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HSA withdrawal

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  • #16
    What I think you're getting at is trying to use untaxed money for a Roth contribution so that your Roth is basically double-tax-advantaged, right?

    Once you're 65, your HSA can be withdrawn for non-health expenditures without the penalty; it's just taxed as income, meaning it's p much a TIRA (WCI calls it the "Stealth IRA") and it's still tax-advantaged because it grew tax-free and was contributed pre-tax.

    Why leave cash in the HSA?  Why not invest it as just another retirement account that might need to be drawn earlier than later?  I guess if you just don't have that $11,000 to make as the Roth contributions, using HSA cash to fund a Roth might be better since then you can draw it tax-free without requiring a health expense...but you'd probably just be best off using both as full-on retirement accounts.


    • #17
      I agree w/ DMFA. You've presented a false choice. Leave the money in the HSA. Invest additional funds in the Roth IRA. Do both - they're both very valuable accounts.  If you don't have the money to do both, then you probably shouldn't be doing a HDHP/HSA, you should just be using a Roth IRA.

      Also, the chatter and consternation about ink fading is mildly amusing and not very helpful to you.  While I do keep my receipts in case I need access to the money, and you should definitely try to do that, the real point of my saving in a HSA is to offset healthcare spending in (a hopefully early) retirement, where I will be taking money out as needed for real-time expenses.  No need for faded or yellow receipts, no need to take the time to electronically store and back up receipts - reimbursement for immediate spending.

      You're thinking way too short term.  Google 'estimated healthcare expenses in retirement' - its a fairly big number ($250k or so, I think?), even more if you retire earlier and have to fend for yourself, so even if you max out a family HSA every year you'll be lucky to get the account to cover much more than anticipated healthcare expenses (maybe unless you work a long time).

      Example (moneychimp calculator, simplified I know):

      start with $0, add $6650 per year (yes, I know it goes up a little each year), at 6% returns (perhaps optimistic), do this for 20 years = $259,301


      • #18
        I think where I continue to disagree is by not saving these receipts you lose the flexibility to use this for anything other than the distant future when you rack up major medical expenses.  If you save zero receipts now but then need the money for something else besides health care expenditures, you cannot access the money without a penalty since you you will have no qualified health expenditures to show as the reason for withdrawal.

        These are all low probability events and the average person on this forum has enough cash flow that using the HSA for anything but retirement expenditures is unlikely, but the effort required to save receipts is so low it just doesn't make sense to me to throw them away.
        An alt-brown look at medicine, money, faith, & family


        • #19
          Re: scanning. Why not just use an app like scannable? I get a receipt take a pic on my phone to create an electronic copy. I can then email it to myself, save in app, etc depending on where I want to keep it.

          If you don't feel comfortable keeping medical information in email form that's fine.... You can do as you see fit with the electronic data.

          I started using this method when saving receipts for reimbursements and found it much more effective than trying to keep paper copies. Should work the same in my mind. All it takes is a simple pic on the app....