I am trying to determine if continuing to an HSA account. What is a realist goal for a balance after growth. It seems like I can’t use the funds towards premiums. Will I need hundreds of thousands of dollars in after deductible healthcare expenses?
What is a realistic goal for an HSA account?
byu/Fast-Sheepherder925 inpersonalfinance
Posted by Fast-Sheepherder925
17 Comments
Unless you have a lot of medical expenses, I would put that money into a 401k or brokerage account if you want access to
You can use HSA for medicare premiums, but also you’re collecting receipts from all the qualified medical expenses you’re accruing since you were eligible for the HSA, right?
You can withdraw an amount equal to reimburse yourself from those expenses as well, in the future.
And if you absolutely can’t find enough medical expenses to drain the HSA, you can still make withdrawals penalty free for any reason after age 65, just paying the taxes as if it were a traditional IRA.
You can use the funds towards Medicare premiums.
Max every year, I wouldn’t even think twice about it. It still acts as a retirement account after 65
At 65 you can treat whatever funds you have there as if it were a pre-tax retirement account and withdraw it for non-medical expenses without penalty.
There’s a good chance you’ll have plenty of medical expenses throughout your life to redeem tax-free.
I save receipts for everything that I can: doctor, dentist, pharmacy, OTC medications. You can get mattresses and all kinds of stuff to qualify. Those receipts add up quickly. One major illness, accident, pregnancy, etc will give you a big chunk to redeem.
Worst case is that it’s comparable to a Traditional 401k without match at 65.
At 65 you can treat whatever funds you have there as if it were a pre-tax retirement account and withdraw it for non-medical expenses without penalty.
There’s a good chance you’ll have plenty of medical expenses throughout your life to redeem tax-free.
I save receipts for everything that I can: doctor, dentist, pharmacy, OTC medications. You can get mattresses and all kinds of stuff to qualify. Those receipts add up quickly. One major illness, accident, pregnancy, etc will give you a big chunk to redeem.
Worst case is that it’s comparable to a Traditional IRA at 65 that dodges pro-rata rules. It’s unlikely to become huge due to the low limit.
HSAs are primarily a way to use tax-advantaged dollars to pay for healthcare costs. If you’re using it that way, you should be contributing enough to cover your deductible at least.
However, the best use for an HSA is a triple-advantaged retirement account. If you can pay for your health expenses out of pocket (for now), you can take advantage of investing your HSA and watching it grow and grow and grow. How much it grows too depends on how long you let it do its thing. Then you can either use it for Medicare premiums, any large medical expenses along the way, or after 65 wherever the hell you want.
Do you plan on ever being old?
Remember that once you get to age 65, you can use it for anything, tax-free. Some folks say maxing the HSA should be your second goal, right below getting the maximum match from any employer plans, because the tax savings are so spectacular and the amount per year isn’t that big.
A HSA is basically a traditional IRA where you can also withdraw funds tax free to pay for medical expenses or reimburse for previous medical expenses (keep receipts)
Besides the employer match portion of your 401k, the HSA is as good as it gets for a retirement account
Investing in an HSA should take precedence even before an IRA. Read more here:
https://www.bogleheads.org/wiki/Prioritizing_investments
COBRA premiums are OK if you stop working pre-Medicare and don’t have private insurance yet, but go through a former employer’s.
If I had access to an HSA I would be maxing it out. Healthcare will probably be my largest expense in 30 years.
Max every year, save receipts, it’s a second IRA.
My goal is to max it out every year until I retire and the balance is what it is at that point. It’s the best kind of account imho
If max every year if you can. Triple tax advantaged.
And for the love of Pete, use the investment option or better yet (because most of those stink) open a HSA investment account at Fidelity and roll money from your plan into that. Invest in low cost mutual funds or ETFs (mutual fund dividends or rebalancing doesn’t generate taxes in a HSA like they do in a regular brokerage account). Save receipts/bills to be able to tap it if you need to. Been maxing mine out for 12 years and have a little over $100K in if so far….
Basically treat it like an additional, smaller Traditional IRA. Max out contributions as soon as your budget allows and don’t spend from it if paying out of pocket is at all a possibility (this is why you have an emergency fund).
Let it continue to grow tax-free and after age 65 you can withdraw from it any time like a Trad IRA (paying taxes) or use it as intended for medical expenses (tax-free). You won’t have have a shortage of medical expenses when you get old and a dollar put into your HSA today and invested properly will be worth $5-$10+ when you need it during retirement.