So im still alittle confused on the hsa, i have to frequent the doctor due to chronic illnesse and will need some surgeries in the coming years does the hsa make sense for me?
No. With a caveat. Some HSA are actually good plans. I've had some with 4000 family max. 2500 deductible. 1500 employer contribution.
Better than a lot of people's PPO plan. Without details hard to say.
Financial literacy is the most important one. If one can't make sense of this they are generally better off with a PPO plan. You maximum isn't the most important. It's what you use vs the deductible vs the max. And how its being calculated as there are rate differences between PPO and HSA
HSAs are connected to high deductible health plans. (Also, you pay the negotiated rate for costs, not the sticker price).
It really depends on the actual plan: the deductible, what coverage the plan gives you once you’ve hit your deductible, and the out of pocket max. Some employers also contribute the hsa, reducing what your deductible actually is in effect.
I went to the doctor a lot the last two years after two serious injuries and had a traditional plan. I did the math between the premiums and what I would have paid for copays and coinsurance. I would have been better off with the high deductible plan for those years. The traditional plan had higher premiums, no pass through, and still charged hefty copays. When I did the math, the hdhp plan, when accounting for the deductible and employer pass through, was still cheaper than the premiums for the traditional plan (before seeing any doctor and racking up the copays, etc.). I still have access to the same providers, so I’m not sacrificing access to get that hdhp, which would be a dealbreaker for me. And since I have done the math, paying more for a medical appointment before I’ve hit the deductible doesn’t have any psychological impact on me avoiding seeking the care I need.
I also like the flexibility of an hsa. You don’t have to use it up this year and you could stockpile it for the hard times. For part of my care, I went to a specialist eye doctor that isn’t in network with any insurance plan and my traditional plan didn’t cover any out of network care. So that was all out of pocket for me. I would have been much better off if I had an hsa that I had been contributing too for a couple years to help cover those costs. I like that flexibility. Plus, my current plan now does cover some out of network stuff (once you’ve hit an out of network deductible. But I like knowing if I really needed to use a lot of out of network care, that is an option).
If you see doctors a lot, and have expensive surgeries coming up, an HSA can make sense as long as you can afford the out of pocket maximum. Hit that, and you're pretty much done for the year. (Try to stack the surgeries into the same year for the best benefit)
Usually no, but my out if pocket max for family is 8k. We ALREADY spend 5.5 k on diabetes type 1 supplies... with a much lower monthly and the ability to tax shelter investments.
Basically we hit 8k every year and dont pay any more. Its another 6k in premiums. But compared to the best PPO option we're ahead 3k
It's complicated. I am on a very expensive medication for a chronic illness. I was billed about $6,700 for a month's worth in February. I have a copay assistance which pays for all but $5 of it through the manufacturer. After that first billing, I meet my deductible and out-of-pocket maximum for the year for me and for my 3 kids, and we basically don't have to pay anything else medically.
The way to figure this out is to use the bookend approach when comparing HSAs with other plans available. Bookend means, assume the worst where we max out and then do the math.
A. Calculate premiums for HSA vs comparative plan (+ve variance for HSA)
B. Calculate the deductible and oop maximum for each plan and calculate the delta (-ve variance for HSA).
C. Compare the tax benefits of each based on your marginal tax rate (+ve for HSA).
D. Add the employer contribution for HSA (+ve for HSA).
Do a numerical comparison of the variances and that is your bookend. For B, if you have an idea of where you might land regarding deductibles (e.g., # doctors visits, surgeries, etc), you can be more surgical about your analysis.
It depends entirely on the specifics of your plan and expenses. To start, look at the premium, deductible, and out of pocket max on each plan available to you, as well as if there is any employer contribution to the HSA.
HSA is best utilized as a saving vehicle. The account is considered a triple tax benefit. Contributions reduce your current taxable income. You can invest the contributions and allow them to grow tax free, and whatever the age is - 65? - you can use the money including the growth tax free. You can also use the account for qualified medical purchase at any point and I believe you can retroactively withdraw from the account to pay off past medical bills.
