Current Events > Reminder: HSA is the best retirement program, better than 401k, IRA, 493B

(+) Yeah! (+)

It is the only triple tax advantaged retirement account you can have no matter how much or little money you make. Contributions are pre-tax, all gains and dividend payments are tax-free, as well as spending the money being tax-free.

You can also supercharge your HSA, and only 9% of people with an HSA are doing this: investing your HSA into the stock market. Some allow you to invest every penny, some require a minimum balance before you can invest, and unfortunately a few don't allow it at all.

Now you need a high deductible health plan in order to have an HSA so not everyone can have one. You will hear people tell you that it's not that great because you can only use it on medical expenses, but think about how many medical expenses you're going to have in retirement!

There is also a way once you are retired to use built up HSA money on non-medical expenses, but that's a whole conversation for another time.

Thank you for coming to my TED talk

BignutzisBack posted...

There is also a way once you are retired to use built up HSA money on non-medical expenses, but that's a whole conversation for another time.

This is literally the most important part if you want to use it as a retirement fund. If you won't elaborate then it's useless outside of medical expenses.

Reminder, if the one your work offers sucks, you can open one elsewhere yourself.

1337toothbrush posted...

This is literally the most important part if you want to use it as a retirement fund. If you won't elaborate then it's useless outside of medical expenses.

I'm not sure I follow, just because I haven't spoken on it in depth yet doesn't mean HSA's magically stop letting you use them for non-medical expenses during retirement. I will go into more depth on the that portion during my next Ted talk, you can't skip ahead you need to start from the beginning!

Hsa is not a retirement plan lol.

BignutzisBack posted...

I'm not sure I follow, just because I haven't spoken on it in depth yet doesn't mean HSA's magically stop letting you use them for non-medical expenses during retirement. I will go into more depth on the that portion during my next Ted talk, you can't skip ahead you need to start from the beginning!

You said it's the best retirement plan and then didn't explain on how it can actually be used as a retirement plan.

Tag

I came in thinking I was going to learn about some new way to invest and I get some dude taking about pumping money into health savings

This is a TEDx at best

lilORANG posted...

Hsa is not a retirement plan lol.

They are retirement accounts if you are using them right.

If you have money in your HSA when you turn 65, you can spend it on anything you want but if you aren't spending it for a qualified medical expense, it will be taxed as income at your then current tax rate.

lilORANG posted...

Hsa is not a retirement plan lol.

1337toothbrush posted...

You said it's the best retirement plan and then didn't explain on how it can actually be used as a retirement plan.

OP is being dumb but he's right. Once you turn 65 you don't have to pay any penalties on withdrawals from an HSA for non-medical purposes. I believe you just have to pay income tax. So it basically acts as a 401k at that point, but using it for medical expenses is still completely tax-free.

lilORANG posted...

Hsa is not a retirement plan lol.

This is exactly why I made this topic, lilORANG is probably a lost cause but I want other people to see through the wave of misinformation from people who don't know what they're talking about.

1337toothbrush posted...

You said it's the best retirement plan and then didn't explain on how it can actually be used as a retirement plan.

The day you turn 65 you can use the HSA on anything. There's of course a catch, the amount you withdraw will be taxed as ordinary income like the other retirement accounts I listed in the top title.

However an HSA doesn't force you to take required minimum distributions at a certain age like other retirement accounts. That means it has every single benefit as the other retirement plans, you aren't forced to funds from it unless you want to so you can continue to maximize compound interest, and it completely crushes every other retirement account when paying for actual medical expenses which we all know old people have a lot of.

In conclusion HSA is the best retirement program

The one flaw is the contribution limit being so low.
Well, and requiring a high deductible plan to be able to contribute in the first place. >_>

uwnim posted...

The one flaw is the contribution limit being so low.
Well, and requiring a high deductible plan to be able to contribute in the first place. >_>

Also that with 401k/IRAs you can start penalty-free withdrawals at age 59.5 vs. 65

[LFAQs-redacted-quote]


Umm no lol, you don't pay taxes on medical expenses, notice I didn't put the words "on anything" in that paragraph you just decided to insert it yourself.

If you guys want to attack me for not going in depth enough in the initial post, call me a douche for how I'm presenting the information, that is absolutely fine I will wear it. That being said I'd bet my next 10 paychecks that not a single person here who disagrees with it being the best retirement vehicle will be able to prove why not.

