Health Savings Account

[vmd]

Hello fellows I have a question;

I had some emergent medical issues and, having a high deductible medical insurance, I am now on the hook for about $5000.00. I am young and healthy otherwise.

I do have an HSA, which currently holds about three times that amount. I have the funds to pay this bill from my revolving accounts. My question is,

Should I withdraw the money from the HSA and pay this bill?

Should I withdraw the money from the HSA, and place it into a regular after-tax account?

Should I not do anything and keep this bill and send to them whenever I decide I should withdraw the money, and if I do this, how long do I have to claim this money?

Answers and the Why's to the answers greatly appreciated!

Thanks much everyone

 

 

 

[hightower]

Usually an HSA account will give you access to a debit card that you can use to pay for medical bills.  If you don't have one, then write them a check and withdraw the money from your HSA.  When you do your taxes you will have to declare that it was used for qualifying medical expenses.  Keep records of the bill and a copy of the check you wrote (once they cash it).

[PhysicianOnFIRE]

There's been some discussion on this topic previously. See this thread.

I used to be a receipt saver & scanner, but I found the record keeping cumbersome and I now choose to pay medical bills directly from the HSA.

The benefit of paying out of pocket and saving the receipt to redeem from the HSA at a later date is the fact that the $5,000 will continue to grow tax free within the HSA. In a taxable account, you will have some tax drag on the money (mine is ~0.5% per year). The downside is keeping track of the receipts as they pile up. It's up to you whether or not it's worth hanging on to the receipt.

For me, it might save me $25 a year in taxes, but I had many small receipts and didn't want to take the time to scan, save, keep the paper version, upload to my HSA cloud folder, and track in Excel. Doing this 10 to 20 times a year (I have kids. Get get earaches, etc...) makes it not worth my time.

[Donnie]

Agree with PoF.  The other thread covered this pretty thoroughly.  Use the HSA for its intended purpose, paying medical bills, and invest the difference in your taxable account.  Saving years of medical receipts sounds pretty miserable to me.

[IRdoc]

Luckily thus far with 2 kids, we have been fortunate.  No major expenses, a few infections and a broken bone.  I pay cash for everything and keep the HSA fully funded.  The 30 year compounded interest makes it rather enticing.  Keeping track of receipts seems easy to me, just use a scanner app on iPhone which directly uploads into Evernote HSA account, unless i'm missing something.

[spiritrider]

I really don't understand the aversion to saving receipts. Especially, since you are required to do so by the IRS even if you are reimbursing on the go. You need to have have a system for saving the receipts for the 3/6 year SOL periods.

Once you have the system, what is the difference how long you have to save them for. In this day and age anybody can save these electronically and account for them in a spreadsheet.

[Hank]

Just take a picture of the receipt and email it to yourself. Keep a gmail label or a folder for HSA receipts. Takes 15-20 seconds.

[ifonlyFI]

I find HSA to be irritating.  Our particular HSA has a debit card we are supposed to use.  Half the time, however, it doesn't work.  I stopped funding it because I typically fofeit the money at the end of the year.

[silverpaw54]

ifonlyFI wrote:

I find HSA to be irritating.  Our particular HSA has a debit card we are supposed to use.  Half the time, however, it doesn’t work.  I stopped funding it because I typically fofeit the money at the end of the year.

Click to expand...

Are you sure it's a HSA? The money is not forfeited for a HSA. FSA is similar, but the money is forfeited. HSAs are only allowed in high deductible plans.

[adventure]

ifonlyFI wrote:

I find HSA to be irritating.  Our particular HSA has a debit card we are supposed to use.  Half the time, however, it doesn’t work.  I stopped funding it because I typically fofeit the money at the end of the year.

Click to expand...

I cut up the debit card the day it arrives in the mail. To get reimbursed, I simply go online and transfer the money to my checking account.

[dentoid]

So no one is holding out on their HSA and using it for their elder years when it can be withdrawn?

[mamaham]

dentoid wrote:

So no one is holding out on their HSA and using it for their elder years when it can be withdrawn?

Click to expand...

we are for now at least...  just saving the paper receipts.   taking the risk if they are lost in a fire, flood, theft. (although i may do a mass scan at the end of each year, but havent decided yet)  seems like it is worth the triple tax advantage to not use the HSA unless it is really needed.  that said, we dont have much in there yet and havent had any large medical bills yet.  so we will see what we do in the future....  my understanding is that you can withdraw the money for any reason (not just medical) once you reach a certain age....

[tex]

dentoid wrote:

So no one is holding out on their HSA and using it for their elder years when it can be withdrawn?

Click to expand...

My current strategy as early career still aggressively paying off loans, and therefore hold a smaller than some cash emergency fund:

- Cashflow healthcare expenses as much as possible

- If expenses ever prevented me from fully funding Roth and tax-deferred, I can always use HSA money

- For bigger expenses that I can still cashflow, bc of folks here and at BH have convinced me of the relative simplicity of 1)cashflow 2)submit to HSA 3) fund taxable with that money

 

As POF has successfully argued, the minimal tax drag is the only difference at that point and probably not worth the effort (risk?) of keeping receipts with the idea of cashing out later

[IMD801]

Related question: does it make sense to use an HSA if my health insurance premiums are so cheap? We have an excellent plan for our family for a little over $100/month.