Author Topic: HSA Question  (Read 712 times)

soccerluvof4

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HSA Question
« on: February 10, 2019, 06:22:18 AM »
Think I have found an area perhaps I can hopefully make an improvement on.

The question is what are the rules if any or best place to put our HSA $  MY DW still works so contributes the max every year but we were very late to the game of putting $ into it and only have 23k in it. We have to use our own bank (or pick the Bank) and so were getting like a 1.50$ a month in interest.  Anyone have any better ideas for a strategy or is that just how it is.

Also to go with that I have been under the assumption that as long as we can continue to pay our deductible/medical bills out of pocket within our budget that we should not touch the HSA and let it keep building. Our Deductible is if the family as a whole (6 people) hits 8k then her company reimburses anymore deductible after that.

Anyhow the $1.50 a month kinda bugs me and I am hoping there are better options.

terran

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Re: HSA Question
« Reply #1 on: February 10, 2019, 07:04:43 AM »
If you want to invest it then Fidelity and Lively (investing through TD Ameritrade) both allow you to invest everything and pay no fees and both have good low fee, no transaction fee index funds and/or ETFs available.

EvenSteven

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Re: HSA Question
« Reply #2 on: February 10, 2019, 07:25:47 AM »
What terran said.

I chose Lively because Fidelity HSAs didn't exist at the time; they just started. I'm happy enough with Lively that I have no plans on switching, but if I were to start a new one I would probably choose Fidelity.

Once the money is in the HSA, treat it like a Roth IRA, and invest it to fit in with your overall asset allocation.

soccerluvof4

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Re: HSA Question
« Reply #3 on: February 10, 2019, 07:41:41 AM »
What terran said.

I chose Lively because Fidelity HSAs didn't exist at the time; they just started. I'm happy enough with Lively that I have no plans on switching, but if I were to start a new one I would probably choose Fidelity.

Once the money is in the HSA, treat it like a Roth IRA, and invest it to fit in with your overall asset allocation.
If you want to invest it then Fidelity and Lively (investing through TD Ameritrade) both allow you to invest everything and pay no fees and both have good low fee, no transaction fee index funds and/or ETFs available.



We are still contributing to it every month so don't I need it to be an HSA bank account? I'm confused with investing it. Because I still I want the pre-tax benefit.

Are you basically both saying that you can setup an HSA investment account and get the same tax advantages.

EvenSteven

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Re: HSA Question
« Reply #4 on: February 10, 2019, 07:58:43 AM »
Quote

Are you basically both saying that you can setup an HSA investment account and get the same tax advantages.

Yeah, the HSA is the account type, and within that account, you can invest in whatever the custodian allows you to. At Fidelity you would invest in Fidelity low cost index funds. At Lively they link your account to TD Ameritrade, where you can invest in low cost commission free ETFs.

Financial.Velociraptor

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Re: HSA Question
« Reply #5 on: February 10, 2019, 08:28:10 AM »
I use Lively and invest most in TD Ameritrade.  Starting in January, the 2.50 monthly fee was dropped.  Lively is now completely free to use.

terran

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Re: HSA Question
« Reply #6 on: February 10, 2019, 08:35:28 AM »
Are you contributing through payroll deductions from your employer, or are you contributing directly to the HSA?

soccerluvof4

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Re: HSA Question
« Reply #7 on: February 10, 2019, 09:21:23 AM »
Are you contributing through payroll deductions from your employer, or are you contributing directly to the HSA?
I use Lively and invest most in TD Ameritrade.  Starting in January, the 2.50 monthly fee was dropped.  Lively is now completely free to use.
Quote

Are you basically both saying that you can setup an HSA investment account and get the same tax advantages.




Yeah, the HSA is the account type, and within that account, you can invest in whatever the custodian allows you to. At Fidelity you would invest in Fidelity low cost index funds. At Lively they link your account to TD Ameritrade, where you can invest in low cost commission free ETFs.






Yes she has it put into our local bank as it is drawn twice a month from her payroll checks to do the max. Basically we fire'd together 4 years ago and  a little over two years ago we got a little nervous with the Health scare so she went back to work for that reason and fortunately lovers her job or being a way from me lol .  Anyhow so about 90% of her check goes to HSA, Maxing 401k and 529s.

We stay within out budget and I have the monthly budget including out deductible Divided by 12.

So am I clear that since the deductible fits in out budget it makes more sense than as well to build up the HSA (avoid using it) till out later years? since I am 54 and she is 50.