I started one on my last open enrollment. Sucks its only limited to the high deductible plan though.

Yep. Everything after $1k in my HSA gets invested. It's pretty great.

[LFAQs-redacted-quote]

It isn't backtracking when other lines in the opening post mention the medical expense restriction.

They let you expense so many things. I was getting massages and expensing them to my HSA. My company funded $500 per year so I was getting free massages.

Prismsblade posted...

I started one on my last open enrollment. Sucks its only limited to the high deductible plan though.

Definitely, the dream would be to allow everyone to utilize one maybe like a Roth IRA where you can contribute the max as long as you at least earn that amount in income over the year.

ironman2009 posted...

Yep. Everything after $1k in my HSA gets invested. It's pretty great.

Same here my HealthEquity HSA requires the $1,000 minimum, everything after that is immediately invested

As someone who has only been maxing out contribs the last 3 years, I can say I 100% agree with TC on all this, and wish I wouldve been seriously taking advantage of the account way sooner. Ive missed out on multiple years of compound growth.

A big part of generating wealth is learning how to strategically minimize tax burden. As TC has mentioned, this is the only account allowable by the IRS that has the potential to be 100% tax free.

One strategy to use with the account is to pay for expenses in earlier years out-of-pocket, but save receipts. There is no time limit restricting how far back you can submit for reimbursements. So hypothetically, you could use a 10 year old receipt to cash in on the balance at a later date. Thats essentially what Ive been doing, paying expenses OOP and hoarding receipts, but I havent had the need yet to cash in. Id rather just let the account sit and grow over time if possible.

Knowing Ive got this side nest egg building up gives me a bit of comfort, knowing itll be an additional source of funds to tap into after I retire to use for medical expenses at that point.

If people want to hate on these thats all well and good, but knowing what I know about taxes and whatnot the benefits of the account simply just far outweigh the negatives.

theAteam posted...

They let you expense so many things. I was getting massages and expensing them to my HSA. My company funded $500 per year so I was getting free massages.

"Massage - Fees paid for massages are not reimbursable unless to treat a physical disability or illness. Medical diagnosis is required."
https://www.cigna.com/individuals-families/member-guide/eligible-expenses#M-O

HSAs have lower contribution limits than IRAs.

Employer plans like 401Ks have matches that give free money.

Topic title is false. HSA is a good account to have in addition to other retirement plans. Its almost always better than FSAs too.

But if youre someone who needs a lot of medical needs, being forced into high deductible plans does you no favors.

This topic sounds like TC just found out what HSAs even are. Not a good topic tbh.

My priorities would be

401k up to employer match
HSA
Roth IRA
The rest of the 401k limit

I should probably be putting some more effort into finding out if some of that last bucket should be Roth 401k instead, but I haven't gotten around to it.

CE_gonna_CE posted...

As someone who has only been maxing out contribs the last 3 years, I can say I 100% agree with TC on all this, and wish I wouldve been seriously taking advantage of the account way sooner. Ive missed out on multiple years of compound growth.

A big part of generating wealth is learning how to strategically minimize tax burden. As TC has mentioned, this is the only account allowable by the IRS that has the potential to be 100% tax free.

One strategy to use with the account is to pay for expenses in earlier years out-of-pocket, but save receipts. There is no time limit restricting how far back you can submit for reimbursements. So hypothetically, you could use a 10 year old receipt to cash in on the balance at a later date. Thats essentially what Ive been doing, paying expenses OOP and hoarding receipts, but I havent had the need yet to cash in. Id rather just let the account sit and grow over time if possible.

Knowing Ive got this side nest egg building up gives me a bit of comfort, knowing itll be an additional source of funds to tap into after I retire to use for medical expenses at that point.

If people want to hate on these thats all well and good, but knowing what I know about taxes and whatnot the benefits of the account simply just far outweigh the negatives.

You put it very well, a lot less confrontational than I did

I have the same regret, in my 20s I had no idea how powerful it could really be, missed out on so much money. Hell I didn't even realize that it could be used on dental and vision expenses for the longest time!

1337toothbrush posted...

