Are you saving off EOBs from your insurer at least? I don’t think insurers are required to keep records forever, and it is a potential outcome that you will either switch HSA providers or insurers at some point in the future before reimbursing yourself for those expenses.
I had to manually add these expense, they were incurred prior to the HSA provider change, and were incurred under a different insurer than my current insurer.
I haven’t been, but maybe I’ll see if I can download them to a google drive location or something in case we change insurers.
I plan to use my HSA account to pay for my Medicare premiums/Medicare Advantage premiums when I hit age 65. I currently have around $35k stashed away at age 30. Maybe I will start using it to pay for health/dental/vision expenses if my HSA account grows over $400k.
Until then I am using my HSA account to fund my retiree medical benefits
This is the most tax-efficient way to do it, no question. But it’s a hassle to track.
The only advantage of doing it this way is the tax on the investment earnings. YMMV, but to me that’s not worth it, especially considering the limited investment options in the HSA and steep fees to keep it running if/when I leave my employer.
So to answer the question:
Yes, I can think of two.
You’ll either pay tax on your withdrawals (making it no better than an IRA or 401K) OR you must be able to prove that you are reimbursing yourself for valid medical expenses, which is a hassle. You’d need to track your expenses and which ones you reimbursed when. (Hint: Expect pushback from the IRS if you withdraw $60,000 tax-free the same year you buy a new Lexus and claim you are reimbursing 30 year old medical expenses. While it’s allowed, it’s likely to be questioned.)
If you leave your job before you withdraw the money you might be hit with fees so steep that they wipe out the tax benefits. Theoretically you could just reimburse yourself right away to avoid the fees though.
To me it’s not worth the hassle, though YMMV. We no longer have an HSA, but when we did we just paid our medical expenses as they were incurred, thus guaranteeing that the withdrawals will definitely be tax-free. HSA is now depleted and we no longer have a HDHP, so we have a regular FSA which is use it or lose it.
Also, don’t count on this being allowed in 30 years. I don’t think Congress likes rich-ish folks like us using HSAs as retirement savings vehicles when the intent was to help poor-ish folks cover medical expenses.
I consider this a “loophole” that will likely be closed at some point. Like putting a 2 year time limit on how long you have to reimburse yourself, for example. Hopefully with enough notice that you could quickly reimburse yourself for your 30-year-old expenses before the change goes into effect. If you’re paying attention.
Still, if you do pay attention then it is certainly a tax-efficient strategy to take advantage for as long as you can.
My thoughts exactly.
You make a good point.
Thanks. My hope was to use it to cover Medicare premiums. Did I misunderstand on that being a tax free use? If it’s not going to make sense to have a $150-200K savings, I can certainly use it to cover my surgeries over the next few years.
Yeah, if Medicare premiums are still a thing when you retire then it would be a permitted tax-free withdrawal.
Note that Medigap premiums are NOT eligible HSA expenses at present (or at least not last time I checked).
As long as your surgeries are considered medically necessary then they’d be covered. I’m guessing most or perhaps all would qualify but this is not my area of expertise. Probably your share of anything covered by your medical insurance counts. If insurance doesn’t cover it then it might still count for the HSA but perhaps a greater chance that it wouldn’t count. But I really have to emphasize… not my area of expertise so double check with someone who knows more than me.
Save eligible receipts so that if you suddenly need a wad of cash unexpectedly for something not medical in nature you can withdraw the HSA and call it a reimbursement of past medical expenses and not pay taxes on the withdrawal.
If you have a HDHP you can open another HSA and transfer the balance; transfers are permitted once every twelve months IIRC.
L’HSA
I put major medical expenses on it. Feels like it’s free.
Yes, true. Big “if”. They’re becoming more common, but not every employer has an HDHP option. And Medicare is not HDHP.
But if they do then transferring the old HSA into the new HSA is most likely a good idea.
Hubby’s employer offers a HDHP, but the PPO plan is really a much better deal if your utilization is much over $0, which ours is. So even though they offer it, we don’t take it.
All the surgeries I’m planning are covered by our insurance plan, but I’ll confirm with someone that this makes them HSA eligible too.
If they are covered by medical insurance then I’d be very surprised if they weren’t HSA eligible, but it never hurts to double check.
I’m relatively sure that you can transfer your HSA to a different provider even if you aren’t eligible to contribute to the new HSA, so you don’t need to worry about where you’re landing as far as HDHP or not.
Yes but if that provider is not a TPA of your current employer then there may be fees. And the fees may be steep.
i plan on using for medicare premium and whatever OOP expense we have. based on current level of medical spend, we will have enough in the future that I am ok with saving it all for that.
Yes, but presumably you would shop around.
I think fidelity has a low-fee HSA. I have been considering opening one and transferring my balance. I have decent investment options with my existing HSA, but Fidelity has more. I have a friend who transfers her full balance each year from our provider to Fidelity.
Fidelity has a no-fee HSA that I currently use. On top of that I invest in their no fee mutual funds too. Man I love Fido