Announcement

Collapse
No announcement yet.

HSA withdrawal

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Pedheart
    replied
    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....

    Leave a comment:


  • RogueDadMD
    replied
    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.

    Leave a comment:


  • Josh0731
    replied
    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

    Leave a comment:


  • DMFA
    replied
    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.

    Leave a comment:


  • RogueDadMD
    replied




    I am not looking to”raid” my HSA to fund a backdoor roth.  Im looking to not save receipts and or digital copies of receipts for 30 years.

    If the money goes in tax free, withdrawn tax free from the HSA for expenses, and then re-invested in a roth, why not do it?   I plan on always having my max out of pocket in the account as cash, and the rest, invested.  Obviously replenishing the cash if a withdrawal is made prior to investing future contributions.

    how and why is there a difference in quality of investment?

     
    Click to expand...


    I'm not sure I am really understanding your question or doing a great job of explaining this, which is why I don't have a blog making me money.

    They both provide tax free growth that you can't get elsewhere.  So if you are funding them separately and not withdrawing the HSA money to fund the Roth, then I think we're in agreement.  Johanna is just saying you don't need to worry about saving receipts -- plenty of expenses will pop up later to justify HSA withdrawals.

    But what you state in that 2nd paragraph is you are wanting to use HSA withdrawals to fund the Roth.  That's just missing an opportunity to double your tax free investment opportunities.  Instead of using HSA money to fund it, use regular after-tax income to fund the Roth and let the HSA money grow separately.  If you're already taking after tax income and putting them into "other" investments, why would you not just fund the Roth that way too?

    You don't get an extra tax advantage by funding the Roth via the HSA -- the HSA money is already growing tax free, you just don't want to worry about having medical expense receipts to withdraw the money.  However I'm not sure why saving receipts is such a big deal.

    Leave a comment:


  • VIRDOC
    replied
    I am not looking to"raid" my HSA to fund a backdoor roth.  Im looking to not save receipts and or digital copies of receipts for 30 years.

    If the money goes in tax free, withdrawn tax free from the HSA for expenses, and then re-invested in a roth, why not do it?   I plan on always having my max out of pocket in the account as cash, and the rest, invested.  Obviously replenishing the cash if a withdrawal is made prior to investing future contributions.

    how and why is there a difference in quality of investment?

     

    Leave a comment:


  • RogueDadMD
    replied




    Aside from “lowering your savings rate”, why wouldnt everybody do this?

     
    Click to expand...


    Forum crashed on me and didn't appear to save my response to this so I'll paraphrase/re-type.

    The "aside" is actually the main point.  The HSA and the Roth are two of the most powerful investment vehicles you have available.  If you have no difficulty funding "other" investments then you should have the funding to separately fund the HSA and Roth.  If you don't then you should stop funding the "other" stuff and put money preferentially into the HSA and Roth on their own.  However raiding the HSA to fund the Roth isn't just hurting your savings rate, it's hurting the quality of savings you are generating.  Not every dollar saved is equal in value.

    Leave a comment:


  • RogueDadMD
    replied





    Johanna, I’ve read many of your posts and think you give great advice, but this is the first time I’ve disagreed enough to say something.  It’s easy to store papers in a box, it’s hard to ensure they don’t get lost, stolen, wet, destroyed, stay eligible, etc.  Without knowing his health/family situation, his premiums, hs expenses, or how much he will eventually store up or whose expenses he will pay, it’s hard to know that he will rack up enough expenses later to use the account when he needs it.  He may have a year where he has $4k in expenses but needs to take out $10k to pay for something else.  What if he needs to use that money sometime before retirement for other expenses and doesn’t have a way to withdraw the money?  I also consider an HSA an emergency fund, not just a retirement fund. 
    Click to expand…


    First of all – thank you for the high compliment. I don’t take that lightly! For me, it’s not worth the time and trouble to scan and save so many odd receipts. Maybe my husband and I happen to have more than average. I do understand your concerns with flood, fire, etc. Of course, a safety deposit box would suffice or a fireproof safe and the cost of such versus value of time saved would be comparable or better. otoh, I (personally) believe it is highly improbable that your receipts will ever be questioned for medical expense reimbursements for HSA withdrawals. Possible, of course, but I’m relying on anecdotal evidence from 35 years of what the IRS questions. Minuscule compared to the fears. Yes, some will fade but even presenting a box of faded receipts that have been organized over a 30-year period would satisfy an examiner that you have made an organized and fair attempt to document records.

    As to his expenditures, my comment was based on average health expenditures projected for retirees around a quarter of a million per person (I had just read an article about it) and the timing probably influenced my response.
    Click to expand...


    Fair enough.  However given how easy CYC makes it to store receipts online I would rather do it that way.  I'm big into cloud storage in general for other things so it also just fits my general practice to do it this way.

    Leave a comment:


  • VIRDOC
    replied
    I have a very HDHP. my out of pocket max is around 12K/year.  Thankfully my wife and kids are healthy, and we barely use it.   For example, over the last 2 years, i have racked up 1K in medical expenses.  I have no trouble funding my 401K and other investment vehicles.  I just dont see a reason to keep the receipts around.  No matter how careful you are, they will fade etc......  No matter how redundent your backup system is, technology will change.  Imaginge if you kept all of your stuff on floppy Disks?

    Aside from "lowering your savings rate", why wouldnt everybody do this?