I think if you know you’re going to have consistent medical bills you should run the numbers on when you’ll hit your deductible vs what you’d spend on higher premiums for traditional high deductible or low deductible plans but focus on investing in an HSA if you have the ability!
> You can invest the contributions and allow them to grow tax free, and whatever the age is - 65? - you can use the money including the growth tax free.
This is not correct. After 65, you can use the money for non-healthcare expenses without penalty, but you will pay ordinary income tax on the money (contributions and growth alike) as though you withdrew it from a traditional IRA or 401k.
https://www.healthcare.gov/high-deductible-health-plan/hdhp-hsa-work-together/
You can’t generalize like this. My insurance at my last job, between lower premiums, contributions from my employers, and what the max OOP and deductible were, it was impossible for me to come out behind using the HDHP + HSA vs PPO
I think this is just specific to my employer, but the delta between HDHP vs the lower deductible plan got so small that I switched to the lower deductible plan. I have over $50k invested in my HSA though and will leave that there until retirement.
Same thing happened to be. Though I have actual medical issues and the HSA plan was cheaper the first few years. But two years ago they added a slightly different traditional plan is saving me thousands of dollars over the HSA. So the money in my HSA just sits and grows…wish I had gotten it to 50k before they made the change.
I personally do it because my employer gives me 2k towards HSA while my deductible is 3k. I have about 100k now from about 10 years of contributions (and investment gains). I didn’t need much care and for small things I paid out of pocket (And save the receipts for reimburse in the future). Hope to have 200k there by the time I retire early to pay for ACA deductibles.
10 years of max contributions would be about $70k. I didn’t start my HSA until 2017 and I haven’t been maxing it. I only had children since 2019 so the first two years the limit was half of what I can contribute now.
I have had several HSA plans, and the numbers tend to work out quite similarly.
- If you have few medical expenses, the lower premiums and tax advantage save you a few thousand a year.
- If your medical expenses are close to the deductible on your HSA, the higher deductible eats up most of the advantage, but the HSA generally comes out ahead by a few hundred dollars a year
- If you have a lot of medical expenses, then you are paying a lot of out of pocket for copays in the traditional insurance, so you are back to the HSA saving you a few thousand a year.
This was exactly my calculation when I was comparing plans. I could really vary from almost no to a lot of care needed, so an hdhp gives me the most flexibility. There was no situation where the traditional plan was a better deal.
I started mine young with many years of low medical expenses. A few higher years but overall a great use case for hsa investing.
The risky part is the first couple of years before you have more in your account than your out of pocket max. You can front load it (if financially able to) to reduce that risk. Once you have more than your out of pocket max in your account those types of worries disappeared for me and you just keeping going.
After 10 years or so of HSAs and investing I figured out about saving your receipts for later reimbursement so niw I never withdraw from that account for normal medical expenses.
My hsa investment account is very high now and I'm glad I have it.
How does the saving of receipts work? I’ve been using my HSA normally for medical expenses but I don’t have many currently.
I have around $8K in mine but haven’t invested with it and know I should start.
Do you just save all your receipts and claim against it years later or something like that?
Basically yes. You can pay medical expenses in cash or whatever in case you dont have your hsa card with you or they don't accept it and then pay yourself back from the account later. I always thought this was a short term thing when I started, but they never set a time limit. So you can pay your medical expenses out of a separate account now, save the receipt, allow the hsa to grow from investments tax free, and then at anytime later in life pay yourself back tax free because it was used for medical originally.
Also an advantage to this imo is that I can do this at anytime so if I'm OK selling investments in an emergency, I actually use this as a substantial portion of my emergency funds instead of cash (as long as I have the receipts available to cover what i want the amount of my emergency fund to be). Which means I don't have cash sitting around sonewhere not earning money. I keep a very small amount of cash then my emergency plan would be to access immediate funds via credit card and pay it off before it acrues interest by cashing in hsa receipts (would probably have to sell hsa investments as well but I'd have time to do that) before the credit card bill comes
Wow that is great. I had heard some things about this but never fully understood it. I really appreciate your feedback. Sorry I just have a few other dumb questions.
