Author Topic: Newbie HSA questions  (Read 2038 times)

Pizzabrewer

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Newbie HSA questions
« on: January 07, 2017, 03:27:12 PM »
DW has been contributing to a HSA for a few years. Not sure of the balance but there is probably a few $k in there. I have only a vague idea of how they work.

Is it best to max out contributions to build a big hedge against future health costs, or should you withhold only what you think you need this year?

If the balance grows to a decent size, can it be invested or otherwise be put to work earning money?

At some point in time, if the balance is large, can it be withdrawn or converted to non-medically-related expenditures or investments?

I recently went on my employer's medical/dental/vision coverage and off hers (wow, what a big savings!). Can her HSA be used for medical expenses I incur going forward?

Any links to "HSA for dummies" articles would be appreciated.

TIA for any advice.

kite

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Re: Newbie HSA questions
« Reply #1 on: January 07, 2017, 04:58:44 PM »
Yes, HSAs can be invested in mutual funds. 
What you should do depends upon your circumstances, your health care costs, life expectancy and other retirement savings.
I max out our contribution each year and invest it agressively, balanced against the rest of our portfolio.  Things like hearing aids and dental care are not covered by medicare.  HSA funds can be used to pay LTC insurance premiums, too. 

cincystache

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Re: Newbie HSA questions
« Reply #2 on: January 07, 2017, 06:33:19 PM »

Is it best to max out contributions to build a big hedge against future health costs, or should you withhold only what you think you need this year?

Max out the contributions, yes. Make sure it is in fact an HSA and NOT an FSA which is completely different.

If the balance grows to a decent size, can it be invested or otherwise be put to work earning money?

In most cases, yes. It can be invested in mutual funds containing stocks and bonds.

At some point in time, if the balance is large, can it be withdrawn or converted to non-medically-related expenditures or investments?

If you have medical expenses and you pay out of pocket, keep your receipt and you can pay yourself back at any time in the future. For example. If it 2017 you incur $1000 worth of qualified medical expenses and you keep you receipts, you can pay yourself back 30 years from now after you accounts has had time to compound tax free.

I recently went on my employer's medical/dental/vision coverage and off hers (wow, what a big savings!). Can her HSA be used for medical expenses I incur going forward?

Yes


Below is a fantastic article discussing HSA and how to use them for early retirement.

http://www.madfientist.com/ultimate-retirement-account/

Quidnon?

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Re: Newbie HSA questions
« Reply #3 on: January 07, 2017, 06:48:57 PM »
DW has been contributing to a HSA for a few years. Not sure of the balance but there is probably a few $k in there. I have only a vague idea of how they work.

Is it best to max out contributions to build a big hedge against future health costs, or should you withhold only what you think you need this year?

Max it out, every year.  Even at the cost of diverting funds from your other savings, an IRA or a 401k.  There is nothing like it.  It is the only savings vehicle that is intended to be tax free going in, tax free coming out, and with tax free growth.  It is also the only savings vehicle that reduces your FICA taxes in addition to your income taxes.

Repeat after me...

"max it out, early and often!"

I will have mine maxed out by June from payroll deductions, and earlier if I can get a rental property sold. 

Quote

If the balance grows to a decent size, can it be invested or otherwise be put to work earning money?


Yes.  In fact, that is kinda the point.

Quote

At some point in time, if the balance is large, can it be withdrawn or converted to non-medically-related expenditures or investments?


Yes, but this is a complex answer.  The age that you can withdraw funds for other than medical expenses without penalty (but not without taxes) is 65.  However, there are a few tricks for getting out some of the money out before 65, if necessary.  There are many devils in these details, so ignore those options until you know a lot more about them.

Quote

I recently went on my employer's medical/dental/vision coverage and off hers (wow, what a big savings!). Can her HSA be used for medical expenses I incur going forward?

She can use deposited funds for you under limited circumstances, but she can't claim the family contribution limit anymore.  This gets tricky, proceed with caution.

Pizzabrewer

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Re: Newbie HSA questions
« Reply #4 on: January 07, 2017, 09:44:49 PM »
Hey thanks y'all!  This is exactly the kind of advice and guidance I was hoping for.

My current employer is the first time in my career I've been offered health insurance.  I've always been on DW's plan, and since I never get sick or go to the doctor I never looked into any of it.  It's always been her thing.  I had no idea the HSA could be anything more than dead money waiting to be spent on healthcare costs.

Thanks again!
« Last Edit: January 07, 2017, 09:49:34 PM by Pizzabrewer »

teamzissou00

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Re: Newbie HSA questions
« Reply #5 on: February 23, 2017, 10:06:24 AM »
New HSA question in this topic.

The company I work for offers a traditional and HSA Plan.  the HSA comes with a higher deductible, but the company contributes $1-2k of free money each year toward it.

I have three kids under 5 years old.  My theory was to stay in the traditional plan, thinking we'd never amass any money in this account since last year we met our out of pocket max. 

Is there a general rule with HSA when deciding to utilize it or a traditional plan?

boarder42

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Re: Newbie HSA questions
« Reply #6 on: February 23, 2017, 10:18:04 AM »
New HSA question in this topic.

The company I work for offers a traditional and HSA Plan.  the HSA comes with a higher deductible, but the company contributes $1-2k of free money each year toward it.

I have three kids under 5 years old.  My theory was to stay in the traditional plan, thinking we'd never amass any money in this account since last year we met our out of pocket max. 

