HSA

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Ugly_Bird
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HSA

Post by Ugly_Bird » Sat Dec 14, 2019 7:55 pm

I've got about $5k on HSA account from my former employer. The rate there is total rip off = 0.2% (People's United Bank)
Thinking to roll those money over somewhere and make as a part of PP. Could be just part of cash or split to the others components of PP.
What banks offer the most suitable options? I never had HSA as part of PP.

Thank you!
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vnatale
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Re: HSA

Post by vnatale » Sat Dec 14, 2019 8:41 pm

Ugly_Bird wrote:
Sat Dec 14, 2019 7:55 pm
I've got about $5k on HSA account from my former employer. The rate there is total rip off = 0.2% (People's United Bank)
Thinking to roll those money over somewhere and make as a part of PP. Could be just part of cash or split to the others components of PP.
What banks offer the most suitable options? I never had HSA as part of PP.

Thank you!
If you are interested in using Vanguard accounts, you can do it through the three providers listed in the top right here:

https://personal.vanguard.com/us/whatwe ... lthsavings

Vinny
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ochotona
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Re: HSA

Post by ochotona » Sat Dec 14, 2019 9:16 pm

Fidelity HSA! No debate! Do it!
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Kriegsspiel
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Re: HSA

Post by Kriegsspiel » Sun Dec 15, 2019 6:54 am

You're talking about the rate, as in you leave the money in the savings part of the HSA? I don't think that's the way to do it. I'm using my HSA as a long term savings vehicle that I'll withdraw from tax free when I'm 65 (or whatever the age will be), so it's all stocks. I don't see myself withdrawing from it to pay for medical costs as it was intended.
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vnatale
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Re: HSA

Post by vnatale » Sun Dec 15, 2019 8:44 am

Kriegsspiel wrote:
Sun Dec 15, 2019 6:54 am
You're talking about the rate, as in you leave the money in the savings part of the HSA? I don't think that's the way to do it. I'm using my HSA as a long term savings vehicle that I'll withdraw from tax free when I'm 65 (or whatever the age will be), so it's all stocks. I don't see myself withdrawing from it to pay for medical costs as it was intended.
I was just reviewing some of the HSA basics with a coworker this past week.

I remember that whenever you withdraw from it if is NOT used to pay for medical costs then it will NOT be a tax-free withdrawal.

A good thing to it for in retirement will be to use it pay for Medicare premiums.

HSA's are often times referred to as "Medical IRAs". It's a good analogy in that both defer taxes on earnings. However, we know that in a traditional IRA one does pay taxes once withdrawing. And, will be the same for HSAs if NOT using those withdrawals to pay for medical expenses.

Vinny
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Re: HSA

Post by pugchief » Sun Dec 15, 2019 8:51 am

vnatale wrote:
Sun Dec 15, 2019 8:44 am
Kriegsspiel wrote:
Sun Dec 15, 2019 6:54 am
You're talking about the rate, as in you leave the money in the savings part of the HSA? I don't think that's the way to do it. I'm using my HSA as a long term savings vehicle that I'll withdraw from tax free when I'm 65 (or whatever the age will be), so it's all stocks. I don't see myself withdrawing from it to pay for medical costs as it was intended.
I was just reviewing some of the HSA basics with a coworker this past week.

I remember that whenever you withdraw from it if is NOT used to pay for medical costs then it will NOT be a tax-free withdrawal.

A good thing to it for in retirement will be to use it pay for Medicare premiums.

HSA's are often times referred to as "Medical IRAs". It's a good analogy in that both defer taxes on earnings. However, we know that in a traditional IRA one does pay taxes once withdrawing. And, will be the same for HSAs if NOT using those withdrawals to pay for medical expenses.

Vinny
Once you have an HSA, you can keep track of all out of pocket medical costs that could have been paid for thru the HSA, but pay the bills with other money. The money can then be withdrawn in retirement in excess of current medical expenses up to the amount previously incurred but not used, i.e., you can reimburse yourself years later for valid expenses while the HSA funds grow triple tax free. Or you can leave the account to your heirs.
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Re: HSA

Post by sophie » Sun Dec 15, 2019 9:06 am

pugchief wrote:
Sun Dec 15, 2019 8:51 am
Once you have an HSA, you can keep track of all out of pocket medical costs that could have been paid for thru the HSA, but pay the bills with other money. The money can then be withdrawn in retirement in excess of current medical expenses up to the amount previously incurred but not used, i.e., you can reimburse yourself years later for valid expenses while the HSA funds grow triple tax free. Or you can leave the account to your heirs.
If you do this, be careful to read the IRS pub about this and keep all the required records. You have to prove that you weren't reimbursed for it from some other source e.g. your HSA, and that you didn't deduct it on any prior tax return. This implies keeping full HSA account statements (to prove no withdrawals) as well as all tax returns dating back to the year of the expense. Also realize that this is currently untested, and it's not clear how this would be treated when you're face to face with an auditor.

This is frankly such a high bar that I figure I'll just use it for medical expenses in retirement. It's not going to ever be such a huge account anyway.