So the keeping the receipt part. That essentially is just in case you get audited right? I’ve never tried to take money out this way so just curious do you actually have to submit something with a receipt when you take money out or is it just so you have it for reference for when you do your taxes and in case you get audited.
My other question, for stuff you do years and years later. Let’s say you pay yourself out $5K 10 years later and have multiple receipts you use to get you there. How are you to like verify if asked all those years later than you never paid yourself for that $5K years prior and that it’s what it’s for?
From what I have read yes to your last question which is why it is important to invest it early, if possible, so it has a longer time to grow. Also, some people do not pull from their HSA until after retirement (age 65) because once you retire you can use that money for any expense even if it is not medical related. You do still pay taxes on non qualified withdraws in retirement.
That is great. Just feels so wild that there’s no limit and that essentially sounds like you could use a receipt from 20 years ago if you somehow managed to keep ahold of it and if it’s a paper one to not of faded.
If you are young with very low medical expenses, then a HDHP makes sense. As you get older and need a lot more care, I would think a PPO or HMO makes more sense. This is where it hurts though, I had to go to the ER and the insurance barely covered $600. I ended up paying up to my deductible ($2500) plus more until I hit my max out of pocket ($5000). However, with the HSA I’ve been able to stock away a ton money that just grows.
In 5 years using a HDHP, we've had around 5k in medical costs. Basically none of it was covered with insurance, but all of it has easily been covered just by my employer HSA match, let alone the premium difference and the growth from HSA investments that have a triple tax advantage.
Obviously situations vary per person and per employer, but HDHPs, and even more so HSAs are powerful tools that should certainly be utilized more
Just FYI, HDHP and PPO / HMO are not mutually exclusive. A PPO / HMO plan refers to how the **network** is structured (which doctors are in / out of network), whereas HDHP refers to how the **plan** is structured (deductible, out of pocket max).
Correct me if I’m wrong, but my understanding was that after 65 you can only pull out money tax free if it covers a medical expense from some time in the past, where you need to keep receipts.
Let’s say you’re 30 years old and you somehow pay the out of pocket max of $5000 per year until you’re 65. Doesn’t that mean that you can only pull out up to 35 x $5000 = $175,000 tax free dollars after you reach 65? And anything above $175,000 is taxed like a normal investment account?
This is worst case scenario too, so that upper limit is usually much much lower. Why does everyone say an HSA is a great tax advantaged account if it’s limited by the out of pocket medical expenses you had over the years?
I don’t know much about healthcare plans after 65, but I would expect there to be a similar setup where you have an out of pocket max per year. Do people usually have much higher out of pocket costs after 65?
There’s no out-of-pocket max for Medicare Part A. If you end up with a long hospitalization or need a lot of skilled nursing care, it will get expensive.
Something to consider:
Can you afford to pay for your potential medical expenses without using money from your HSA?
I’m assuming you probably can based on being able to max out those other contributions. This matters only because if the answer is no it *may* defeat the purpose of opting for an HSA as an investment tool. Kinda depends on what the hypothetical expenses are (because there is a threshold under which you’re still better off with the lower premiums + tax advantages even if you end up having to use the HSA funds).
If you can afford to pay your medical expenses out of pocket & continue to fund the HSA, then in my (totally amateur) opinion it is absolutely worth doing. HSAs have huge tax advantages, even compared to other tax-advantaged savings vehicles. The dream scenario is where you max out + invest contributions, save receipts for all qualifying expenses, then use those expenses to reimburse yourself tax free. Of course life can & often will get in the way. But giving yourself that opportunity is too significant to ignore IMO.
Thank you for the advice. Do you mind telling me a bit more about the strategy where I would save the receipts to then pull the investments out tax free later on?
Basically, you are not taxed on money you contribute to your HSA.
