Recently, I started my first big time role. Big time meaning great salary, benefits, etc. For many years, I worked as an independent contractor or part-time employee for a variety of businesses. This is the first time I'm in a position that allows me to build for my future.
I'm learning about all the benefits with my compensation package. This is my first time with an HSA account. I would love to hear feedback on if I should be putting money into the account vs. paying out of pocket. Someone mentioned to me that they add money to their HSA but they never touch it.
I go to the doctor regularly so I do have medical expenses. I would estimate I've spent close to $1.5k so far this year. Single, no kids so I believe my max contribution is $4k per year.
Tips and advice would be greatly appreciated. Gracias.
Need some advice on an HSA account
byu/SohoBebe inpersonalfinance
Posted by SohoBebe
4 Comments
At a minimum you should max it out regardless.
Then it’s up to you whether you take reimbursements now or later. You can wait and take tax free reimbursements in 40 years and let the money grow inside the HSA tax free until then.
If you don’t have the room to cash flow your medical expenses then just take the reimbursement now.
Max it out. If you can afford to max it and pay out of pocket for expenses and leave the HSA alone, then do that. You can invest hsa.
I’ve been maxing my hsa for several years (family plan so this year is 8750) and have not done a single withdrawal.
I scan my receipts and keep a database to make it easier to pay myself later in retirement
It’s triple advantaged
Pre tax deposits to lower your income
Tax free growth
Tax free withdrawal
It’s the best of both worlds between traditional 401k and Roth
Max it out if you can afford it. If you can afford to pay out of pocket, invest the HSA money and let it grow. You will only have more Healthcare expenses as you get older, so a robust HSA will come in handy later on.
HSA accounts are great because they have triple tax advantage: tax deductible contributions, tax free withdrawals for medical expenses, and tax free growth. Your 401(k) and IRA are only double tax advantaged.
There are two downsides. The first is that in order to contribute you have to have a high deductible health care plan. That may or may not make sense for you. The second is that HSA accounts often have high fees and limited investment options. You can get around the this by transferring the money from whatever your employer uses to an HSA account at Fidelity, but that probably only makes sense if you plan to invest the money.
HSAs are such good investment accounts that many will pay medical expenses out of pocket to keep their HSA money growing until retirement.