"Massage - Fees paid for massages are not reimbursable unless to treat a physical disability or illness. Medical diagnosis is required."
https://www.cigna.com/individuals-families/member-guide/eligible-expenses#M-O

Never asked me any questions when I submitted for it

BignutzisBack posted...

You put it very well, a lot less confrontational than I did

I have the same regret, in my 20s I had no idea how powerful it could really be, missed out on so much money. Hell I didn't even realize that it could be used on dental and vision expenses for the longest time!

Yup the high deductible part was the thing that scared me away from them for many, many years. Combine that with the fact that the employer match isnt nearly as generous as what employers typically give on a 401k, and I just didnt think it made sense and I always opted to stay on the low deduct plans to try to save a few bucks.

Now that Im nearing mid-40s, have a decent understanding of taxes and wealth generation by way of being a CPA and doing corporate accounting for so long, and by reading a decent number of books on investing strategy, its pretty clear in hindsight that the better choice for me wouldve been to just dive into the high deductible plan and start way earlier.

theAteam posted...

Never asked me any questions when I submitted for it

Chiropractic doesn't require a diagnosis, and some places basically throw in a massage anyway.

theAteam posted...

Never asked me any questions when I submitted for it

If you ever were to get audited by the IRS and couldnt prove that it was a valid HSA reimbursable expense, they would make you pay the taxes + any penalties and fees on that distribution.

That's my understanding, anyway. The plans are pretty lax about what you need to submit to get the money out, and place the burden of proof on you to ensure that the expenses are qualified and you have the proper receipts and documentation to back everything up.

CE_gonna_CE posted...

If you ever were to get audited by the IRS and couldnt prove that it was a valid HSA reimbursable expense, they would make you pay the taxes + any penalties and fees on that distribution.

That's my understanding, anyway. The plans are pretty lax about what you need to submit to get the money out, and place the burden of proof on you to ensure that the expenses are qualified and you have the proper receipts and documentation to back everything up.

Well I guess Ill get fucked if they do that. Its $200 worth of expenses I sure hope they dont waste a ton of resources tracking that down.

HSAs are good if your employer matches it. Often they will up to a certain point and if you are healthy go ahead and get the cheapest plan with HSAs. I would use them all the time when I was young

[LFAQs-redacted-quote]


Cant be too much because roth ira has a annual income cap to even contribute.

Investing it is a pain in the ass. Have to do it all by hand or pick from specific funds. No robo advising or managed accounts. And then sometimes the signup doesn't even work.

uwnim posted...

Reminder, if the one your work offers sucks, you can open one elsewhere yourself.

Prismsblade posted...

I started one on my last open enrollment. Sucks its only limited to the high deductible plan though.

Can someone square these statements w/ me?
I never get an HSA b/c I literally can't. It's only available w/ a high deductible health plan, which I'm NOT doing.
So...can you get a HSA on the private market separate from your healthcare choices w/ your employer?

HSAs are typically only associated with high deductible plans. I never saw one that wasn't

streamofthesky posted...

Can someone square these statements w/ me?
I never get an HSA b/c I literally can't. It's only available w/ a high deductible health plan, which I'm NOT doing.
So...can you get a HSA on the private market separate from your healthcare choices w/ your employer?

Yes, but you still need a high deductible plan. Your bank or brokerage firms have HSAs most likely.

Axiom posted...

HSAs are typically only associated with high deductible plans. I never saw one that wasn't

cuttin_in_farm posted...

Yes, but you still need a high deductible plan. Your bank or brokerage firms have HSAs most likely.

Ok, so they're useless.
Shame, sounded like a good "investment" vehicle. Not enough for me to spend like $10K deductible for healthcare, though. Fuck that.

streamofthesky posted...

Ok, so they're useless.
Shame, sounded like a good "investment" vehicle. Not enough for me to spend like $10K deductible for healthcare, though. Fuck that.

"High" in this case is 1,500. That's what mine is and the out of pocket max is 3,000. But there are HDHPs that do have it cranked up to 10k or more from what I hear.

Preventative care is still fully covered before meeting your deductible, so if you are healthy, the savings from the much lower premiums plus the ability to have an HSA make them much better than a regular plan.

At my job, the out of pocket max for the regular and the HSA were the same and due to the cost difference in the premiums, even if I have like a health issue like once or twice a year it would still be cheaper for me to take the high deductible plan.

You guys plan to retire?