Author Topic: Do you use money in your HSA during working years?  (Read 5618 times)

MrGville

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Do you use money in your HSA during working years?
« on: February 24, 2017, 11:53:42 AM »
I have a high deductible health plan through my employer.  I also have an HSA account into which i contribute the max annually for a single person.  My question is...does it make more sense to continue to max out my HSA during my working years (probably 10-15 more years) and save this money for medical expenses during my retirement?  I can invest the money in my HSA and let it grow for the next 20 or so years before use.  One thing to keep in mind is that I have met my deductible (~$3,600) for the past few years and will likely continue to meet my deductible yearly due to an ongoing medical condition.  I can comfortably pay this deductible out of pocket with cash if I determine it makes more sense than using funds from my HSA at this point. 

The one thing I do like about using HSA funds to pay for my medical expenses is that I am using money that is taking out of my paycheck before it reaches my bank account.  No one like spending money on medical expenses, so using funds from my HSA make it a little more tolerable. 

Thanks in advance for any thoughts/advice.

Altons Bobs

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Re: Do you use money in your HSA during working years?
« Reply #1 on: February 24, 2017, 12:01:33 PM »
I do use my HSA money whenever I use approved medical services.  It's too much trouble for me to save receipts for reimbursement years later. I'm not good at keeping track of things, so it's easier for me to do this than to keep receipts and reimburse myself later.

Heroes821

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Re: Do you use money in your HSA during working years?
« Reply #2 on: February 24, 2017, 12:03:39 PM »
My plan for my HSA is exactly that. Cap every year regardless of if I need to hit a deductible every once in awhile and then use it in retirement.

Currently with saved receipts you are allowed to claim money out of your HSA for medical expenses many years after they occurred. I can't say this will still be possible 40 years from now, but if so it can allow you to leave the HSA to grow and compound before you reimburse yourself. 

I personally plan to hold it until I reach medicare age and then use it for any out of pocket expenses that aren't covered by medicare.

MrGville

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Re: Do you use money in your HSA during working years?
« Reply #3 on: February 24, 2017, 12:05:45 PM »
I do use my HSA money whenever I use approved medical services.  It's too much trouble for me to save receipts for reimbursement years later. I'm not good at keeping track of things, so it's easier for me to do this than to keep receipts and reimburse myself later.

Thanks.  I specifically am asking about saving money in an HSA to use for medical expenses that occur in the future.  Basically, does it make sense to let my HSA grow for 10, 15, or 20+ years (in the meanwhile covering all medical expenses with cash), and then having a (hopefully) large pot of funds available to use for medical expenses that occur when I am older.

Aggie1999

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Re: Do you use money in your HSA during working years?
« Reply #4 on: February 24, 2017, 12:16:31 PM »
Unless you think the gov't will change the rule that you can't reimburse yourself in later years, it makes no sense to pay for medical expenses out of your HSA when you have other taxable income that you can comfortably use to pay the medical expenses. Leave the money in your HSA and the growth is tax free. Leave the money in your taxable accounts and you pay taxes on the growth. Pretty simple.

omega13

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Re: Do you use money in your HSA during working years?
« Reply #5 on: February 24, 2017, 12:16:34 PM »
I do the same thing. I am not planning on touching my HSA for as long as I work. Given that it has triple benefits, I would only use it if I absolutely have to.

The only annoying part is that I have to meet a $2,000 minimum balance before I can invest that money. And I cannot front load the contributions. They are equally spread through each paycheck. 7 months of my contributions will sit waiting at <0.01% interest rate until I surpass that threshold.

I still think it's a great deal long term though.

AZDude

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Re: Do you use money in your HSA during working years?
« Reply #6 on: February 24, 2017, 12:27:15 PM »
If you spend ~$3600 every year for medical expenses, starting from 0 and going 15 years, then 15 years from now you would have ~$72,000 in your HSA, figuring a return of 4% plus inflation.

