety eyeglasses for my husband.

For 2024, ACA re-enrolled us in the same bronze level HDHP. However when I 'shopped' on the state's site, I found an almost identical bronze plan (same insurer) with an HSA option and is $300 cheaper per month. The deductibles are slightly hirer but we never reach anywhere near the deductibles.

Questions:

1. Go with the HSA plan, its a no-brainer, right?

2. I don't know how to set-up an HSA and what, if any, administration will need to be done. I checked Schwab and they have a Health Savings Brokerage Account ... is that the ticket or something else? Can you explain a bit or better yet point me to a resource I can read that details the steps I need to take?

3. Do my husband and I get one HSA account for both of us, or one for each of us?

4. Is the timing important of when the HSA is setup vs when the insurance (for 2024) takes effect?

5. Can we purchase the HDHP + HSA plan ( $300 less/mo on premiums) and then just never setup the HSA - or is the HSA a required?

6. Hopefully TurboTax will guide me through what I need to due when processing state and federal taxes, right?

Well, that's it for now. I guess it's obvious I don't know what I'm doing. I appreciate any advice or resources you point me to.

[quantAndHold]

1. Go with the HSA plan, its a no-brainer, right?

Right.

2. I don't know how to set-up an HSA and what, if any, administration will need to be done. I checked Schwab and they have a Health Savings Brokerage Account ... is that the ticket or something else? Can you explain a bit or better yet point me to a resource I can read that details the steps I need to take?

Yes, that’s it. You just open a HSA account. Fidelity also has one with no fees.

3. Do my husband and I get one HSA account for both of us, or one for each of us?

Someone will have to correct me on this, because I’ve never faced this situation, but I *think* you can just open a single account for both of you.

4. Is the timing important of when the HSA is setup vs when the insurance (for 2024) takes effect?

You can open the account anytime, you just can’t contribute until 2024.

5. Can we purchase the HDHP + HSA plan ( $300 less/mo on premiums) and then just never setup the HSA - or is the HSA a required?

The HSA is not required, just a nice thing to have.

6. Hopefully TurboTax will guide me through what I need to due when processing state and federal taxes, right?

Right.

One thing to be aware of is the year each of you turns 65, you have to stop contributing to the HSA for that person. So in 2024, you can contribute the full amount for both of you, then in 2025, you will only be able to contribute for yourself.

Hope this helps.

[quantAndHold]

Oh. Also, once you have the HSA, save your medical receipts. You can withdraw from the HSA tax free anytime, even years later, as long as you can show receipts. Once you get to Medicare, you can also use it to pay medicare premiums. Also, once you hit 65, you can withdraw it for anything you want, but if it’s not for medical expenses, you will have to pay taxes on the income.

[curmudgeon]

It makes sense to pick that plan. You may or may not want to actually set up and use the HSA. If your income tax usually nets out close to zero, then the HSA account may not give much benefit.

I think the Schwab HSA isn't available to individuals; it's only available through employers. Fidelity is a good option for individual HSA; a local credit union might be an option as well.

If you are paying income taxes, or if you have a significant IRA that you might like to convert to Roth, then there can be definite advantages to the HSA. You can use money from the HSA to pay for eyeglasses, dental bills, medicare premiums, as well as usual medical expenses.

[GerryL]

You're getting close to Medicare age so you need to understand how HSAs work (or don't) with that program. Once you sign up for Medicare -- actually 6 months prior -- no more $$$ can be added to your HSA. Not by you. Not by your employer. You can use the money in the HSA, but you cannot add to it.

If you will still be covered by an employer's plan when you reach 65, do not act on the conventional wisdom to "at least sign up for Medicare Part A since it doesn't cost you anything." Problem is that there are no alarms that go off if you ignore this warning. (And many people in HR are oblivious to the rule.) But the IRS can eventually come after you for taxes (and maybe penalty) on money that has been added to an HSA once you are enrolled in any part of Medicare.

Catalog this under Questions People Don't Even Know They Need to Ask.

[gasdoc]

I was going to post my own HSA question, but then I read your post and decided it might be better to tack this on to yours.

We are also early 60's, but we have been contributing to an HSA for many years. We currently have over $100K after contributions and investment earnings. it can certainly pay off. Just save the receipts for later reimbursement.

I do wonder when current retirees actually began taking withdrawals from their HSA's, using their saved receipts as documentation?

Gasdoc

[curmudgeon]

I was going to post my own HSA question, but then I read your post and decided it might be better to tack this on to yours.

We are also early 60's, but we have been contributing to an HSA for many years. We currently have over $100K after contributions and investment earnings. it can certainly pay off. Just save the receipts for later reimbursement.

I do wonder when current retirees actually began taking withdrawals from their HSA's, using their saved receipts as documentation?

