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Step 19 - why would you avoid using your HSA for m...
# general
t
Step 19 - why would you avoid using your HSA for medical expenses?
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c
It grows tax free and the distributions are tax free. So the optimal strategy is to let them grow and keep track of all of you medical expenses. When you're older you can take distributions based on the old expenses. If you take it out now you lose the tax free growth. It's the only account that's triple tax advantaged. You dont pay taxes on the contributions, growth, or distributions.
s
The chart is really missing a step; see the second part of my message from an earlier thread about the chart. At step 19, you've reached the point where you can afford to pay for all your medical expenses without using the HSA contributions so you're free to use it purely as an investment account. https://frumfinance.slack.com/archives/C04E9F1HAJK/p1673905556936709?thread_ts=1672346085.859969&cid=C04E9F1HAJK
t
thats right, just makes it seem like you shouldnt be using it for medical expenses at all. which is the ultimate way to eventually cash out
s
Right so I also suggested adding something about keeping all your medical bills so you can cash out whenever you need to as a reimbursement for old bills
b
@curved-toothbrush-84425 that's an interesting point. Is there no time limit for reimbursements? As an exaggerated example, if you start contributing to an hsa are you able to pay back a medical expense from 10 years prior?
s
The expense has to have occurred after you opened your HSA
m
I'm working on fixing the HSA language. DM me with ideas please.
b
@swift-vegetable-15776 OK that makes sense. Still, if the account had been opened I didn't think about it being valid to reimburse 10 years later. Good idea about paying back from years prior to help with simchas and other major expenses.
e
I disagree about funding for this years expenses assuming a non-HDHP would yield better coverage net of higher premiums. Especially for those who can itemize their healthcare expenses. I also disagree about using it for Simcha’s. Probably better to wait and use to cover Medicare Part B/D.
Will run couples at least $5k/year after age 65 (as adjusted for inflation). Probably more given IRMAA.
m
I strongly disagree about using it for simchos. I agree with @eager-smartphone-39564 about not funding if non HDHP would yield better coverage.
b
I wouldn't be too keen on using it for Simchos but I'm curious what the benefit is to saving it if you would be going into debt otherwise. It leads me into my other question which @eager-smartphone-39564 touched upon, are there bloated medical expenses later in life that it would make sense to do your best to save up for? I don't know what Medicare Part B/D is
e
Yeah I think if it’s a question of debt it gets back to classic leverage issues. I guess I’m referring to the alternative of using some other source of funds.
But Medicare Parts B and D are the aspects of retiree healthcare that involve monthly premiums.
c
Part A: covers hospital and certain nursing facilities. Part B: covers doctors and outpatient Part C: third party insurance that's approved by Medicare Part D: covers pharmaceuticals
b
Ok ya, leaving the debt aspect aside, I would definitely agree to use it for Medicare.
@curved-toothbrush-84425 that makes sense, thanks for laying it out. Are A and C covered by Medicare?
And now that I'm thinking about it, I thought there were some restrictions around HSA and Medicare? I'm pretty sure you can't contribute to an HSA while on Medicare, are you allowed to use HSA funds for a medical expense while on Medicare?
e
You are absolutely correct. You cannot fund it while covered by Medicare.
You also cannot use your HSA to cover Medigap.
But part B and D premiums are qualified medical expenses
b
Ok got it thanks.
m
I don't think I'm following anymore. Can someone send me some resources to read?
e
One of the best articles on personal finance I have ever read: https://www.kitces.com/blog/hierarchy-tax-preference-savings-vehicle-roth-high-income/
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