At that point, you would be getting ~$2880 a year, using the 4% rule, to pay your deductible. So you would only be liable for roughly $800 a year in medical expenses. Not too bad an idea. Of course, things will probably change drastically between now and then, so you are taking a risk that politicians, health insurers, etc... will not FUBAR your plan.

Dezrah

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Re: Do you use money in your HSA during working years?
« Reply #7 on: February 24, 2017, 01:12:00 PM »
Let's say you have to buy medication for $50. 

You could pay with it out of your HSA and be done; tax-advantage achieved. 

Or you could pay out of pocket and let that money invest for a while.  Ten years later at 7% annualized return, that $50 has grown to about $100.  Now you can pay yourself back for the $50 plus you can get another $50 medication "for free".


I'll also add from personal experience, letting the HSA build to x1, then x2+ of the out-of-pocket maximum is super comforting.  I could have a super shitty medical crisis and know that at least my medical bills won't be a problem.  I prefer to delay satisfaction now while it's easy and give future sick-me permission to spend without worry.

boarder42

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Re: Do you use money in your HSA during working years?
« Reply #8 on: February 24, 2017, 02:41:36 PM »
i did now i do not because of what Dezrah points out above.

the growth is tax free too.  when used for medical.  So since i'm maxing all my tax advantaged accounts and still ahve 30-40k left for taxable i pay medical bills now in cash and stash my reciepts ... the other advantage is this money can help with your 5 year bridge as well in FIRE.  So my reciepts that i stashed i can claim that money at any time tax free. all the while it has been growing tax free

begood

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Re: Do you use money in your HSA during working years?
« Reply #9 on: February 24, 2017, 03:07:13 PM »
I don't trust that the status quo will remain. We're using our HSA for medical expenses now. I keep thinking we'll get ahead on it, but first there were braces, and now there's wisdom teeth, and an ultrasound or two... it adds up quick!

Mr. Green

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Re: Do you use money in your HSA during working years?
« Reply #10 on: February 24, 2017, 03:09:50 PM »
Another happy convert. I've had an HSA for 7 years now. I used to use the money as needed. Then I realized what a great investment vehicle it is so I stopped. I have the money invested in Vanguard's Total Stock Market Index and between my contributions and growth the balance is now about $25,000. As someone in his early 30's, by the time I'm "retirement age" and use Medicare, my money will have grown to the point where it could pay for all my medical costs in old age. And it's all tax free spending when spent on medical expenses. It would be a pretty cool feeling to know that I have one bucket of funds that will pretty much cover our medical costs in retirement, and all our other money is for other things.

BogleBoy

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Re: Do you use money in your HSA during working years?
« Reply #11 on: February 25, 2017, 01:04:07 AM »
If you're able to max out all of your tax-advantaged accounts you should be spending after tax dollars on healthcare before you spend HSA dollars.

You don't get the tax sheltered space back after you take the money out, so why give it up if you can spend taxable account dollars on your healthcare expenses? You can leave the money in there to grow without paying taxes on the dividends, and you can even shift between funds freely with no taxable events.

Plus, once you're 65 you can withdraw for any reason (healthcare or otherwise) without penalty. Even before that you can withdraw money for healthcare expenses you incurred years ago if you need to, doesn't matter how long ago you incurred the expense but it's probably a good idea to keep records/receipts.

See:
https://www.bogleheads.org/wiki/Health_savings_account#Paying_current_expenses_out_of_pocket


BTDretire

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Re: Do you use money in your HSA during working years?
« Reply #12 on: February 25, 2017, 08:17:52 AM »
Another happy convert. I've had an HSA for 7 years now. I used to use the money as needed. Then I realized what a great investment vehicle it is so I stopped. I have the money invested in Vanguard's Total Stock Market Index and between my contributions and growth the balance is now about $25,000.

