My questions are in bold bold at the bottom if you don't want to read the background story.This thread is enlightening. Thanks for sharing MDM!
http://forum.mrmoneymustache.com/taxes/hsa-for-an-adult-child-great-benefit-if-one-qualifies/I know my mother's work has a plan that qualifies for an HSA. I will be 25 in January and could reap the benefits if she were to change plans.
I explained the whole tax free in and out stuff, but she didn't quite understand so I want to make sure I am explaining it properly.
You contribute tax free and it grows tax free. If you encounter a medical expense (whether that be a broken leg or contact solution) as long as it is on the approved list then you can CHOOSE to get 'reimbursement' for that cost by a withdrawal tax-free from your HSA account.
I then tried to tell her if you do not need to be reimbursed immediately you can let that money sit for X years growing tax-free and THEN reimburse yourself.
She understands the concept. Her response was, "So you have to keep record of those medical expenses for 10 years so you have proof and can get the tax-free withdrawal for reimbursement?!"
This is when I realized that I wasn't sure how that worked.
How does the reimbursement/withdrawal process work for an HSA?
Do you need to turn in a receipt every time to withdraw money?
Do you turn in medical related expenses immediately when they occur and the account keeps track of the amount of money 'freed' up for your reimbursement if you so choose?