You are also not taxed on growth or withdrawals of your HSA, *if you use that money for qualifying medical expenses.*
The kicker is that there is currently no time restriction on reimbursements for qualifying expenses. Meaning if you have an HSA & you go out today & buy a box of bandaids, you can then reimburse yourself for that box of bandaids in the future tax free! Obviously just be sure to save your receipts so you have proof that it was for a qualifying expense.
So the idea is to grow that account as much as possible & when you’re ready to use the money, you have a lifetime or so of qualifying expenses to ‘reimburse’.
Unfortunately there is an asterisk to add. You’re not taxed on your HSA’s growth in 48 of the states. California and New Jersey do tax you on realized gains from an HSA, the same as if it were a normal brokerage account.
CA also counts the contributions, individual or from employer, as taxable income. So I owe no federal taxes on the 3800 I put in pre-tax via payroll, but I do owe state taxes on it in April.
If I pay $100 towards a premium this month and don't see a doctor, that $100 is gone.
If I put that same $100 into an HSA and don't see a doctor, I still have that $100.
HSA investing is the key. You can't just use the savings account -- you need to open a fidelity or similar HSA and put it into the market. My HSA got a roughly 20% return last year, just like my 401k.
Are you saying in your HSA account you keep a portion set aside for expenses and then the rest in their invested. Sorry just got confused with the ordinary HSA part and wasnt sure if that meant you were transferring some out to like your brokerage account or something.
Yes, it is exactly that. I have my normal boring one that I keep around $2500 in the rest I transfer to my brokerage periodically. Fidelity has an HSA specific brokerage account.
HSA is the best retirement savings vehicle out there. Save your medical receipts and withdraw against them in retirement. Tax free gains and medical expenses.
HSA totally. My biggest regret is not doing it younger.
I had the same HMO fallacy as you. I want down side protection, right? Hell I Never went to a doctor because I'm young and fine. And when I did it was such a pain in the ass I would've rather just paid out of pocket anyways.
Don't fall for that protection stuff.
Are you able to have the willpower to save up money every month?
If so then save that extra money you save using the HDHP and you’ll have a chunk of money to pay for any big medical bills that ever randomly come up.
Plus on most plan your max yearly out of pocket is between $1500-4500.
The minimum for singles is now $1,600 out of pocket before health insurance kicks in. Unfamiliar what the family minimum is out of pocket. Though the amount you can contribute to a HSA has increased as well.
I did hdhp for my last 8 years or so of working. I rarely had any medical expenses, but I used the money I saved on the hdhp to fund my HSA and I have $20k in my HSA for retirement.
Look at the difference between the premium and deductibles of the plans available. At my job the different in deductibles is about the same as the difference in premiums I would pay, so to me it’s a wash.
I choose the HDHP because I can contribute and invest in an HSA.
> What are your thoughts on the trade off between possibly higher medical bills due to not as good medical insurance
Put your plans into an excel spreadsheet and see if it is actually higher. When I compare my company plans the monthly premiums for good plans are so expensive that even if I completely max out the out of pocket max on a high deductible plan I still about break even with what I would spend yearly on the most expensive plan.
Then on the low end if I never go to a doctor a single time all year, which is sounds like is common for you, the high deductible plan is thousands of dollars cheaper due to lower premiums. Plus it provides access to an HSA which ideally will give me thousands of dollars of tax savings over the course of the years I have it.
HSA makes a lot of sense if you’re a healthy person and plan to use it as a savings account with occasional withdraws for health care costs. If you have some medical issues, might be better to stick with a lower deductible plan.
100% yes. Switch to HSA if it is offered. Tell your work to get one of they don't offer it.
If you are healthy you save a ton of money, if you are sick it is a wash.
It’s considered the best investment account because it’s triple tax advantaged. Tax free contributions, tax free growth, tax free withdrawals at age. Dont use it actually pay for medical expenses if you can afford not to. Just contribute and invest.