Where is your HSA that you can invest it in Vanguard's Total Stock Market Index?
Quote
As someone in his early 30's, by the time I'm "retirement age" and use Medicare, my money will have grown to the point where it could pay for all my medical costs in old age. And it's all tax free spending when spent on medical expenses. It would be a pretty cool feeling to know that I have one bucket of funds that will pretty much cover our medical costs in retirement, and all our other money is for other things.
I am not spending any of my HSA money, I pay all medical expense from current income.
I have a folder that I put all medical reciepts in, then at the end of the year I mark an envelope
with the year, put all reciepts in it, seal it up, and put it back in the folder. Start over.

MichaelB

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Re: Do you use money in your HSA during working years?
« Reply #13 on: February 25, 2017, 08:50:04 AM »
If you're able to max out all of your tax-advantaged accounts you should be spending after tax dollars on healthcare before you spend HSA dollars.

You don't get the tax sheltered space back after you take the money out, so why give it up if you can spend taxable account dollars on your healthcare expenses? You can leave the money in there to grow without paying taxes on the dividends, and you can even shift between funds freely with no taxable events.

Plus, once you're 65 you can withdraw for any reason (healthcare or otherwise) without penalty. Even before that you can withdraw money for healthcare expenses you incurred years ago if you need to, doesn't matter how long ago you incurred the expense but it's probably a good idea to keep records/receipts.

See:
https://www.bogleheads.org/wiki/Health_savings_account#Paying_current_expenses_out_of_pocket

On the other hand, though, it seems to me that if you're not maxing out your tax-advantaged accounts yet, then you should pay out of the HSA. If I pay medical expenses out of pocket, but I'm not maxing my IRA and 401k yet, then every dollar out of pocket for medical expenses is one less dollar in my pocket put into those other accounts. Even if you take money out of the HSA as you're putting money in thru work, you're still getting the full deduction on your income. So paying out of the HSA means you will have more leftover dollars in checking and savings for your IRA, thereby increasing your income deduction.

Let's say you have $1000 after bills to invest in your tax advantaged accounts. But then, oh no! $500 medical bill. If you pay that $500 out of pocket, then put the remaining $500 into your HSA, you have gotten a $500 income deduction, and increased the amount in your tax-advantaged accounts by $500. Cool. But if you put $1000 into the HSA, but then pay the $500 out of your HSA, you have still increased the amount in your tax-advantaged accounts by the exact same $500, but you get a $1000 deduction this time. Win!

If you're not maxing out your tax-advantaged accounts, then you're either taking those dollars out of your HSA, or you're just never putting them into the IRA. So increase your deduction. Once everything is maxed out, THEN start paying out of pocket.

ltt

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Re: Do you use money in your HSA during working years?
« Reply #14 on: February 25, 2017, 11:25:16 AM »
What happens to the money in the HSA account if it's set up in an individual's name and that person would pass away? Would it go to the family members for their medical care?

bassman2003

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Re: Do you use money in your HSA during working years?
« Reply #15 on: February 25, 2017, 11:38:18 AM »
If you're able to max out all of your tax-advantaged accounts you should be spending after tax dollars on healthcare before you spend HSA dollars.

You don't get the tax sheltered space back after you take the money out, so why give it up if you can spend taxable account dollars on your healthcare expenses? You can leave the money in there to grow without paying taxes on the dividends, and you can even shift between funds freely with no taxable events.

Plus, once you're 65 you can withdraw for any reason (healthcare or otherwise) without penalty. Even before that you can withdraw money for healthcare expenses you incurred years ago if you need to, doesn't matter how long ago you incurred the expense but it's probably a good idea to keep records/receipts.

See:
https://www.bogleheads.org/wiki/Health_savings_account#Paying_current_expenses_out_of_pocket

On the other hand, though, it seems to me that if you're not maxing out your tax-advantaged accounts yet, then you should pay out of the HSA. If I pay medical expenses out of pocket, but I'm not maxing my IRA and 401k yet, then every dollar out of pocket for medical expenses is one less dollar in my pocket put into those other accounts. Even if you take money out of the HSA as you're putting money in thru work, you're still getting the full deduction on your income. So paying out of the HSA means you will have more leftover dollars in checking and savings for your IRA, thereby increasing your income deduction.