Is there a general rule with HSA when deciding to utilize it or a traditional plan?

there is no rule its simple math.  I need to know what your tax bracket is and the cost of each plan per year and the OOP max for each plan.  typically the HSA still wins.  b/c you

1. pay less in insurance premiums
2. you are getting 1-2k in free money - need to know the exact number here
3. your tax savings on the additional money you contribute to max your HSA.

ltt

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Re: Newbie HSA questions
« Reply #7 on: February 24, 2017, 05:25:38 AM »
I have a question also.

We were trying to decide this year whether to go with a traditional or HSA.  We decided on traditional this year  because we have a daughter who is disabled and, over the course of many years, has needed multiple surgeries, and we pretty much know what to expect with her surgeries from a financial standpoint.  She has had fairly high medical needs over the past 7 years, but this year should be the last year of surgery for her--she is 12 y/o.  We are thinking we want to switch to HSA next year through husband's employer.     

My husband is probably about 4-5 years out from retirement--in his late 50s.  We have fairly routine doctor visits and regular mail order prescriptions also.  Four children would be covered on the plan.  We would also receive $1,000 from employer by participating in the HSA.

Here is a question.  How is it set up?  We would be using a family plan and the money would be deducted from my husband's paycheck.  What happens to the money once a person retires or if a person passes away?  It continues to grow (from reading the above posts), but would the dependent children of the family be able to use it for continued medical expenses until they reach age 26? 

I definitely need to go read more about this.


ltt

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Re: Newbie HSA questions
« Reply #8 on: February 24, 2017, 05:29:08 AM »
New HSA question in this topic.

The company I work for offers a traditional and HSA Plan.  the HSA comes with a higher deductible, but the company contributes $1-2k of free money each year toward it.

I have three kids under 5 years old.  My theory was to stay in the traditional plan, thinking we'd never amass any money in this account since last year we met our out of pocket max. 

Is there a general rule with HSA when deciding to utilize it or a traditional plan?

there is no rule its simple math.  I need to know what your tax bracket is and the cost of each plan per year and the OOP max for each plan.  typically the HSA still wins.  b/c you

1. pay less in insurance premiums
2. you are getting 1-2k in free money - need to know the exact number here
3. your tax savings on the additional money you contribute to max your HSA.

But doesn't the higher deductible just offset the lower insurance premiums amount if you are a family that typically uses a fair amount of health care?

boarder42

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Re: Newbie HSA questions
« Reply #9 on: February 24, 2017, 05:32:19 AM »
New HSA question in this topic.

The company I work for offers a traditional and HSA Plan.  the HSA comes with a higher deductible, but the company contributes $1-2k of free money each year toward it.

I have three kids under 5 years old.  My theory was to stay in the traditional plan, thinking we'd never amass any money in this account since last year we met our out of pocket max. 

Is there a general rule with HSA when deciding to utilize it or a traditional plan?

there is no rule its simple math.  I need to know what your tax bracket is and the cost of each plan per year and the OOP max for each plan.  typically the HSA still wins.  b/c you

1. pay less in insurance premiums
2. you are getting 1-2k in free money - need to know the exact number here
3. your tax savings on the additional money you contribute to max your HSA.

But doesn't the higher deductible just offset the lower insurance premiums amount if you are a family that typically uses a fair amount of health care?

its a math equation and in MOST instances i've seen as long as you're taking advantage and maxing your HSA up to the family limit - Esp. if your work allows you to salary deduct(b/c it bypasses FICA too)  then you will come out ahead with an HSA plan vs traditional. 

ITS MATH.  stop assuming.

teamzissou00

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Re: Newbie HSA questions
« Reply #10 on: February 24, 2017, 09:21:30 AM »
New HSA question in this topic.

The company I work for offers a traditional and HSA Plan.  the HSA comes with a higher deductible, but the company contributes $1-2k of free money each year toward it.

I have three kids under 5 years old.  My theory was to stay in the traditional plan, thinking we'd never amass any money in this account since last year we met our out of pocket max. 

Is there a general rule with HSA when deciding to utilize it or a traditional plan?


there is no rule its simple math.  I need to know what your tax bracket is and the cost of each plan per year and the OOP max for each plan.  typically the HSA still wins.  b/c you

1. pay less in insurance premiums
2. you are getting 1-2k in free money - need to know the exact number here
3. your tax savings on the additional money you contribute to max your HSA.

25% tax bracket

Premium weekly for traditional = 75.82

Premium weekly for HSA = 55.02

Savings of 1081.60/year

Company contribution = $1000

Decuctible goes from $1000 individual/$2000 family in traditional to $2000 individual $4000 family

Out of pocket max goes from 7k to $6550 in HSA

$6750 is the max contribution for the year which includes the 1k company contribution. 

We currently do the max FSA of $2500, which is 48/week pre tax $'s
If we did HSA, which would be $110/week

So - my premiums go down by $20.80 week, but essentially go up by the difference in FSA and HSA max levels by 89.20/week. 

if I were to incur costs of $7000/year in healthcare, balanced $1400 across all 5 of us...we'd pay 100% in HSA until $4k, and 100% until $2k in traditional.  this is where my math brain starts frying...

boarder42

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Re: Newbie HSA questions
« Reply #11 on: February 27, 2017, 06:12:55 AM »
so if you had 7k in costs spread as you described i'm going to assume 20% co payment up to max from you correct if thats wrong.

HSA cost is 4000 - 1k from you company - 5750*(.25+state(need to know this+FICA)) + Premium +20%(2550)   = 4493 - (state income tax * 5750)
Trad cost is 2000 + Premium + 5k(20%) -FSA savings = 6317

huge annual savings and if you are healthier you come out farther ahead.

boarder42

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Re: Newbie HSA questions
« Reply #12 on: February 27, 2017, 06:17:10 AM »
There are probably also some co pays on your trad plan in there as well.