Thanks for the info as well. I think I understand it now.

terran

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Re: HSA Question
« Reply #8 on: February 10, 2019, 10:38:25 AM »
If she's having it payroll deducted she'll need to check with her employer. A couple of considerations:

  • Many employers will only payroll deduct to a particular HSA provider. In this case you're stuck with contributing to that provider (but see below) if you want to contribute through payroll deduction
  • Some employers will send payroll deducted contributions to any HSA provider. In this case you'd just need to make sure your chosen provider can give you a routing number to have the contribution sent to (I would think most could, but check)
  • The big reason to contribute through payroll deduction is if the contribution is not subject to FICA taxes. This is usually true, but not always, so check with your wife's employer. If the payroll deducted contributions do not avoid FICA at her employer you might want to just contribute directly, in which case you'll need to deduct the contribution when you file taxes much like an IRA contribution (but different form)

If you do want to continue to payroll deduct and your wife's employer will only contribute to certain provider(s) you can still open an account with another provider and move your balance over periodically, while maintaining the current account for the contributions. It adds a little extra complexity to your life, but it may be the only way to get access to a better HSA while continuing to payroll deduct.

In this case you can make unlimited trustee-to-trustee transfers, but it's pretty likely that the current HSA provider charges a fee for this, so you may want to do this infrequently or go with option two.

You can make one indirect HSA rollover per 12 month period (not that this is per 12 month period, not be calendar year). To do this, withdraw funds from your current HSA just like you would if you were reimbursing yourself for medical expenses, then either have the new HSA provider pull the funds from your normal bank account coded as a rollover, or write them a check that you submit with a rollover form. Either way you'll need to fill out form 8889 when you do your taxes to show the withdrawal and indicate that it was a rollover.

terran

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Re: HSA Question
« Reply #9 on: February 10, 2019, 10:44:18 AM »
I don't know that I would necessarily avoid reimbursing yourself. It's a fine option and certainly something you can do, but it requires that you hold on to the receipts until you do reimburse yourself. Since thermopaper receipts (I think that's what they're called) tend to fade over time you should probably scan them in.

If you aren't already maxing out other tax advantaged accounts (wife's 401(k) and IRA for both of you) or if you're drawing from other tax advantaged accounts I would probably just reimburse yourself now so you don't have to keep track of receipts for as long. On the other hand, if you're already maxing other accounts and you're not withdrawing and you're in a high tax bracket now you might consider leaving the money in the HSA.

soccerluvof4

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Re: HSA Question
« Reply #10 on: February 10, 2019, 11:56:53 AM »
If she's having it payroll deducted she'll need to check with her employer. A couple of considerations:

  • Many employers will only payroll deduct to a particular HSA provider. In this case you're stuck with contributing to that provider (but see below) if you want to contribute through payroll deduction
  • Some employers will send payroll deducted contributions to any HSA provider. In this case you'd just need to make sure your chosen provider can give you a routing number to have the contribution sent to (I would think most could, but check)
  • The big reason to contribute through payroll deduction is if the contribution is not subject to FICA taxes. This is usually true, but not always, so check with your wife's employer. If the payroll deducted contributions do not avoid FICA at her employer you might want to just contribute directly, in which case you'll need to deduct the contribution when you file taxes much like an IRA contribution (but different form)

If you do want to continue to payroll deduct and your wife's employer will only contribute to certain provider(s) you can still open an account with another provider and move your balance over periodically, while maintaining the current account for the contributions. It adds a little extra complexity to your life, but it may be the only way to get access to a better HSA while continuing to payroll deduct.

In this case you can make unlimited trustee-to-trustee transfers, but it's pretty likely that the current HSA provider charges a fee for this, so you may want to do this infrequently or go with option two.

You can make one indirect HSA rollover per 12 month period (not that this is per 12 month period, not be calendar year). To do this, withdraw funds from your current HSA just like you would if you were reimbursing yourself for medical expenses, then either have the new HSA provider pull the funds from your normal bank account coded as a rollover, or write them a check that you submit with a rollover form. Either way you'll need to fill out form 8889 when you do your taxes to show the withdrawal and indicate that it was a rollover.



It is a payroll deduction and she can pick where she wants it to go. The account she is putting it in is one that is now 50% from this Job that until two years ago was sitting dormant from when I had my own business that had the other 50% in. 

Going to have to do some more work based on what you said as far as paying medical bills with it now or keep building it. We live off my set up 4% withdrawal and about $700 of her income is left by the time she maxes everything out she can through work.
Thanks for your help.