Let's say you have $1000 after bills to invest in your tax advantaged accounts. But then, oh no! $500 medical bill. If you pay that $500 out of pocket, then put the remaining $500 into your HSA, you have gotten a $500 income deduction, and increased the amount in your tax-advantaged accounts by $500. Cool. But if you put $1000 into the HSA, but then pay the $500 out of your HSA, you have still increased the amount in your tax-advantaged accounts by the exact same $500, but you get a $1000 deduction this time. Win!

If you're not maxing out your tax-advantaged accounts, then you're either taking those dollars out of your HSA, or you're just never putting them into the IRA. So increase your deduction. Once everything is maxed out, THEN start paying out of pocket.

This is what we do.  Right now with 2 kids in daycare, we are not quite able to max out all our tax advantaged space.  We use the HSA to pay medical costs, and stuff as much in our IRAs as we can.  In the future I anticipate us being able use out of pocket money for medical costs, leave the HSA be, and max out all our tax advantaged accounts, once our boys are in school and the daycare costs go away.

BlueMR2

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Re: Do you use money in your HSA during working years?
« Reply #16 on: February 25, 2017, 11:45:42 AM »
I do pay out of my HSA despite being in my working years.  I have it maxed out of course, but I'm already very retirement fund heavy.  It lets me get my medical stuff done "at a discount" (by virtue of being pre-tax) while letting me invest more into taxable accounts now (which I may need to carry me to the classic retirement funds).

Mr. Green

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Re: Do you use money in your HSA during working years?
« Reply #17 on: February 25, 2017, 01:13:10 PM »


Where is your HSA that you can invest it in Vanguard's Total Stock Market Index?
It's through MyBenefitWallet, backed by Mellon Bank of New York. The website isn't the greatest but I had to use it with my employer an when I left their fees were small enough that it made it about the lowest cost option so I stayed with them. I have to keep a $1,000 balance in the "savings account" to avoid a monthly fee and all the rest is in my "investment account." There are about 30 different mutual fund options and VTSMX is one of them. They only charge $2.90 a month for using the investment platform so ~$35 a year in fees on $25,000 is about a 0.15% expense ratio, on top of Vanguard's expense ratio.

seattlecyclone

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Re: Do you use money in your HSA during working years?
« Reply #18 on: February 25, 2017, 03:05:08 PM »
Agree with previous posters. If you're maxing all your available tax shelters, let the money compound in the HSA. Save receipts for later or just expect that you'll have enough post-retirement medical expenses to use the full balance. If you're not maxing out all of your available tax shelters, withdraw from your HSA as medical expenses come up and use that tax-free money to get closer to maxing out your retirement accounts.

cookielover

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Re: Do you use money in your HSA during working years?
« Reply #19 on: February 25, 2017, 03:17:08 PM »
I have decided that moving forward I will use HSA fund immediately to reimburse the medical expense every year.

I have been funding HSA maximum every year and collecting the receipts in the past several years hoping that HSA money keeps growing and I will get all the medical expenses reimbursed later.  But it has become too much for me to keep tracking the receipts and I am not a very organized person.  I have started reimbursing myself for those receipts I collected so far and very regretfully I found that lost some receipts.  Lesson learned.  This strategy works for others but it does not work for me.  Simplicity is more important for me.

GetItRight

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Re: Do you use money in your HSA during working years?
« Reply #20 on: February 25, 2017, 03:22:44 PM »
I pay medical expenses with a CC, or cash if they won't take a CC. Then make a deposit and immediate withdrawal from the HSA to get the tax savings. I'm still in debt repayment on student loans though, so if I were debt free aside from the mortgage I would be inclined to max my HSA and keep scanned receipts along with tracking in my spreadsheet (expense/details/amount/depositedYN/reimbursedYN/etc.). Idea being to use it for ER.

charis

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Re: Do you use money in your HSA during working years?
« Reply #21 on: February 25, 2017, 03:46:46 PM »
We max our HSA every year and withdraw once in while.  Currently have over $20K saved with $17K invested after four years.  I took some out for Lasik surgery and maybe another $1K over that time, while paying down student loans.  I keep my receipts but I think it will most likely used for future medical costs.