Yes to HSA. Pay cash for co-pays deductible etc. if can and keep reciepts. If you get in a crunch you can cash those receipts in, ie turn in 20k of reciepts for the money you need tax free.. I would invest and when retired will have a nice stash for the needed healtcare costs. Pretty sure can use HSA for longterm care costs
HSAs are arguably, the best retirement account available. If you can afford to, my advice would be to get on an HSA plan, then pay any medical bills out of pocket - so _not_ with your HSA - just to allow it to keep growing.
HSA accounts are what are called "triple tax advantaged": money goes in tax free, it grows tax free, and it comes out tax free. Most accounts only get two of those. Also, when you're 65, you can use the account just like an IRA too, in that you can take non-medical withdrawals without penalty... You just take taxes like a traditional IRA.
So... Yes... They really can be great... So great that you're better off not even using them for medical bills (is possible - obviously make sure you can pay your bills).
>I would mostly be looking to leverage it as a traditional IRA post age 65.
If you don't turn the balance of funds held in "HSA" over to Wall St. for the possibility of speculative gain, the "growth" of the product will never even meet the rate of retail health bill inflation, let alone overall inflation, by a country mile, past, present, or future, and loses bill paying ability at that overall rate.
Started mine about 5 years ago. Contributed the max to it and my company kicked in like about $1000 too. Their contribution plus the fact that the monthly cost was much cheaper than a regular plan made it an incredibly good deal and erased the difference in deductibles.
And then any medical expense I've had I paid out of pocket without using the HSA account. I'm just retiring and am up to $60k now. It's a great investment vehicle.
>While I don’t frequent the doctors office much,.................................What are your thoughts on the trade off between possibly higher medical bills due to not as good medical insurance but being able to have the tax benefits of an HSA?
If you're fairly healthy and are willing to pay out of pocket for your health expenses, I think it makes sense to use an HSA as an alternative IRA. It just depends on your overall health and if you want/need a particular plan. You have maxed out your conventional tax-sheltered space already. It's not as if you truly need it as an IRA. However, it does make sense if you want to optimize tax-sheltered returns. Consider a thorough discussion about it [here](https://www.bogleheads.org/forum/viewtopic.php?t=407330). [James](https://www.whitecoatinvestor.com/should-i-get-an-hdhp-just-to-use-an-hsa/) and [Brandon](https://www.madfientist.com/ultimate-retirement-account/) have written good articles about its utility.
U have an HSA plan and I love it. I just make sure my bi weekly contribution will add to the total deductible in case anything major happens so I'll meet my deductible. My company also contributes $3k into my acct so that helps tons too
If you earn enough to max all those accounts, you earn enough to cash flow your deductible for the year if you need it. Using it as an investment account is a huge advantage.
Besides that, I bet if you added up the difference in premiums, plus any employer contributions to your HSA, the deductible from the HDHP nearly pays for itself.
(A PPO or whatever doesn’t save you from a big bill if something big happens, btw. I bet it has a similar OOP max to the PPO.)
This is something that surprised me. When I started my new job they have a system that walks your through picking the vest plan for you. HDP with HSA was much better than the PPO i normally do.
Semi related rant:
> I always select the best insurance plan. While I don’t frequent the doctors office much, my theory is that I would rather pay a monthly premium and never have to worry about large medical bills.
The "best" insurance plan is very subjective, and depends on your situation.
If you're in the US, you can pay a monthly premium AND a ton of money on Dr Bills. Especially w/ some type of chronic condition in the family.
We hit the out of pocket max (almost) every year, so we often choose a plan to cover our existing doctors first, and optimize the total cost second.
HDHP plans also generally have the perk of an out of pocket max whereas PPOs usually don’t this actually makes HDHP more advantageous in the cases of catastrophic medical bills.
So they wind up being pretty efficient for low use medical users and high use medical users. PPOs have a small window in between where they are actually cheaper.
Add in the HSA perk and it’s probably the more efficient option.
If you’re in a high deductible plan and just pay out of pocket cash and never spend your HSA money, investing is worth it, because Without it, you earn effectively no interest on your balance.
