HSA cold feet?

[TheAnonOne]

My wife has an HSA and we just set her up for it. Maxed it out, all (nearly) 7k of it. Coming out of her checks in 24 portions.

I get that it's the ultimate retirement account, but im really unsure about that point, and how we really get money out of it. Saving recepts over my entire life to get money out sounds like a PAIN!

I guess im looking for reassurance that this is the right thing. We already max our 401ks and IRAs and invest in taxable. The HSA has good investment options..

[MayDay]

We have had one for ~4 years now.

We have a good chunk of money in it.  Maybe 30K?  We haven't received any distributions so far.  We are "lucky" enough to have had plenty of medical expenses, so we could get most/all of it out if we needed to.  Basically any medical bill we pay, we keep a copy of the bill itself, or a print-out of the online payment receipt (yes we keep paper copies, my H likes PAPER everything!) and for each calendar year, we stick them all in a 8.5x11 envelope.  Then we keep all the envelopes with our tax envelopes that we file away.  So it isn't a huge amount of work to save everything, and we tend to not bother saving little 5$ receipts for a generic prescription- just the bigger bills for 100$ or more. 

My understanding of the process to get a reimbursement is that we don't actually have to submit receipts at that point, we just have to have them in case we are audited (which, if we submit 25K plus of medical expenses at once, I guess there is a good chance we will get audited!)

[JLee]

My wife has an HSA and we just set her up for it. Maxed it out, all (nearly) 7k of it. Coming out of her checks in 24 portions.

I get that it's the ultimate retirement account, but im really unsure about that point, and how we really get money out of it. Saving recepts over my entire life to get money out sounds like a PAIN!

I guess im looking for reassurance that this is the right thing. We already max our 401ks and IRAs and invest in taxable. The HSA has good investment options..

When you turn 65, you can withdraw from it without corresponding medical expenses...so it's not really for your entire life.

[TheAnonOne]

My wife has an HSA and we just set her up for it. Maxed it out, all (nearly) 7k of it. Coming out of her checks in 24 portions.

I get that it's the ultimate retirement account, but im really unsure about that point, and how we really get money out of it. Saving recepts over my entire life to get money out sounds like a PAIN!

I guess im looking for reassurance that this is the right thing. We already max our 401ks and IRAs and invest in taxable. The HSA has good investment options..

When you turn 65, you can withdraw from it without corresponding medical expenses...so it's not really for your entire life.

Still keeping the tax free nature of it?

We are in a higher bracket with hhi around 200 to 225. So the tax implications are nice. I just wonder with the plan of fire around 33 to 35 (currently 26) if it will help or hurt us in the long run.

[acroy]

Jump in with both feet!
We've had ours since it came out, 5-6 years at least I think. Great way to protect some wages from tax.
I figure receipts are easy to keep: scan and store. They are only ever needed if audited.
Good luck!

[TheAnonOne]

Jump in with both feet!
We've had ours since it came out, 5-6 years at least I think. Great way to protect some wages from tax.
I figure receipts are easy to keep: scan and store. They are only ever needed if audited.
Good luck!

I guess my main concern is that I won't have recepts because I won't have 7k worth of out of pocket expenses a year. (Obviously this is a good thing but bad for taking money out of an HSA!)

Does everyone really spend 7k * market gains on medical expenses? I'd be surprised if I've spent 1k in my life so far. (Keeping in mind im only 26)

[JLee]

Jump in with both feet!
We've had ours since it came out, 5-6 years at least I think. Great way to protect some wages from tax.
I figure receipts are easy to keep: scan and store. They are only ever needed if audited.
Good luck!

I guess my main concern is that I won't have recepts because I won't have 7k worth of out of pocket expenses a year. (Obviously this is a good thing but bad for taking money out of an HSA!)

Does everyone really spend 7k * market gains on medical expenses? I'd be surprised if I've spent 1k in my life so far. (Keeping in mind im only 26)

You'll be able to withdraw up to whatever your running total of medical expenses are.

If you've only spent $1k in your whole life, consider yourself lucky! I rarely have medical expenses but easily hit my $1300 deductible this year (I'm 32).

[I'm a red panda]

Does everyone really spend 7k * market gains on medical expenses? I'd be surprised if I've spent 1k in my life so far. (Keeping in mind im only 26)

$1k in 26 years? And you have had high deductible health insurance before?   You are very lucky to be so healthy.  Do you get a yearly physical? Take any medication? I think you must be underestimating your spendings...

I have a PPO, so most things are covered way more than they ever would be on a HDHP, but I easily hit $500-1,000 a year, and some years hit my out of pocket max of $3,000.  Last year due to emergency out of network costs and stupid "allowable charges" BS on those out of network, my total spending was nearly $20k.