BTW I second the recommendation for Fidelity's HSA. It is MUCH simpler to manage than any other investment-capable HSA since you don't have to deal with the brokerage + custodian setup. This setup to my mind is risky, as it's relatively new and virtually untested, and I've already seen first hand the problems that can occur if you're trying to pull your money out of the investment account. (Basically the custodian kept blocking the transfers, demanding that I call them repeatedly to "confirm" - because apparently a printed, signed and mailed form didn't do the trick). Also, Fidelity's investment lineup cannot be beat.
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Ugly_Bird
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Re: HSA

Post by Ugly_Bird » Mon Dec 16, 2019 8:09 am

sophie wrote:
Sun Dec 15, 2019 9:06 am
pugchief wrote:
Sun Dec 15, 2019 8:51 am
Once you have an HSA, you can keep track of all out of pocket medical costs that could have been paid for thru the HSA, but pay the bills with other money. The money can then be withdrawn in retirement in excess of current medical expenses up to the amount previously incurred but not used, i.e., you can reimburse yourself years later for valid expenses while the HSA funds grow triple tax free. Or you can leave the account to your heirs.
If you do this, be careful to read the IRS pub about this and keep all the required records. You have to prove that you weren't reimbursed for it from some other source e.g. your HSA, and that you didn't deduct it on any prior tax return. This implies keeping full HSA account statements (to prove no withdrawals) as well as all tax returns dating back to the year of the expense. Also realize that this is currently untested, and it's not clear how this would be treated when you're face to face with an auditor.

This is frankly such a high bar that I figure I'll just use it for medical expenses in retirement. It's not going to ever be such a huge account anyway.

BTW I second the recommendation for Fidelity's HSA. It is MUCH simpler to manage than any other investment-capable HSA since you don't have to deal with the brokerage + custodian setup. This setup to my mind is risky, as it's relatively new and virtually untested, and I've already seen first hand the problems that can occur if you're trying to pull your money out of the investment account. (Basically the custodian kept blocking the transfers, demanding that I call them repeatedly to "confirm" - because apparently a printed, signed and mailed form didn't do the trick). Also, Fidelity's investment lineup cannot be beat.
Thank you Sophie and the other responders.
This is why I had in mind using those money to contribute to the cash allocation as semi-deep cash (the other part is in SHY and saving acc). Google search shows that some banks offer HSAs with 2.00% APY+plastic+checks. That yield is 10x than current 0.2% at People's. I hope there will be no need to disturb the HSA till retirement but have them accessible just in case.
One of the results of the search: Evansville Teachers FCU 2.01% $500 min
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Re: HSA

Post by Tortoise » Mon Dec 16, 2019 1:44 pm

Do any of you who aren't yet retired use your HSA to pay current medical expenses? Or do you use taxable accounts for current medical expenses and just use your HSA as a long-term savings vehicle to eventually be used in retirement?

I've had HSAs for several years now and have always used them for current medical expenses (seems to be standard advice in most personal finance books and articles). It wasn't until recently that I noticed people on various investing and personal finance forums like this one and Bogleheads talking about how you actually benefit more from HSAs' tax advantages if you use them for long-term saving/investing rather than current spending.
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Re: HSA

Post by Ugly_Bird » Mon Dec 16, 2019 2:08 pm

Tortoise wrote:
Mon Dec 16, 2019 1:44 pm
Do any of you who aren't yet retired use your HSA to pay current medical expenses? Or do you use taxable accounts for current medical expenses and just use your HSA as a long-term savings vehicle to eventually be used in retirement?

I've had HSAs for several years now and have always used them for current medical expenses (seems to be standard advice in most personal finance books and articles). It wasn't until recently that I noticed people on various investing and personal finance forums like this one and Bogleheads talking about how you actually benefit more from HSAs' tax advantages if you use them for long-term saving/investing rather than current spending.
Good point. At my previous job I was younger and healthier. That allowed me to accumulate about $10k on HSA account payed by the employer to compensate the high deductible. I never went to a doctor during those times. Then I had to spend about half of that money for dental expenses on the top of the endurance (implants+crowns). It left me with $5k I need to roll over from that account as the yield is absolutely horrible. My current health insurance covers pretty much everything so it is OK do dock these money away to a semi-deep contribution. Still 15 years to go to 65 (might retire earlier... at least this is the plan).
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Tortoise
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Re: HSA

Post by Tortoise » Mon Dec 16, 2019 6:35 pm

Even if you have a lot of medical expenses, my understanding is that if you have a big enough cash cushion in your taxable accounts, you can potentially come out ahead by using taxable cash to pay all of your medical bills and letting your HSA grow tax-free for as long as possible (then eventually spending it in retirement or something).

I think the idea is that if you pay current medical expenses from your HSA, you get two tax benefits (tax-deductible contribution, tax-free withdrawal), whereas if you invest the HSA funds and wait until retirement to use them to pay medical expenses, you get three tax benefits (tax-deductible contribution, tax-free growth, tax-free withdrawal).
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Re: HSA

Post by Kriegsspiel » Mon Dec 16, 2019 6:59 pm

Tortoise gets it.
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