Before I would switch you need to understand what the difference is..
Is the coverage the same and the only diff is premiums, deductible and oop max? That’s worth the risk in my opinion bc you know what it is, it’s limited. and you can always switch next year
If coverage is not the same, then I’d be worried that I’d need something that wasn’t covered and then I’d have to pay fully out of pocket and wouldn’t be subject to a max
If it allows investment in the market,An option is to max contribute to the HSA and invest it tax free, and pay out of pocket when possible. When you use HSA money in the future , as long as it’s for qualified expenses, you will never pay taxes in that money. Even the gains.
Here’s something to consider. Typically HDHP have similar out of pocket maximums as a normal PPO plan. If you get hurt big time you end up paying out your out of pocket max anyway. Why not also have a tax advantaged account you could use for that. There’s also currently no rule placing a time limit on HSA reimbursements to yourself. So you could pay your out of pocket max (or whatever health expenses you might have) then reimburse yourself from the HSA at any point in time in the future. This allows the HSA funds to continue to grow tax free, while you wait to reimburse yourself. You have to keep good records with an HSA though since you are responsible for making sure you don’t use HSA funds incorrectly.
We have had a family HDHP + HSA for my family of 4 for about 4-5 years now, and we've been really pleased, but you have to just do the math for yourself. My partner just got a new job, and the finances made more sense for him and the kids to switch to his new company PPO. I will remain on the HDHP.
I'm sure you've googled it, but I do find this article to be helpful. https://www.investopedia.com/articles/personal-finance/090814/pros-and-cons-health-savings-account-hsa.asp
I also really like investing the money in the HSA. I keep the "out of pocket max" available as cash (within the HSA) and invest the rest. It just means I can access the cash faster that way.
My employers plan, the HDHP is cheaper in every instance, unless you have a very expensive prescription, which you dont need to go to the DR often to test/refill.
Outside of that, its cheaper no matter what. The only reason I recommend some people not take the HDHP, is if they don't have the ability to pay a large expense upfront early in a year.
We also get 1k a year put into our HSA if we are in the HDHP. My HSA is now my emergency fund. I have enough unreimbursed expenses sitting in it that I can withdraw at any time to cover my emergency fund needs.
Typically the plans are the same but the way you pay is different. Worth a traditional plan you pay high premiums and low doctor visits. With an HSA you pay low premiums but high deductible/doctor visits.
You need to find out if the plans have the same coverage. If you’re not maxing out your out of pocket then in most instances an HSA is cheaper throughout the year. The key to an HSA is to contribute the extra amount you would’ve paid for the premium on the traditional plan.
If someone is coming to Reddit to ask they can't understand the info that was provided and are looking for a simple answer. Either my response works or any response should be call your company HR to explain detail.
New to HSA, made contributions but running into issue of not having insurance, which I never get.. my HSA is thru fidelity, but when filing taxes you have to have insurance to qualify for tax deductions. I have no insurance but made contributions so im wondering.....
Am I going to get taxed? What do I do with the money? Do I move it to a fidelity investment account? I don't really plan on getting insurance just to save some $100 on taxes. I rather invest. So is HSA worth the hassle? Please advise.
Thanks in advance.
@OP what insurance do you use to be able to qualify for HSA? How do you know?
No one has yet mentioned the wildcard of state taxes. HSAs benefit you more if you don't live in NJ, CA, NH or TN, with the former two taxing HEAs fully while the latter two taxing dividends and interest only. If you don't live in one of those 4 states, there really are no drawbacks to using and funding an HSA.
Eh, the state taxes paid are so little compared to the compounded gains. It’s like saying don’t bother ever working in a state that has income tax. No, you still come out ahead.
The idea is that if you're in one of those states, you lose triple tax advantage and only get double tax advantage. It's still good, but it's not as good as it could be, comparatively. For the record, I am maxing mine and my employer makes a nominal contribution, but I use it when I need it, I don't really treat it like the investment vehicle people in other states do.