Secretly Saving

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Re: Do you use money in your HSA during working years?
« Reply #22 on: February 25, 2017, 06:21:24 PM »
It's a triple tax advantaged account.  What's better than that?  Let it grow, grow, grow!  You your taxable monies for healthcare expenses.  Our HSA tracks all of our bills for us and we also use Evernote as a backup.

FIreDrill

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Re: Do you use money in your HSA during working years?
« Reply #23 on: February 25, 2017, 06:41:50 PM »
My wife and I are in our mid/early twenties and our plan is to use our HSA as a long term tax sheltered investment account and then access that money during FIRE for medical expenses if needed.  It should be easy as long as we keep making our current income.  So far we have around 13k in the account, 11k invested and 2k cash.  We max it out each year, I believe the contribution limit is 6750 this year for a family.  Ideally, we will grow the account to where our yearly deductible will be less than 4% of the account balance.  Kinda like a 4% medical FIRE account...  I think if you start young enough this goal is definitely achievable.

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cacaoheart

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Re: Do you use money in your HSA during working years?
« Reply #24 on: February 26, 2017, 08:57:37 AM »
Where is your HSA that you can invest it in Vanguard's Total Stock Market Index?
 

I can do so with Optum Bank.

rtrnow

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Re: Do you use money in your HSA during working years?
« Reply #25 on: February 26, 2017, 11:15:19 AM »
Where is your HSA that you can invest it in Vanguard's Total Stock Market Index?
 

HSA bank allows me to invest in Vangurad ETF's via TD Ameritrade with no fees.

tralfamadorian

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Re: Do you use money in your HSA during working years?
« Reply #26 on: February 26, 2017, 11:26:21 AM »
HSA bank allows me to invest in Vangurad ETF's via TD Ameritrade with no fees.

I use them as well and have been happy.  I called once with a question and they were friendly and helpful. 

charis

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Re: Do you use money in your HSA during working years?
« Reply #27 on: February 26, 2017, 12:05:22 PM »
Where is your HSA that you can invest it in Vanguard's Total Stock Market Index?
 

HSA bank allows me to invest in Vangurad ETF's via TD Ameritrade with no fees.

I do this through Elements Financial.

InnTee

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Re: Do you use money in your HSA during working years?
« Reply #28 on: February 28, 2017, 12:11:26 PM »
WageWorks HSA also has decent investment options, including several Vanguard funds.

I've been maxing out the HSA the last year or so, and not making any payments out of it. As far as I know, it's the only investment vehicle with a triple tax benefit that will allow me to pull out funds (for medical expenses, granted) before a "traditional" retirement age.

rockstache

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Re: Do you use money in your HSA during working years?
« Reply #29 on: February 28, 2017, 12:22:18 PM »
Related question: If you have an HSA with a meh bank with meh fees, is there an option to roll it somewhere when  you leave that job, or do you have to leave it there?

InnTee

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Re: Do you use money in your HSA during working years?
« Reply #30 on: February 28, 2017, 12:29:31 PM »
Related question: If you have an HSA with a meh bank with meh fees, is there an option to roll it somewhere when  you leave that job, or do you have to leave it there?

I know you can roll it into another HSA, though there is paperwork to be done. I'm in the process of consolidating two HSAs now.

Not sure if you can roll it into an IRA or other investment vehicle.

MichaelB

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Re: Do you use money in your HSA during working years?
« Reply #31 on: February 28, 2017, 01:07:24 PM »
You cannot do HSA to IRA. You are allowed one (as in, during your whole life) IRA to HSA rollover. Also, the transferred amount, when combined with other HSA contributions for the year, may not exceed your annual maximum contribution.

