What is the Most Strategic Way to Utilize Your HSA?

What is the Most Strategic Way to Utilize Your HSA?

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[nobeliefisok]

I want to add some context for a way to think about HSA vs 401k vs Roth account withdrawals
1. Money already in Roth accounts is not going to be taxed again
2. Money in HSA accounts taken out to pay for qualified medical expenses is not going to be taxed
3. Money in 401k accounts will be taxed when taken out
4. Money in HSA accounts taken out after 65 for other reasons you pay normal taxes, no penalties
5. 401k accounts have RMD, the others do not

What this means is that You should use HSA money to pay for medical expenses when you are 65 or older. And while you are under 65, keep putting the maximum into HSA accounts, even if you are retired and need to withdraw from a 401k to do so (not Roth though). And once you are 65 and I assume you begin Medicare, you should reimburse yourself for medicare premiums (not medigap) from your HSA, and pay all other qualified medical expenses from it, tax free. If you have Medicare A, you will no longer be able to contribute to your HSA.

Why? Because once you are retired, money in a 401k and in an HSA are the same tax wise except for two feature, both of which are better in the HSA
1. No taxes on withdrawals for qualified medical expenses (why you should pay these)
2. No RMD, required minimum distributions (why you may not want to use HSA money)

This effectively means transferring money out of a 401k and into an HSA (limits apply) when retired have no taxes on them, and reduce the effective future RMD's and become available tax-free for qualified medical. It also means that HSA money can be treated exactly like 401k money for purposes of future expenditures for going on a trip, or paying for an air conditioner repair, or just for normal living costs. Its a "better" 401k-like place to have money stored in retirement. Plus its tax-free for medical costs.

The question asked in the video is not really "should I use money in an HSA" but more a matter of when. An answer is to use up all your HSA money (maximizing as above for putting money in) so that when you die, the last qualified medical bill of yours is paid off with the last dollar in the HSA. "But why?" is the follow on question.

HSA goes in one lump sum to the beneficiary, and taxed as normal income in that year. Inheriting 401k money is better for that reason.

[Ranjit]

super helpful video to understand advantages of HSA, thank you, I have 2 questions on HSA

1) my previous employer didn’t have HSA eligible insurance plan. so, I started my HSA plan from 2023 with new employer, and I didn’t spend my HSA money and started investing.
Question, can I use my HSA money started from year 2023 to reimburse my medical expenses occurred and bills saved for the years before 2023?
I am planning to invest now and use my HSA money after 20 years from now, can I reimburse medical expenses occurred before 2023?

2) My HSA started in 2023, plan is to save money in HSA for next 20 years without reimbursing for any medical expenses.
Say in 2023 I have large medical expense greater than standard medical deduction, 7.5% greater than my gross income. I used medical tax deductible as it is not reimbursed to file my taxes and got tax deductible.
Question - now when I start reimbursing my HSA after 20 years, Can I reuse the same medical bills used as medical tax deductible in year 2023 and reimburse my HSA (If have saved the copies)?
Hope my questions are clear enough to understand.

[KatieLibby]

We bank our medical expenses each year. At the end of the year we withdraw those expenses from our HSA and invest it in tax free acvounts.

[longtalltexan]

When I track my HSA expenses, do they have to be on a separate receipt? For instance, if I go to Walmart and buy multiple things and two items qualify for HSA reimbursement, can I keep the receipt for the whole purchase or would I need a receipt specifically for the two items? Hope this makes sense.

[JakeSpradlin]

I personally plan to build up expenses and do a massive refund when I am older

[Oprizzle]

Random question. If a friend or family medical expense, can you pay or donate to help them?

[BunkMasterFlex]

I never go to the doctor. I just put Robitussin on everything

[grantzwingelberg]

what if my employer doest have a HDHPs?

[Zorlig]

Ideally you want your account value to equal your reimbursable expenses at the end of your life + you have contributed the maximum amount every occasion. This is because it is better to pull money out easier tax free an invest it in a taxable account than to have to pay income tax on a non medical HSA distribution. So we have to model all expected qualified expenses and possible outcomes. I haven't seen this done yet and am not sure how it would turn out.

[nd]

Does HSA work if your’re 20 years from retirement, income under $50k, and have a condition now? It seems HSA is only good for people who have lots of disposable income to pay for med expenses now while letting the HSA money grow.

[Joenzinator]

Is there a limit to how much I need in the HSA account? If I just leave what I have in there, it should be around $200K at retirement, which seems like a lot.

[KarenRawson]

"The future belongs to those who believe in the beauty of their dreams." - Eleanor Roosevelt

[lhpeterparker]

Why do you never talk about a limited purpose FSA in conjunction with a HSA?

[evgeniichulkov]

Investing in HSA makes sence only for rich people who already maximized IRAs and 401k. For everybody else who don't put 23k a year in 401k strategy should be to
1) Contribute to HSA
2) Withdraw the money for current and past medical record
3) Invest withdrawal in Roth 401k or Roth IRA until you maximize allowed contribution.
4) Profit: Roth account is much more flexible and you already get a tax deduction on these money

You shouldn't grow money in HSA. Just use it for deduction and move to Roth account if you have this opportunity. Then you in the retirement and your kids after your death will not be punished with tax on the overgrown HSA funds.

[mirict]

Unrelated to this video, however I wasn’t sure the best way to reach out. I work for state government and unlike some of the pension plans you have discussed before I’m not in an investment pension plan but a “guaranteed benefit program” basically I am guaranteed a monthly benefit for the rest of my life which is going to be calculated as 90% of an average of my highest 8 years of income. Basically if my highest 8 years averages 100, 000 I will continue to earn 90, 000 a year in retirement after 30 years of working, which for me puts me at 53 retirement age. Do I need to actually save anywhere else or should I be using more income to live my life today

[markh]

Can you reimburse medicare from an HSA

[kourtneyrice]

The wisest thought that is in everyone's minds today is to invest in different income flows that do not depend on the government, especially with the current economic crisis around the world. This is still a good time to invest in gold, silver and digital currencies (BTC, ETH.... stock, silver and gold)