If you don't spend that amount in medical costs, you are basically either setting the money aside for a year in the future where your situation has changed and you spend a lot (for example, on a HDHP family plan with a $6,000 deductible and a $25k out of pocket max, and your child breaks their neck and spends a few weeks in the ICU, a few weeks in the hospital, a few weeks in inpatient therapy, a few months in outpatient therapy.  That money is EASILY all gone.  Been there, done that, except I was the child.) or you are waiting until you are 65 to access it, and it is just another investment account.

[Northwoods]

Still keeping the tax free nature of it?

We are in a higher bracket with hhi around 200 to 225. So the tax implications are nice. I just wonder with the plan of fire around 33 to 35 (currently 26) if it will help or hurt us in the long run.

No reason not to load it up. When you FIRE you can continue to let it grow and keep your receipts or you can start spending it down with your medical/dental/vision expenses.

If you still have funds in there at full retirement it basically converts to an tIRA.

[Gimesalot]

My wife has an HSA and we just set her up for it. Maxed it out, all (nearly) 7k of it. Coming out of her checks in 24 portions.

I get that it's the ultimate retirement account, but im really unsure about that point, and how we really get money out of it. Saving recepts over my entire life to get money out sounds like a PAIN!

I guess im looking for reassurance that this is the right thing. We already max our 401ks and IRAs and invest in taxable. The HSA has good investment options..

When you turn 65, you can withdraw from it without corresponding medical expenses...so it's not really for your entire life.

Still keeping the tax free nature of it?

We are in a higher bracket with hhi around 200 to 225. So the tax implications are nice. I just wonder with the plan of fire around 33 to 35 (currently 26) if it will help or hurt us in the long run.

After 65, you can use the money both penalty-free and tax-free for certain medical expenses.  After 65, you can also withdraw the money penalty-free but you will have to pay income tax for ANY use.  More info: https://www.hsaresources.com/pdf/Turning_65.pdf

[Nothlit]

Saving recepts over my entire life to get money out sounds like a PAIN!

I agree with this. My HSA is only 4 years old, and I already find it cumbersome to have to keep track of the necessary paperwork. Not least because most medical bills are just that: bills, not receipts. So I end up having to save both the bill and then some proof of payment (bank statement, etc.) showing I paid the bill. And then there's the matter of somehow proving a negative: that I was never reimbursed for these expenses from any other source prior to taking the reimbursement from my HSA. How can I prove that 30 years from now?!

What keeps me on the HSA train, though, is remembering that medical expenses tend to grow significantly later in life -- it's just the nature of aging, plus potentially having a family someday. So I've basically taken to holding a loose attachment to prior medical expenses -- if I'm able to reimburse them someday years from now, great. If not, chances are I will have enough medical expenses later in life to fully exhaust my HSA at that later time even without today's expenses being a factor. Worst case scenario if I lost all of my receipts is that I just wait until age 65 and start making regular taxable withdrawals, and the HSA becomes equivalent to a Traditional IRA.

[2Birds1Stone]

Jump in with both feet!
We've had ours since it came out, 5-6 years at least I think. Great way to protect some wages from tax.
I figure receipts are easy to keep: scan and store. They are only ever needed if audited.
Good luck!

I guess my main concern is that I won't have recepts because I won't have 7k worth of out of pocket expenses a year. (Obviously this is a good thing but bad for taking money out of an HSA!)

Does everyone really spend 7k * market gains on medical expenses? I'd be surprised if I've spent 1k in my life so far. (Keeping in mind im only 26)

The average person will spend upwards of $250k in their lifetime on health expenses.

You can use HSA funds to pay for dental, some vision, and many other things.

It's a GREAT insurance policy as well. If forbid you do incur health costs in the future that are very high for whatever reason, you can now pay for them with tax free money =)

[Spork]

I get that it's the ultimate retirement account, but im really unsure about that point, and how we really get money out of it. Saving recepts over my entire life to get money out sounds like a PAIN!

I am sure all HSA's are different, but hsabank lets you upload them as jpg/gif/pdf.  When you incur an expense, snap a pic, upload.  It is less than a minute.

[MayDay]

You asked if anyone really has expenses that high- yes.  We do. 

My H had a triple bypass in his 30's with no risk factors- not overweight, not a smoker, exercises, etc.  Hundreds of thousands of dollars of bills- we easily hit the family OOP Max which was something like 10K.  Have hit it almost every year since, as he has a lot of followup tests, plus expensive medications.  Throw in children's various minor emergencies (we had a broken foot last month) and it can add up quickly.

For us, even with interest, we could so far easily spend the entire HSA.  OTOH, one of my H's colleagues got really lucky timing the market, and made a boatload of $$$ in his HSA the first few years.  He no longer adds to his HSA as he is not interested in extreme retirement savings, and has plenty in the account to last the rest of his life.  Different strokes. 

