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I hear ya, between an unexpected surgery last year and another unexpected illness with surgery this year, we are up to $11K + in expenses which we paid out of pocket for, to keep the HSA intact, and have a huge stack of receipts to use at some point. Completely debating reimbursing ourselves to some extent sooner vs later.
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We’ve been fortunate in the now 6+ years we’ve had the HSA plan to only go over $3,000 OOP expenses twice (children’s births during residency) and $1000 twice since. We didn’t have the cash in residency to pay out of pocket and save the receipts so we used the HSA funds that we had contributed over time, plus the generous contribution from my employer ($400/quarter). So we are currently spending on average less than $1500/year of the $6500 (whatever the numbers have been since 2010).
We get the tax break now on health care expenses and have the extra money we didn’t spent to pay for health care now to invest in a taxable account, all while out HSA fund grows over time due to growth and contributions. My plan is to use it for health care expenses in retirement.Comment
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Seems straightforward. If you have the money to cashflow the expenses without impacting lifestyle aspects that are important, then keep it in the HSA and invest it.
Otherwise withdraw it and use it pay for expenses.
I've done both depending on what else is going on w/my expenses. I'll cash flow things as long as I can, but if I need $1-2k at some point I pull it out and use it. It's not something to stress about either way. If you save/invest half and pay for expenses with half that's still good.An alt-brown look at medicine, money, faith, & family
www.RogueDadMD.comComment
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Seems straightforward. If you have the money to cashflow the expenses without impacting lifestyle aspects that are important, then keep it in the HSA and invest it.
Otherwise withdraw it and use it pay for expenses.
I’ve done both depending on what else is going on w/my expenses. I’ll cash flow things as long as I can, but if I need $1-2k at some point I pull it out and use it. It’s not something to stress about either way. If you save/invest half and pay for expenses with half that’s still good.
For me it is a decision of investing 1k in taxable versus 1k in HSA for a 1k medical expense. I am leaning to taxable because of the flexibility and low tax drag given my 3 fund portfolio. I don’t see much of an advantage of keeping the HSA untouched for years and holding on to receipts for decades.Comment
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For me it is a decision of investing 1k in taxable versus 1k in HSA for a 1k medical expense. I am leaning to taxable because of the flexibility and low tax drag given my 3 fund portfolio. I don’t see much of an advantage of keeping the HSA untouched for years and holding on to receipts for decades.
I suppose I view it differently. I have a high expectation that over time my medical expenses will continue to go up (between me, my wife, and 3 kids), so a dollar growing/spent from an HSA is superior to one in a taxable account when spent on qualified medical expenses, because that's what I expect to spend it on.
The 20% gain in the HSA account last year (thanks to market gains) paid for a couple years worth of health insurance deductibles.
If that $ was invested in a taxabout account already it would be subject to 20% LTCG to gain access to spending it on those expenses, whereas in the HSA it's tax free.
I know there are nuances here -- I think PoF (maybe?) published a guest post not long ago showing the tax benefits in this comparison are not as large as they seem, but the effort required to track expenses is minimal. Maybe a few hours a year or less.
An alt-brown look at medicine, money, faith, & family
www.RogueDadMD.comComment
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Yes we use it for expenses.
It just seems ridiculous to save receipts for 20+ years.
The money has value now.
After a few years once I have a year's worth of contributions saved up in cash (maybe about ~$6k) I'll invest the excess.Comment
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A couple of people are talking about saving receipts like it's a really onerous task.
1. Evernote/Dropbox
2. Evernote scan widget on your phone/any scanner app
3. Simple spreadsheet w/ date, note on expenditure, and totals
It takes ~45 seconds from start to finish.
For the hardcore DIY folks on this site maintaining digital copies of receipts seems like a pretty Jr. varsity task.Comment
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Additionally, I would point out that you need to save proof of the expense and payment for three years anyway. Does it really matter how long you have to keep them?
Anecdotally, HSA CP-2000 Notices seem to be in the frequency ballpark of 529 CP-2000 notices. I have had both and know friends, colleagues and acquaintances who had one or the other. Neither is common, but neither is uncommon.