Source: https://www.mywealthcareonline.com/fifththirdhsa/Resources/HSAResources/HSAFrequentlyAskedQuestions.aspx

rtrnow

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Re: Do you use money in your HSA during working years?
« Reply #32 on: March 01, 2017, 05:53:00 AM »
Related question: If you have an HSA with a meh bank with meh fees, is there an option to roll it somewhere when  you leave that job, or do you have to leave it there?

Yes, you can definitely roll it to another HSA. I did just that a couple of years ago. At that time, I could find two good choices that offered Vanguard investment options. I chose HSA Bank bc the other option (can't remember right now) only offered admiral share funds and my HSA didn't have enough cash at the time to take advantage of that. Another HSA benefit is that you can contribute any money not just earned income. I'm continuing to put money in my HSA even with no earned income for the last 2 years.

rockstache

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Re: Do you use money in your HSA during working years?
« Reply #33 on: March 01, 2017, 08:30:25 AM »
Thanks everyone! I just opened ours this year so I have a lot to learn.

MasterStache

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Re: Do you use money in your HSA during working years?
« Reply #34 on: March 01, 2017, 11:44:46 AM »
We use ours on occasion. For instance I endured a trip to the ER last year for chest pain (turned out to be nothing) and severe, debilitating side pain (turned out I passed a kidney stone). The bill was huge and our HSA has plenty of money in it so we could afford a minor hit.

BayAreaFrugal

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Re: Do you use money in your HSA during working years?
« Reply #35 on: March 01, 2017, 05:03:52 PM »
I'm in my working years and I spend the money in my HSA mostly for psychological reasons. I acknowledge that it would technically be better to use taxable accounts to pay for it, but my HSA is relatively hidden from me, it's basically a pile of money I pretend doesn't exist. So it *feels* like my healthcare is free, whereas if I used a taxable account I would notice the money leaving much more. Maybe some day I'll beat this psychological weakness out of myself, but it hasn't happened yet. :)

Slow time fun

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Re: Do you use money in your HSA during working years?
« Reply #36 on: March 15, 2017, 08:33:42 PM »
If you're a parent, there's another potential advantage of keeping money in HSA and cash flowing medical costs: The money in an HSA is considered a retirement account, I believe. Thus, this money is not entered into the college aid apps (e.g., FAFSA) so you will not have to not be penalized for having it.

chemistk

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Re: Do you use money in your HSA during working years?
« Reply #37 on: March 16, 2017, 10:49:42 AM »
We use ours (right now) for two reasons:

1) My employer funds $2,000 a year for families into our HSA - mostly offsetting the cost of our healthcare expenses
2) OOP money (right now) is going to better things with better returns for us, and the fees in our HSA are horrible with no option to change bank. (BofA)

Once life has settled down for us, we'll shift towards paying for medical costs OOP.

MayDay

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Re: Do you use money in your HSA during working years?
« Reply #38 on: March 16, 2017, 12:29:13 PM »
So far we are trying to just let it grow.

But I am hoping that at some point we can amass enough to let it keep growing while also getting reimbursed.  We'll see.  Our deductible is high (~6-8K I think) and we often hit it, so at some point I wouldn't mind getting that money.  However, I also hope to fund it enough that we can use it as a hedge against healthcare inflation during retirement, depending on what 45 does to the ACA. 

ohsnap

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Re: Do you use money in your HSA during working years?
« Reply #39 on: March 16, 2017, 02:07:23 PM »
Some of you mentioned withdrawing for dental & vision work.  Are you eligible for an FSA, so you can use FSA $ for that?  My husband's company allows him to put $2600/year into a Limited Purpose FSA.  It can only be used for dental & vision expenses, plus some employers have it set up to reimburse medical expenses that exceed your HSA-compliant health plan's deductible. 

We maxed out the LPFSA in 2016 and 2017 to cover orthodontia.  For 2018 we plan to max out again for Lasik.  After that, I'm not sure - we don't typically have a lot of dental or vision expenses.

The LPFSA is especially great if you're in one of the few states (like mine) that don't allow a tax deduction for HSA. :(