MDM

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Re: HSA Question
« Reply #11 on: February 10, 2019, 09:01:02 PM »
Depending on where she is on the SS benefit calculation curve, it might be worth not using payroll deduction but contributing to the HSA provider via check (or whatever conduit) instead.

If she is past the second bend point, the loss of SS benefit is probably negligible and doing the payroll deduction is the better path.

If she hasn't yet reached the first bend point, it might be worth some back of the envelope cost/benefit calculations.

soccerluvof4

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Re: HSA Question
« Reply #12 on: February 11, 2019, 04:45:05 AM »
Depending on where she is on the SS benefit calculation curve, it might be worth not using payroll deduction but contributing to the HSA provider via check (or whatever conduit) instead.

If she is past the second bend point, the loss of SS benefit is probably negligible and doing the payroll deduction is the better path.

If she hasn't yet reached the first bend point, it might be worth some back of the envelope cost/benefit calculations.


Thats a good point. Never thought of that. When you say bends can you be more specific though? I will have her log in and see were she is at.

terran

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Re: HSA Question
« Reply #13 on: February 11, 2019, 05:57:25 AM »
Depending on where she is on the SS benefit calculation curve, it might be worth not using payroll deduction but contributing to the HSA provider via check (or whatever conduit) instead.

If she is past the second bend point, the loss of SS benefit is probably negligible and doing the payroll deduction is the better path.

If she hasn't yet reached the first bend point, it might be worth some back of the envelope cost/benefit calculations.
Thats a good point. Never thought of that. When you say bends can you be more specific though? I will have her log in and see were she is at.

Yes, that is a good point.

If you fill out this worksheet with her social security earnings to date (which you can find on the social security website) and then follow the steps, if she has any income applied to step 5 part c then she's over the 2nd bend point.

Basically, only the 35 highest earning years count. Remember that past years are indexed for inflation (see the worksheet). From those 35 years, the first $388,920 (=$926/month x 35 years x 12months/year) of lifetime earnings are counted at 90% which is a very good deal, after that anything up to $2,344,860 (=$5583/month x 35 years x 12months/year) of lifetime earnings are counted at 32%, which is still pretty good, but beyond that only 15% is counted, which doesn't change the eventual benefit very much.

Of course, your wife will be eligible for 1/2 of your benefit once you file, so if you significantly out earned her, then her building her own benefit is less valuable.


MDM

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Re: HSA Question
« Reply #14 on: February 11, 2019, 10:00:19 AM »
Depending on where she is on the SS benefit calculation curve, it might be worth not using payroll deduction but contributing to the HSA provider via check (or whatever conduit) instead.

If she is past the second bend point, the loss of SS benefit is probably negligible and doing the payroll deduction is the better path.

If she hasn't yet reached the first bend point, it might be worth some back of the envelope cost/benefit calculations.


Thats a good point. Never thought of that. When you say bends can you be more specific though? I will have her log in and see were she is at.
A couple of spreadsheets and a web tool that work well for calculating an individual's benefit:
 - The 'SocialSecurity' tab of the case study spreadsheet (CSS).
 - The Downloadable Social Security Benefit Estimator (repost) - Bogleheads.org.
 - Social Security Calculator
A web tool that evaluates SS benefit start dates for a couple:
Open Social Security: Free, Open-Source Social Security Calculator

I know the CSS shows where one is relative to the two "bend points" in a chart.  Don't recall whether the others do as well.

talltexan

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Re: HSA Question
« Reply #15 on: February 14, 2019, 08:34:22 AM »
I have several useful investment options through my work HSA at Optum Bank.

I use a Vanguard fund with large value-oriented companies and a domestic REIT.

terran

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Re: HSA Question
« Reply #16 on: February 15, 2019, 05:53:46 AM »
I have several useful investment options through my work HSA at Optum Bank.

I use a Vanguard fund with large value-oriented companies and a domestic REIT.

Optum Bank seems to vary quite a bit depending on the agreement your employer has made with them. Things to look for include minimums that have to remain uninvested, monthly fees, and additional expense ratios added on top of what the fund you invest in charges. My account, for example, requires a minimum of $2000 to be kept in cash, and charges 0.03% per month on the amount invested up to $10, which is the equivalent of an additional  0.36 expense ratio on invested balances up to $33,333.33 (then dropping, as it maxes out at $120/year). This is why employer contributions go here so they're FICA exempt, but will then be transferred to Fidelity once a year to be invested.

You can see what your Optum Bank account charges by going to Accounts > Overview > Account Details > Account Fee Schedule.