Now in that same circle, Backdoor Roth Form 8606 CP-2000 Notices seem to be more common. I don't know why with examples like WCI's excellent tutorial. Surprisingly, or not most of the people receiving them have had CPAs make the errors.Comment
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Yes we use it for expenses. It just seems ridiculous to save receipts for 20+ years. The money has value now.
I'm not sure but I feel like we are having different discussions. The money has "value" now if you need it to pay expenses. If you make sufficient money to pay healthcare expenses from cashflow, then the only question is what is the best way/place to save/invest the money for long-term use.
If you want to let the money grow and use it to pay for future expenses that may be higher or harder to save for when they arrive, then the HSA is the perfect place to park the $. If you plan to use it to buy a boat and don't expect many healthcare expenses that would allow accessing the money w/o a penalty, than a taxable account is probably better.An alt-brown look at medicine, money, faith, & family
www.RogueDadMD.comComment
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Yes we use it for expenses. It just seems ridiculous to save receipts for 20+ years. The money has value now.
I’m not sure but I feel like we are having different discussions. The money has “value” now if you need it to pay expenses. If you make sufficient money to pay healthcare expenses from cashflow, then the only question is what is the best way/place to save/invest the money for long-term use.
If you want to let the money grow and use it to pay for future expenses that may be higher or harder to save for when they arrive, then the HSA is the perfect place to park the $. If you plan to use it to buy a boat and don’t expect many healthcare expenses that would allow accessing the money w/o a penalty, than a taxable account is probably better.
There some flexibility here that you're not referencing though RDMD.
If you collect receipts like I'm doing you have options:
1) True stealth IRA
2) True HSA being contributed to and withdrawn from on a yearly basis
3) Retirement health care
4) Withdraw from HSA up to receipts amount for future non-healthcare purchase
Or frankly a combo of all 4.Comment
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If you collect receipts like I’m doing you have options:
1) True stealth IRA
In my never ending crusade to vanquish this term from the lexicon of humanity. If you have any other pre-tax assets you should almost never take non-qualified distributions from an HSA after 65. It would be extreme rare for this to be true for a physician.Comment
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We use our HSA regularly for all out of pocket medical costs. But, after reading this thread, I just realized I should be saving receipts for tax purposes. I guess I wasn't thinking about that. Boy I feel stupid now.
Guess we'll start doing so as of today
ops:
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We use our HSA regularly for all out of pocket medical costs. But, after reading this thread, I just realized I should be saving receipts for tax purposes. I guess I wasn’t thinking about that. Boy I feel stupid now.
Just to clarify, you only need enough receipts annually to account for your withdrawals from your HSA. Keep those with your other tax documentation for each year. As for other receipts, I would, in general, recommend saving only the significant ones for use in the future ($100+) if you are emptying the account each year.My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clientsComment
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No one should feel bad about not being able to afford to pay cash for medical expenses. Life happens.
If you’re in private practice (and have a say in your benefits) there is no reason you should be paying for ANY medical expense ever.
Step 1. Have a high deductible plan with HSA
Step 2: Employer maxes out your HSA on your behalf
Step 3: Employer creates a medical expense reimbursement plan.
A medical expense reimbursement plan is separate from an HSA. It allows for tax free reimbursement for out of pocket medical expenses.
Any expense up to your annual deductible gets reimbursed tax free. Once you meet your deductible your insurance foots the bill. There’s never a scenario where the HSA needs to be touched.
I realize that ivory tower academics or people in large multi specialty groups may not have the luxury of having a say in their benefits. If you have to use your HSA don’t beat yourself up.Comment
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If you collect receipts like I’m doing you have options:
1) True stealth IRA
In my never ending crusade to vanquish this term from the lexicon of humanity. If you have any other pre-tax assets you should almost never take non-qualified distributions from an HSA after 65. It would be extreme rare for this to be true for a physician.
Thank you for the clarification, much appreciated.
I was mostly commenting on the flexibility of various options.Comment
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