[GetItRight]

I prefer an HSA. Getting money out of it is easy, I'm still in debt repayment so I only put money in when I have any medical expenses and pull it out immediately, to get the tax savings. It's just like any other online account where you transfer to and from, no need for explanations or justification to the bank for any transaction. I keep a spreadsheet of all medical expenses with date, doctor, price, paid Y/N, passed through HSA Y/N, notes, etc. I keep PDF copies of every EOB and corresponding invoice/receipt all preceded with the date so it's easy to organize and track. If I didn't pull the money out of the HSA it would still be easy to track how much I could pull at any given time. Just get a system in place and stick to it religiously so you don't get tripped up. Be sure to back up your data if you keep it digitally.

[BuildingFrugalHabits]

I just used my HSA Debit card to pay medical expenses directly as they arise.  I think that paying cash and saving the receipts for future reimbursement seems like a major pain in the ass.

[GetItRight]

I just used my HSA Debit card to pay medical expenses directly as they arise.  I think that paying cash and saving the receipts for future reimbursement seems like a major pain in the ass.

I pay with a 2% cash back CC for any medical provider that accepts CC payments, so long as they don't give more than a 2% cash discount. Reimburse myself from the HSA, transferred direct form HSA to checking. Profit!

[2Birds1Stone]

I just used my HSA Debit card to pay medical expenses directly as they arise.  I think that paying cash and saving the receipts for future reimbursement seems like a major pain in the ass.

I pay with a 2% cash back CC for any medical provider that accepts CC payments, so long as they don't give more than a 2% cash discount. Reimburse myself from the HSA, transferred direct form HSA to checking. Profit!

Surely you could get a better long term return than 2% even having HSA funds invested in a fairly conservative portfolio no?

[Spork]

I just used my HSA Debit card to pay medical expenses directly as they arise.  I think that paying cash and saving the receipts for future reimbursement seems like a major pain in the ass.

...but that pain in the ass is rewarded with compounded investments.  Taking a photo of a receipt is easy.

[GetItRight]

I just used my HSA Debit card to pay medical expenses directly as they arise.  I think that paying cash and saving the receipts for future reimbursement seems like a major pain in the ass.

I pay with a 2% cash back CC for any medical provider that accepts CC payments, so long as they don't give more than a 2% cash discount. Reimburse myself from the HSA, transferred direct form HSA to checking. Profit!

Surely you could get a better long term return than 2% even having HSA funds invested in a fairly conservative portfolio no?

I'm still in debt repayment so I only put money in when I have any medical expenses and pull it out immediately, to get the tax savings.

[Paul der Krake]

OP, I'm your age, use next to no medical services, and still max out my HSA.

Unless you have a good reason to project an early death before 65, there's no reason not to.

[JLee]

I just used my HSA Debit card to pay medical expenses directly as they arise.  I think that paying cash and saving the receipts for future reimbursement seems like a major pain in the ass.

...but that pain in the ass is rewarded with compounded investments.  Taking a photo of a receipt is easy.

And also a way to help fund the gap between IRA conversions if you RE and need access to tIRA funds.

[mizzourah2006]

I just use it in real time for medical expenses. I almost never have medical expenses, but once we had a daughter that changed. We spent most of last year's on the birth and we spent most of this years on one hospitalization for her. If we ever get a chance to save in it that would be great, but I'd rather use it to cover the real-time medical expenses than as an extra savings account.

[Highbeam]

You can spend HSA funds on weird things too. I used it for the daughter's braces.

[mizzourah2006]

You can spend HSA funds on weird things too. I used it for the daughter's braces.

yup, braces, dental work, lasik, and infertility treatment are just some things we have used it for.

[Rocketman]

I keep it simple for us.  I don't save my medical expenses up to pull out in the future. If I have a medical expense I just use my HSA. I max fund it but a couple of grand a years drops out of it.

That's ok by me.

Good luck with yours

[rubybeth]

I just toss paper receipts/bills into a folder which I keep in my regular files of stuff. Maybe someday I will scan, but it's not a big deal. But our medical costs are high--DH has a chronic condition, and our HSA doesn't require any documentation to get money out (just enter the amount we spent and the date, and get reimbursed). Eventually, I think we'll stop getting immediately reimbursed, but right now, I get the payments done right away so I don't forget. You could also just keep a simple spreadsheet and tally any medical expenses. Or, if you use Mint.com or some other budget tracking site, make a label for reimbursable expenses.

[Dezrah]

I find paper receipts inevitably get lost or faded.  What we've done is set up a Folder in Google Drive where I upload scans of the receipts.  A Google Spreadsheet in the same folder contains information on the date, amount spent, brief description, and whether I have or haven't been reimbursed from the HSA.  There's no fear of losing my records.

It sounds like a lot of work but I swear it's not.  I recently fell behind and had to upload and organize about 4 months of receipts (we have regular prescriptions).  It took about 20 mins.  The hardest part is just nagging DH to give the receipts.

I also consider the HSA part of my "oh shit" fund.  With a few clicks, I could transfer about $1,300 in medical reimbursements with no fees, penalties, or taxes.