Gasdoc

As a retiree, I would tend to prioritize withdrawing from the HSA (for past/present medical expenses) over withdrawing from an IRA. That's specific to your income tax position, but if I had extra tax headroom, then I might do Roth conversions while drawing down the HSA. Essentially a Roth has similar tax characteristics to the HSA but more flexibility, so I prefer to leave/move money to the Roth if that's an option.

Personally, I decided I didn't want the bother or keeping receipts for such a long cycle, so I do a once-a-year or so withdrawal of all our expenses to date. We have a pretty substantial balance, so now that we are starting medicare, I'm going ahead and drawing out the medicare premiums at the same time.

[MP123]

I was going to post my own HSA question, but then I read your post and decided it might be better to tack this on to yours.

We are also early 60's, but we have been contributing to an HSA for many years. We currently have over $100K after contributions and investment earnings. it can certainly pay off. Just save the receipts for later reimbursement.

I do wonder when current retirees actually began taking withdrawals from their HSA's, using their saved receipts as documentation?

Gasdoc

As a retiree, I would tend to prioritize withdrawing from the HSA (for past/present medical expenses) over withdrawing from an IRA. That's specific to your income tax position, but if I had extra tax headroom, then I might do Roth conversions while drawing down the HSA. Essentially a Roth has similar tax characteristics to the HSA but more flexibility, so I prefer to leave/move money to the Roth if that's an option.

Personally, I decided I didn't want the bother or keeping receipts for such a long cycle, so I do a once-a-year or so withdrawal of all our expenses to date. We have a pretty substantial balance, so now that we are starting medicare, I'm going ahead and drawing out the medicare premiums at the same time.

It's worth noting that an inherited HSA (by other than a spouse) is no longer an HSA and is immediately taxable to the beneficiary, unlike an IRA where distributions can be spread over years. Something to consider, depending on your plans.

[gasdoc]

Thanks for the reply's. I have more questions, so I think I'll make my own post rather than to monopolize the OP's post. Thanks!

gasdoc

[miket29]

You're getting close to Medicare age so you need to understand how HSAs work (or don't) with that program. Once you sign up for Medicare -- actually 6 months prior -- no more $$$ can be added to your HSA. Not by you. Not by your employer. You can use the money in the HSA, but you cannot add to it.

This statement needs to be qualified. If you sign up for Medicare to begin as soon as you turn 65 then you can contribute to a HSA for all the months before the month in which you turn 65.

Medicare coverage is retroactive for the six months preceding Medicare enrollment, but not before an enrollee's 65th birthday. Any time a person over age 65 who has been contributing to an HSA delayed enrollment in Medicare or Social Security—which triggers automatic enrollment in Medicare Part A—this becomes an issue.
https://www.shrm.org/resourcesandtools/ ... tions.aspx

So if you begin Medicare as soon as you turn 65 then the retroactive coverage does not apply and you can make HSA contributions for those months. Those who delay the start of Medicare because they have other coverage (perhaps choosing to work until FRA for Social Security) are the ones affected by the 6-month lookback.

[GerryL]

You're getting close to Medicare age so you need to understand how HSAs work (or don't) with that program. Once you sign up for Medicare -- actually 6 months prior -- no more $$$ can be added to your HSA. Not by you. Not by your employer. You can use the money in the HSA, but you cannot add to it.

This statement needs to be qualified. If you sign up for Medicare to begin as soon as you turn 65 then you can contribute to a HSA for all the months before the month in which you turn 65.

Medicare coverage is retroactive for the six months preceding Medicare enrollment, but not before an enrollee's 65th birthday. Any time a person over age 65 who has been contributing to an HSA delayed enrollment in Medicare or Social Security—which triggers automatic enrollment in Medicare Part A—this becomes an issue.
https://www.shrm.org/resourcesandtools/ ... tions.aspx

So if you begin Medicare as soon as you turn 65 then the retroactive coverage does not apply and you can make HSA contributions for those months. Those who delay the start of Medicare because they have other coverage (perhaps choosing to work until FRA for Social Security) are the ones affected by the 6-month lookback.

Correct. Forgot that I was already past 65 when my employer pushed me into a high-deductible and I had to deal with the mess of poor advice about signing up for Part A.

[Grebely]

HSA contribution reduces your MAGI for ACA, so your premium credit would be larger. FWIW, my recent experience opening and funding an HSA account at Fidelity was super smooth and fast.

[mjs2013]

Hello Everyone, OP here.
I want to belatedly to express my sincere THANKS! for all of the useful and actionable information you've provided. It was just what I was looking for and I really appreciate your time spent responding to this post.
Best Wishes to You All,
MJS

[rterickson]

Questions:

3. Do my husband and I get one HSA account for both of us, or one for each of us?

If you are both enrolled in the HDHP plan you can contribute the family max. to a single HSA. You can also contribute the catch-up amount to the same HSA. But due to a quirk in how the legislation was written, you would need to open a second HSA to receive the catch-up amount for the second spouse.

Piece of cake at Fidelity.