HSA - do you save receipts?

[ObgynMD]

I don’t save receipts because I see my HSA as my other Roth account and have no intention to withdraw from it.

[pierre]

I don’t save receipts because I see my HSA as my other Roth account and have no intention to withdraw from it.

Until retirement right? Not using as part of estate planning, I’m assuming. Isn’t the idea to save receipts now so you can withdraw from the account triple tax free in your latter years?

I guess it depends on how much healthcare one consumes now vs how much they expect to later. But like okayplayer said, there will probably be enough expenses in the future that these receipts may be moot.

[pysibal]

I save only significant receipts (birth of kids, imaging, expensive labs, etc). Digital > physical, and agree with saving it in more than one place in case of disaster. I am definitely going to lose a physical folder full of paper between now and 2050.

Thought experiment as follows helped me learn something:

I assumed my HSA would be a drop in the bucket for retirement health spending (esp since in can be OTC meds, dental work, etc). To check my own intuition about this, I put the following into an investment calculator: $7200 (current HSA contribution cap for a couple) with 5% real returns and a 30 year time horizon. $521,202 is the ending amount. For 20 years it's $260,869. In 2021 Medicare part B premiums are 148.50 /mo, or 1782/yr. If you work 20 years and FIRE with a 30 year retirement, you spend 20.5% ($53,460) of that money just on premiums! Note, I'm assuming all of of these numbers roughly keep pace with inflation.

Lots of estimates about healthcare costs in retirement and wide variability across people/populations, but I'm seeing $200k to $300k estimates for a couple retiring at 65. Doc costs may be higher because retirement is longer, or lower because we take better care of ourselves? Who knows.

Overall, the high “average” end looks like $300,000k of costs plus $53,000k of premiums. So maybe overfunding isn’t a big risk for those who are on a 20-year career path, but more so for those on a 30 year path. I was surprised that the HSA as funded above for 20-25 years actually does look like it would cover the lion's share or all of healthcare costs "on average."

[childay]

Recently got HSA, thanks for the responses

[Lithium]

I’ve been saving receipts for almost 7 years. Just added up the totals for fun - looks like I have a hair under $2k of expenses accounted for.

[Anne]

Related question: if you retire in/get most of your healthcare in retirement in another country can you use your HSA for those expenses?

[okayplayer]

I save only significant receipts (birth of kids, imaging, expensive labs, etc). Digital > physical, and agree with saving it in more than one place in case of disaster. I am definitely going to lose a physical folder full of paper between now and 2050.

Thought experiment as follows helped me learn something:

I assumed my HSA would be a drop in the bucket for retirement health spending (esp since in can be OTC meds, dental work, etc). To check my own intuition about this, I put the following into an investment calculator: $7200 (current HSA contribution cap for a couple) with 5% real returns and a 30 year time horizon. $521,202 is the ending amount. For 20 years it's $260,869. In 2021 Medicare part B premiums are 148.50 /mo, or 1782/yr. If you work 20 years and FIRE with a 30 year retirement, you spend 20.5% ($53,460) of that money just on premiums! Note, I'm assuming all of of these numbers roughly keep pace with inflation.

Lots of estimates about healthcare costs in retirement and wide variability across people/populations, but I'm seeing $200k to $300k estimates for a couple retiring at 65. Doc costs may be higher because retirement is longer, or lower because we take better care of ourselves? Who knows.

Overall, the high “average” end looks like $300,000k of costs plus $53,000k of premiums. So maybe overfunding isn’t a big risk for those who are on a 20-year career path, but more so for those on a 30 year path. I was surprised that the HSA as funded above for 20-25 years actually does look like it would cover the lion's share or all of healthcare costs "on average."

In the same way you are factoring in growth of the HSA in the stock market, you shouldn’t forget to adjust the costs for inflation…

[CordMcNally]

Related question: if you retire in/get most of your healthcare in retirement in another country can you use your HSA for those expenses?

Pub. 969 doesn't seem to cover that particular issue which makes me think it would be ok.

[GasFIRE]

While I agree that most of us are likely to have enough health care expenses in retirement to use accumulated HSA funds, the advantage of saving receipts is financial flexibility. If you need a new roof or want to take an extravagant retirement trip spending HSA receipts is cheaper than tapping your pre-tax account or selling VTSAX with cap gains from taxable. It becomes another avenue to favorably adjust your income.

[ObgynMD]

Until retirement right? Not using as part of estate planning, I’m assuming. Isn’t the idea to save receipts now so you can withdraw from the account triple tax free in your latter years?

I guess it depends on how much healthcare one consumes now vs how much they expect to later. But like okayplayer said, there will probably be enough expenses in the future that these receipts may be moot.

Someone please correct me if I’m wrong, but I thought after age 65 yo you can withdraw without any tax penalty for any reason and do not need to provide a receipt. That is why I figured it’s not worth saving receipts because we do not plan to withdraw from the HSA account before 65yo.

[GasFIRE]

Someone please correct me if I’m wrong, but I thought after age 65 yo you can withdraw without any tax penalty for any reason and do not need to provide a receipt. That is why I figured it’s not worth saving receipts because we do not plan to withdraw from the HSA account before 65yo.

Yes but you’ll owe regular income tax, just like a tIRA. Still a good deal, but not as good as spending it on qualified health care expenses. Triple tax free - better than Roth.

[ObgynMD]

Yes but you’ll owe regular income tax, just like a tIRA. Still a good deal, but not as good as spending it on qualified health care expenses. Triple tax free - better than Roth.

Oh interesting. Guess I should start saving receipts!

[F0017S0]

Upload to my custodian’s website and keep physical copies.

[endo4jc]

I scan receipts into a PDF using TurboScan app. Send to my gmail. Download a copy to a folder on my computer. Have backups on external hard drives. It’s very simple and takes little time once the system is set up. I don’t like keeping paper receipts that can be lost.

[FIREshrink]

Yes, I’m sacrificing some tax drag but my hope is that I’m turning turning what would be taxable income into long-term capital gains. I also will have a sizable pre-tax position as I’m maxing a 403b and 457b and employer puts in about 30k whereas I don’t have a lot extra for taxable.

Aren't you turning tax free gains into long term capital gains?