Author Topic: My first HSA  (Read 3631 times)

jfer_rose

  • CM*MW 2023 Attendees
  • Pencil Stache
  • *
  • Posts: 984
  • Age: 46
  • Location: Urban Dweller
My first HSA
« on: November 24, 2015, 06:53:35 PM »
I just started a new job with a high deductible health plan. The company also offers an HSA, partly funded by the employer. After reading about the HSA tax benefits on Mad Fientist (and how good they are for early retirement), I was very excited and decided to max out my benefit for the year. However, now that I have received the account info, my HSA is a checking account to be used to pay health-care expenses. It doesn't appear I have any investment options. I can't tell if the account will earn even a tiny bit of interest. With these circumstances,  does this change the appeal of HSA accounts for early retirement?

Thoughts?

ETA: I found documentation. Appears my HSA will earn 0.050% interest. So losing $$$ to inflation big time.
« Last Edit: November 24, 2015, 07:04:06 PM by jfer_rose »

MoonShadow

  • Magnum Stache
  • ******
  • Posts: 2542
  • Location: Louisville, Ky.
Re: My first HSA
« Reply #1 on: November 24, 2015, 07:18:08 PM »
Only somewhat, as it adds a bit of extra work for you to invest for the future.  Because your HSA is yours, you have the right to transfer those funds out of your default HSA account into any other HSA account; but you have some extra paperwork and tax forms to manage that the rest of us would not.  Also, make sure there isn't an investment option; I had to call my HSA bank to get mine opened up, as it's not a default option.  Also, sometimes the HSA bank won't let you "see" an investment option until you have saved more than a set minimum amount.  My own minimum is $2200, which my HSA bank was unwilling to transfer into an investment account.  So I have to keep $2200 in my HSA checking at all times, even though I don't use it, they know I don't use it, and they know WHY I don't use it.

FrugalShrew

  • Handlebar Stache
  • *****
  • Posts: 2181
Re: My first HSA
« Reply #2 on: November 24, 2015, 08:05:37 PM »
Thanks for bringing up this topic, jfer_rose! I just finally put some money into my HSA but didn't think to check on the investment angle.

Based on MoonShadow's response, sounds like I have some digging to do!

MDM

  • Senior Mustachian
  • ********
  • Posts: 11477
Re: My first HSA
« Reply #3 on: November 24, 2015, 09:13:10 PM »

Dezrah

  • Bristles
  • ***
  • Posts: 457
Re: My first HSA
« Reply #4 on: November 25, 2015, 07:34:26 AM »
My advice, start keeping a detailed spreadsheet NOW.  I wish I had done this from the beginning.  We've had so many moves that there's a good chance a lot of our records are misplaced, or faded, or or aged enough that the bank can't help us with the records anymore.

Make a Google Docs (or your prefered cloud storage method) file where you keep scans of your qualified medical expenses, label these by date, payee, and amount for easy searching.

In that same folder, make a Google spreadsheet where you have a little more information, like method of payment and whether or not it has been redeemed from the HSA.  Keep the spreadsheet updated every time you move funds around.

If you're ever in a tight spot and really need money, you can reimburse yourself from the HSA.  In thirty years when you're retired, you can pull out funds selectively as needed and still reap the tax advantages.  If the IRS raises an eyebrow, you got it covered.

MoonShadow

  • Magnum Stache
  • ******
  • Posts: 2542
  • Location: Louisville, Ky.
Re: My first HSA
« Reply #5 on: November 25, 2015, 12:21:25 PM »
One thing I recently found out about HSAs...
Although the money you put in the HSA is pretax federally, some states will still tax it. Since I live in California, I still have to pay state taxes on the money I contribute and I think the gains when I eventually sell the investments (like a taxable investment account).

In addition to California, Alabama and New Jersey also tax HSA contributions as regular income.

It's still worth it for me to invest in the HSA though because of the federal tax savings.

Yes.  And you can always move after you retire.