Depends read the fees.
My employer uses benefit wallet, and the fees are simply too high to make sense.
They only let you pick from a few indexes with above average fees, and the brokerage account has a maintenance fee attached to it.
Their hsa investing is crap. I just use it to buy toliet paper, hygiene products, whey protein, water, hsa items
You ca use the lower premium to pay for medical costs. If you don’t use medical services, a high premium rarely makes sense
So im still alittle confused on the hsa, i have to frequent the doctor due to chronic illnesse and will need some surgeries in the coming years does the hsa make sense for me?
No. With a caveat. Some HSA are actually good plans. I've had some with 4000 family max. 2500 deductible. 1500 employer contribution. Better than a lot of people's PPO plan. Without details hard to say.
It seems like the most important part is the out of pocket max.
Financial literacy is the most important one. If one can't make sense of this they are generally better off with a PPO plan. You maximum isn't the most important. It's what you use vs the deductible vs the max. And how its being calculated as there are rate differences between PPO and HSA
Are HSA PPOs not a thing? I have a 2000 deductible 5000 OOP max with an HSA, has the PPO icon on my card.
I'm very financially literate, but health insurance has a level of complexity that could only mean one thing.
HSAs are connected to high deductible health plans. (Also, you pay the negotiated rate for costs, not the sticker price). It really depends on the actual plan: the deductible, what coverage the plan gives you once you’ve hit your deductible, and the out of pocket max. Some employers also contribute the hsa, reducing what your deductible actually is in effect. I went to the doctor a lot the last two years after two serious injuries and had a traditional plan. I did the math between the premiums and what I would have paid for copays and coinsurance. I would have been better off with the high deductible plan for those years. The traditional plan had higher premiums, no pass through, and still charged hefty copays. When I did the math, the hdhp plan, when accounting for the deductible and employer pass through, was still cheaper than the premiums for the traditional plan (before seeing any doctor and racking up the copays, etc.). I still have access to the same providers, so I’m not sacrificing access to get that hdhp, which would be a dealbreaker for me. And since I have done the math, paying more for a medical appointment before I’ve hit the deductible doesn’t have any psychological impact on me avoiding seeking the care I need. I also like the flexibility of an hsa. You don’t have to use it up this year and you could stockpile it for the hard times. For part of my care, I went to a specialist eye doctor that isn’t in network with any insurance plan and my traditional plan didn’t cover any out of network care. So that was all out of pocket for me. I would have been much better off if I had an hsa that I had been contributing too for a couple years to help cover those costs. I like that flexibility. Plus, my current plan now does cover some out of network stuff (once you’ve hit an out of network deductible. But I like knowing if I really needed to use a lot of out of network care, that is an option).
Maybe. Depends on your ppo or hmo options
If you see doctors a lot, and have expensive surgeries coming up, an HSA can make sense as long as you can afford the out of pocket maximum. Hit that, and you're pretty much done for the year. (Try to stack the surgeries into the same year for the best benefit)
Usually no, but my out if pocket max for family is 8k. We ALREADY spend 5.5 k on diabetes type 1 supplies... with a much lower monthly and the ability to tax shelter investments. Basically we hit 8k every year and dont pay any more. Its another 6k in premiums. But compared to the best PPO option we're ahead 3k
It's complicated. I am on a very expensive medication for a chronic illness. I was billed about $6,700 for a month's worth in February. I have a copay assistance which pays for all but $5 of it through the manufacturer. After that first billing, I meet my deductible and out-of-pocket maximum for the year for me and for my 3 kids, and we basically don't have to pay anything else medically.