     

    Leave a comment:


  • jfoxcpacfp
    replied


    Johanna, I’ve read many of your posts and think you give great advice, but this is the first time I’ve disagreed enough to say something.  It’s easy to store papers in a box, it’s hard to ensure they don’t get lost, stolen, wet, destroyed, stay eligible, etc.  Without knowing his health/family situation, his premiums, hs expenses, or how much he will eventually store up or whose expenses he will pay, it’s hard to know that he will rack up enough expenses later to use the account when he needs it.  He may have a year where he has $4k in expenses but needs to take out $10k to pay for something else.  What if he needs to use that money sometime before retirement for other expenses and doesn’t have a way to withdraw the money?  I also consider an HSA an emergency fund, not just a retirement fund.
    Click to expand...


    First of all - thank you for the high compliment. I don't take that lightly! For me, it's not worth the time and trouble to scan and save so many odd receipts. Maybe my husband and I happen to have more than average. I do understand your concerns with flood, fire, etc. Of course, a safety deposit box would suffice or a fireproof safe and the cost of such versus value of time saved would be comparable or better. otoh, I (personally) believe it is highly improbable that your receipts will ever be questioned for medical expense reimbursements for HSA withdrawals. Possible, of course, but I'm relying on anecdotal evidence from 35 years of what the IRS questions. Minuscule compared to the fears. Yes, some will fade but even presenting a box of faded receipts that have been organized over a 30-year period would satisfy an examiner that you have made an organized and fair attempt to document records.

    As to his expenditures, my comment was based on average health expenditures projected for retirees around a quarter of a million per person (I had just read an article about it) and the timing probably influenced my response.

    Leave a comment:


  • RogueDadMD
    replied




    That’s my point exactly.

    Why wouldn’t you take out money spent on qualified med expenses and reinvest that money in your backdoor ira? Therefore you don’t have to save receipts?
    Click to expand...


    Johanna's point was that as a physician you should have the cash flow to do BOTH -- max a backdoor Roth IRA and an HSA without withdrawing HSA money to fund the backdoor Roth.

    I've done exactly what you are proposing, however I've stopped doing it.  It lowers your overall savings rate those years and costing you future flexibility from the HSA.  When you use the HSA money to fund the Roth IRA, you're only saving the amount that was in the HSA, all you've done is shift the money to a different account, not increase your savings.

    Leave a comment:


  • VIRDOC
    replied
    That's my point exactly.

    Why wouldn't you take out money spent on qualified med expenses and reinvest that money in your backdoor ira? Therefore you don't have to save receipts?

    Leave a comment:


  • RogueDadMD
    replied







    There are concerns that the receipts are going to fade and become illegible after 30 years, if not become lost or misplaced.  I have a plan to scan them all into my PC, but that’s a huge hassle I haven’t gotten around to yet.
    Click to expand…


    Some will, most won’t. Personally, I just will not waste my time on such a highly improbable occurrence. Given how much you’ll spend on various medical-related bills over 30 years, enough will survive as proof of your expenditures.
    Click to expand...


    Johanna, I've read many of your posts and think you give great advice, but this is the first time I've disagreed enough to say something.  It's easy to store papers in a box, it's hard to ensure they don't get lost, stolen, wet, destroyed, stay eligible, etc.  Without knowing his health/family situation, his premiums, hs expenses, or how much he will eventually store up or whose expenses he will pay, it's hard to know that he will rack up enough expenses later to use the account when he needs it.  He may have a year where he has $4k in expenses but needs to take out $10k to pay for something else.  What if he needs to use that money sometime before retirement for other expenses and doesn't have a way to withdraw the money?  I also consider an HSA an emergency fund, not just a retirement fund.

    We don't know if he's used any money now or will need it, we don't even know that he'll be on a HDHP in the future (employment status and available policies change), so his out of pocket expenses could go down dramatically and he could be paying more in premiums.

    Since joining my HDHP in 2013 (and slowly adding my family to it) I've had one year where I used none, one year where I used a little, last year I hit the out of pocket max, and this year may again hit the out of pocket max.  But my out of pocket max is $5500/year (which is really low compared to most plans), so even if I reimburse myself for that entire amount I still would have money left in my HSA each year, so saving those receipts is important.

    I've been scanning receipts and storing them in a cloud service as they are paid then stick the receipt in a folder.  Also ConnectYourCare (who maintains my HSA) lets me upload the receipts to their system and use that as the basis for withdrawing from them when needed.  So I technically have mine backed up 3 ways (paper, personal cloud service, and CYC), and I can tell you that even last year when I maxed out my account and had a ton of receipts, the effort this required was minimal.

    Leave a comment:


  • jfoxcpacfp
    replied




    There are concerns that the receipts are going to fade and become illegible after 30 years, if not become lost or misplaced.  I have a plan to scan them all into my PC, but that’s a huge hassle I haven’t gotten around to yet.
    Click to expand...


    Some will, most won't. Personally, I just will not waste my time on such a highly improbable occurrence. Given how much you'll spend on various medical-related bills over 30 years, enough will survive as proof of your expenditures.

    Leave a comment:


  • Lithium
    replied
    There are concerns that the receipts are going to fade and become illegible after 30 years, if not become lost or misplaced.  I have a plan to scan them all into my PC, but that's a huge hassle I haven't gotten around to yet.

    Leave a comment:

Working...
X