mad fientist hsa

Brandon, Have you ever estimated the actual overall tax savings from using a HSA? An individual expense is $200 and you are 40 years old. If I am correct so far in my HSA assumptions, do you get the money taxed on the $3K contribution to your HSA back in your tax refund/taxes you file for that calendar year? If you call the IRS and find that they have changed their position on this, that would be very good news. I’m way late to the party here but just want to thank you for this post. I see the $750 as additional money to invest each year, by front-loading my tax return into yet another tax-shelterded account the following year, compounding the tax savings. Of course, she considers herself lucky that she is able to allow the HSA to grow without pulling out too much for medical expenses. I have had an HMO for the last 6 years with company, but for financial reasons, the HMO is no longer offered and we have either the HD plan or traditional PPO. Similarly, a distribution from an HSA in the current year can be used to pay or reimburse expenses incurred in any prior year as long as the expenses were incurred after the HSA was established. Great post. Now they do! I’d like to approach him with as much information as possible but am having a hard time finding it on my own. The idea of “borrowing from yourself” to pay for doc bills, while allowing the money to grow tax-free in an HSA is awesome. This is great, but even for the cheapest Bronze plan to qualify for an HSA monthly premiums are over $500 for us. We quit our jobs this year and got a healthcare.gov high deductible plan and opened an HSA. What About if I Don’t Hit My Out of Pocket Max? As I have linked to this article in the past, I 100% agree with the premise, calculations, fancy pictures, etc. Pay medical expenses out of pocket now. That’s why I’m looking for (the HSA equivalent of) an in-service rollover: I want to take my now-three-years of contributions and invest them at lowest cost, while letting my contributions (and my employer’s) continue to come in pre-tax. It is an expense that you’re going to have to factor into your calculations but since you’re a fientist, I’m sure you’ll figure out a way to minimize that expense as much as possible :). After reading your article, I feel like such a moron. You mention, and I agree since I’m young and have similarly few medical bills, that $200 a year doesn’t meet the deductible and it doesn’t break the bank to pay it and not get reimbursed right away. Now just check your email to confirm! Email Have pretty much identical concerns and questions myself. HSA Chart from SHRM.ORG. Hi Mad Fientist, It is great to see the IRS explicitly state that reimbursements can be deferred to future tax years. OK, maybe this is a little too much and a big hypothetical but the point is that it’s not a great gift to leave your children. Maybe one day they will make this less complicated. My HSA provider also has online storage for documentation, so I keep up with that for reference in the future. The Mad Fientist turned me onto the realization that your HSA might be The Ultimate Retirement Account through what might be considered a loophole in the rules. Before using payroll deductions, I suggest everyone read http://www.bogleheads.org/wiki/Payroll_deduction and consider the impact lower OASDI taxes has on your social security benefits. Here is my analysis: – My current health plan and the HDHP plan that I want to switch to have about the same bi-weekly premium. However, I am also making another assumption that wasn’t addressed, so I wonder if you would comment. I just received your email referencing this blog post and I’m investing in my HSA for the first time. I was fortunate enough to have a company that offered this in 2008. Which HSA custodian do you recommend? If you max out your deductible every year, you’d be paying nearly $900 more to go with the HDHP so I doubt that’d be worth it, just to get access to an HSA. Man does it feel good. Just filed my taxes and ran into an issue with my HSA. Monthly Cost (Annualized): $3k, FSA contribution (*is recognized as pre-tax in CA) = $2650 ($1272 tax savings), PPO: $6728 ($9819 remains to invest in post-tax accounts) a. Great job Brandon. Any suggestions? We are strongly considering a HDHP with HSA for next year’s enrollment with my job. $220 is not insignificant, but won’t break the bank. I’m retired already. For retirement account exemptions, the lowest I found was a limit of $500,000. Powered by ConvertKit FI Spreadsheet. I realize I am late to this party, but I enjoyed the article and it has made me think more about fully funding my HSA account. I can hear you saying, “What if I put all this money into my HSA but I don’t have any health issues…how will I ever get my money out?”. Started with those I wasn’t. She learned about the HSA account’s power from the Mad Fientist when she was home on short term disability after breaking her ankle at a work function. I’m probably losing out on a few hundred dollars here and there, assuming the market goes up. Thanks to your blog, my wife and I have made two major changes in our investment approach – I’m glad I did. there’s no vesting for HSA Funds like 401k or pension plans. He actually wrote this a number of years ago, but I just stumbled on it earlier this year. So I suggest you leave that $200 in the HSA to grow tax free for as long as you can and only withdraw that money when you need it (just make sure you keep the receipt so if the IRS asks why you took out $200 from your HSA in the year 2036, you have the receipt to show that it’s for a valid medical expense). HSA Accounts. Family HDHP coverage is an HDHP covering an eligible individual and at least one other individual (whether or not that individual is an eligible individual). When used intelligently, the HSA can potentially provide the best benefits of both a Traditional IRA and a Roth IRA because you are not only able to contribute pre-tax dollars, like you can with a 401(k)/403(b)/Traditional IRA, but you can still enjoy the tax-free growth and tax-free distributions that a Roth provides! I likely won’t start taking money out of my HSA until I stop contributing to it. I visit the doctor very little and can easily cover the yearly deductible if I ever needed to. I’m really interested in this point you’re making Scott. Social Security and Medicare) on your contributions. As far as health insurance is concerned, I think the Affordable Care Act is great for future early retirees. Married couple, 1 