Author Topic: HSA Question  (Read 2909 times)

TheOldestYoungMan

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HSA Question
« on: March 04, 2015, 03:38:56 PM »
I don't think I can contribute to an HSA.  I have an employer sponsored health plan (which has a whopping $0/yr premium).  There's no way it counts as High Deductible.

But since I've had really good health insurance since I started working ~8 years ago and never had it cover any decent medical expense (massive car accident got covered by auto insurance), I'm thinking in retirement I'd go for an HDHP through the ACA/Obamacare, assuming subsidies are still available.

At that point, my earned income is somewhere between $0.00-all/yr.  I won't have access to a 403b/457b for contributions anymore.  I'll still have the tIRA and rothIRA.  Does the HSA become another account, and what would the point of that be?  I guess to have it in the event I do a side hustle and make too much money, gives me another place to put a deduction.

Anyone have a good link to something that breaks this out for me?

My long-term plans for catastrophic illness largely involve cool ways to die quickly.

dunhamjr

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Re: HSA Question
« Reply #1 on: March 04, 2015, 03:47:56 PM »
an HSA doesnt sound like it will do you a whole lot of good, right now.  you obviously need to be able to contribute to one first.

however.  if once you 'retire' you can get into a hdhp and have an HSA, any side hustle money could probably be contributed. (you will need to check)

the benefit is that the money goes in pre-tax, and comes out no-tax for qualified expenses.
^ if i understand it all properly, which i think i do.


dandarc

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Re: HSA Question
« Reply #2 on: March 04, 2015, 03:51:25 PM »

TheOldestYoungMan

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Re: HSA Question
« Reply #3 on: March 04, 2015, 03:57:27 PM »
Thanks.

nanu

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Re: HSA Question
« Reply #4 on: March 04, 2015, 04:54:05 PM »
I'm not an expert on health plans, but I know my (future) employer has several options for a health plan,
and the HDHP is actually the only one without a monthly premium (I'm assuming the employer covers it, not that it doesn't have one at all, obviously).
So you should definitely check if yours is an HDHP or not, don't just assume it isn't

seattlecyclone

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Re: HSA Question
« Reply #5 on: March 04, 2015, 05:12:50 PM »
I don't think I can contribute to an HSA.  I have an employer sponsored health plan (which has a whopping $0/yr premium).  There's no way it counts as High Deductible.

Your logic does not compute. Premiums and deductibles are not the same. My employer-sponsored health plan is an HDHP for which I am charged a $0 premium, and the employer even puts some money into the HSA for me each year! While I doubt your employer would offer you an HDHP without telling you that's what it is, it's certainly possible for them to do so. What matters is not what you pay each month, but rather whether or not the deductible (amount of expenses that you have to cover before the plan kicks in) is high enough.

When you retire and pick your own health plan, you certainly could benefit from making contributions to an HSA after retirement!

Suppose you retire this year with some taxable money and you're also working on a Roth pipeline for when the taxable funds are spent. Suppose your retirement living expenses are $30k, so you roll $35k over from your traditional IRA to your Roth IRA ($30k budget plus some extra to account for inflation over the next five years). The standard deduction this year is $12,600 for a married couple, plus two $4,000 personal exemptions. That leaves $14,400 of your Roth conversion that you'll have to pay ordinary income tax rates on. That's solidly in the 10% tax bracket, meaning you'll owe $1,440 of taxes on this money. You sell $30k of stock in your taxable account to pay your living expenses, plus another $1,440 worth to pay the taxes on your Roth conversion. This leaves you well below the top of the 15% tax bracket, so no tax is owed on the capital gains.

What if you add in an HSA contribution to this scenario? You sell an additional $6,550 from your taxable account to make a full HSA contribution. This means you'll have some more capital gains income, but the HSA deduction counts against your "regular" income first! This means your tax bill will go down by $655 each and every year you do this.

In addition to the tax savings, your ACA premium subsidy could go up as well! That $6,550 that you sell out of your taxable account to fund your HSA doesn't quite increase your gross income by $6,550; the principal doesn't count as income. Therefore your MAGI will actually decrease by whatever amount of the $6,550 was attributable to your cost basis rather than capital gains. In addition, you'll have $655 less that you have to sell to pay your taxes, which further decreases your MAGI.

TheOldestYoungMan

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Re: HSA Question
« Reply #6 on: March 05, 2015, 07:23:10 AM »
Ahh thanks.  I wasn't trying to relate the premium to the HDHP, I was just bragging on the low premium.  It isn't high deductible because it has no deductible.  We only have one choice, it's probably an artifact of working at a hospital.

The rest of that explanation is very helpful though, thank you.