child. Checking for if my Health Insurance Plan qualifies for an HSA: http://www.irs.gov/publications/p969/ar02.html#en_US_2013_publink1000204025. What I’ve found so far only says yes, one doesn’t HAVE to have earned income to contribute to HSA (unlike IRA/Roth IRA); but what tax benefit is there, unless HSA contribution can lower incomes from capital gains/dividends/interests? I doubt many people will scroll through all the comments at this point, so this may be something to add to the main article once it’s verified. Thanks for this post. So 1 out of 3 of the tax advantages is gone. Looks like I am littering your blog – Love the article, I’ve been maxing out my HSA for years but just now started deferring reimbursements. It’s too risky for the minimal reward you get for investing in it vs a PPO and investing any remaining funds in a taxable account. I’d argue that most of the time it makes sense to pay with after-tax money. In 2019, that will now be $1,200 / mo. Calendar Year Annual Prescription Out of Pocket Max: $2,000 Individual; $4,000 per family. I called the IRS again, and spoke with a representative who put me on hold a few times to research the question. The tax benefits associated with making pre-tax contributions outweigh the admin fees for the HSA but if I stop contributing to the account, I won’t get those tax benefits so it would probably make sense to start drawing down on the account then to minimize the years I have to pay the additional HSA admin fee. I think you have to have a certain income to make this work. Hi, when I first learned about HSA 3 years ago I knew they were a great opportunity and participated for 2 years and maxed out contributions. I already have the 401k and IRA’s maxed. Nick (and MF), Thanks for this great information. Success! It’s actually a rather complicated tax situation in CA that no one explains well… and I’m unsure if even I’ve been filing my taxes right with my HSA all these years! Absolutely! What do you think? We could have gone lower deductible, that we never meet, and paid $365/month. Unlike the FSA (Flexible Spending Account, where it is use it or lose it at the end of the year), the HSA continues to roll over and remains your money to grow tax free. Taxation on Traditional Retirement Accounts. I can see how Pub 969 defines qualified medical expenses as “expenses that would generally qualify for the medical and dental expenses deduction”, as defined in Publication 502, and Pub 502 does say “You can include only the medical and dental expenses you paid this year” but to me, that doesn’t explicitly mean the HSA can only be used for current year expenses. When you get down to it, this article basically describes a way to game the health insurance system to avoid taxes; no criticism of individuals who choose this is intended; I’d do it as well if I could. There’s another benefit that I recently learned about with HSA accounts that I wanted to share. p.s. Depending on your taxable income level, the FICA tax rate for the $3300 in potential HSA contribution will be: But what about medical expenses that were incurred after you stoped contributing to the HSA? Family Out of Pocket Max: $5k To take a deduction, Pub 502 states that the expense has to be a qualified medical expense AND has to have been paid for in the current tax year but an HSA distribution just states that it has to be a qualified medical expense, as defined in Pub 502. Here is why the HSA is better than the other two: Traditional IRA: Money going in (pay FICA tax), growth (no tax), money coming out (pay income tax) What if the deductible is much higher than the standard plan? Inside of the total stock index fund that is already tax efficient. As long as I keep my receipts (and make digital copies, in case the physical copies wear out), I can withdraw the money for qualified medical expenses from my HSA at any time, in a similar way a retired person over age 59.5 can withdraw money from a Roth IRA – tax free! Your email address will not be published. Basically, what happens is that all the healthy employees see the advantages of an HSA, so they all opt for the HSA plan and shift money away from the traditional plan. Decide which option will make you most comfortable and if that option comes with an HSA, great! I think there is some confusion on when you can withdraw from the HSA. Interesting. How would you revise this for those of us with a TSP? …What is the deadline for submitting claims for reimbursement from my HSA? My monthly cost (pre tax) for the plan I’ve been using is $195 and the HDHP is $19. Thanks a lot for the comment, Mr. FC, and glad to hear you are able to take advantage of an HSA. I’ve never used a self-directed HSA before and I’m wondering what other’s experience have been? Time will tell if this turns out to be the case in practice, and no read yet on it’s value as a retirement account. Your HSA is the super ultimate retirement account! I assume we can roll it over to somewhere else (which will save some annoying monthly fees we pay now to my employer provided account). My employer offers the option to do a low deductible plan with an FSA or a high deductible plan with an HSA. I prefer the HSA over the FSA but you have to have a certain amount of discretionary income to make it work. https://www.irs.gov/publications/p969/ar02.html. Interesting find from my previous employer that may be relevant to the article: limited use FSA. For example, a really bad car accident involving a lot of people. Any thoughts? In your case (which is also similar to my situation), I’d pay for medical expenses out-of-pocket so that I leave more of my money growing tax free (I’d rather have $1000 in an HSA instead of $1000 in my taxable account, if given the choice). it could only be used for dental and vision expenses. In that case, you’re better off as you found. I appreciate any feedback. Reminder, distributions using SEPP must continue 5 years or until age 59 1/2, whichever is longer. There must be a way to figure out under what circumstances paying with after-tax money is the better solution. And, they are kicking in $500 a year. That would allow contributions of $7650 plus $4350. Thoughts? My company gives me $500 a year into my HSA. I understand you can wait as long as you want to reimburse yourself for back bills that qualify, even if your not now in an HSA. It’s always nice to hear when something I’ve written helps someone save a considerable amount of money so I really appreciate the comment. 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