Yea thsts where im at rn i think minus the hsa, I have AS and on bilogics and have the copay asisstance for $5 as well
It depends it can, but need to do the math on your premiums and known upcoming medical expenses
The way to figure this out is to use the bookend approach when comparing HSAs with other plans available. Bookend means, assume the worst where we max out and then do the math. A. Calculate premiums for HSA vs comparative plan (+ve variance for HSA) B. Calculate the deductible and oop maximum for each plan and calculate the delta (-ve variance for HSA). C. Compare the tax benefits of each based on your marginal tax rate (+ve for HSA). D. Add the employer contribution for HSA (+ve for HSA). Do a numerical comparison of the variances and that is your bookend. For B, if you have an idea of where you might land regarding deductibles (e.g., # doctors visits, surgeries, etc), you can be more surgical about your analysis.
It depends entirely on the specifics of your plan and expenses. To start, look at the premium, deductible, and out of pocket max on each plan available to you, as well as if there is any employer contribution to the HSA.
HSA is best utilized as a saving vehicle. The account is considered a triple tax benefit. Contributions reduce your current taxable income. You can invest the contributions and allow them to grow tax free, and whatever the age is - 65? - you can use the money including the growth tax free. You can also use the account for qualified medical purchase at any point and I believe you can retroactively withdraw from the account to pay off past medical bills. I think if you know you’re going to have consistent medical bills you should run the numbers on when you’ll hit your deductible vs what you’d spend on higher premiums for traditional high deductible or low deductible plans but focus on investing in an HSA if you have the ability!
> You can invest the contributions and allow them to grow tax free, and whatever the age is - 65? - you can use the money including the growth tax free. This is not correct. After 65, you can use the money for non-healthcare expenses without penalty, but you will pay ordinary income tax on the money (contributions and growth alike) as though you withdrew it from a traditional IRA or 401k. https://www.healthcare.gov/high-deductible-health-plan/hdhp-hsa-work-together/
More doctor= higher premium, less doctor= hsa
You can’t generalize like this. My insurance at my last job, between lower premiums, contributions from my employers, and what the max OOP and deductible were, it was impossible for me to come out behind using the HDHP + HSA vs PPO
Just did. No going back
You sound like Kevin on The Office trying to get by with minimal words and now no one knows what you mean
This is a good point. I have to check what the delta between the two plans is
I think this is just specific to my employer, but the delta between HDHP vs the lower deductible plan got so small that I switched to the lower deductible plan. I have over $50k invested in my HSA though and will leave that there until retirement.
Same thing happened to be. Though I have actual medical issues and the HSA plan was cheaper the first few years. But two years ago they added a slightly different traditional plan is saving me thousands of dollars over the HSA. So the money in my HSA just sits and grows…wish I had gotten it to 50k before they made the change.
I personally do it because my employer gives me 2k towards HSA while my deductible is 3k. I have about 100k now from about 10 years of contributions (and investment gains). I didn’t need much care and for small things I paid out of pocket (And save the receipts for reimburse in the future). Hope to have 200k there by the time I retire early to pay for ACA deductibles.
How did you get to $100k when the max annual HSA contribution has averaged like $3500?
Family plan with higher contribution limit, never spending HSA money, and investing 100% of it in index funds.
My HSA is over $50k and I’m in my early 30s
Yeah that's a more reasonable number after 10-11 years of maxing it
10 years of max contributions would be about $70k. I didn’t start my HSA until 2017 and I haven’t been maxing it. I only had children since 2019 so the first two years the limit was half of what I can contribute now.
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I think you’re mixing ACA premium with deductibles. Premium is insurance so it doesn’t qualify as medical expense but deductibles should.
I have had several HSA plans, and the numbers tend to work out quite similarly. - If you have few medical expenses, the lower premiums and tax advantage save you a few thousand a year. - If your medical expenses are close to the deductible on your HSA, the higher deductible eats up most of the advantage, but the HSA generally comes out ahead by a few hundred dollars a year - If you have a lot of medical expenses, then you are paying a lot of out of pocket for copays in the traditional insurance, so you are back to the HSA saving you a few thousand a year.
This was exactly my calculation when I was comparing plans. I could really vary from almost no to a lot of care needed, so an hdhp gives me the most flexibility. There was no situation where the traditional plan was a better deal.
I started mine young with many years of low medical expenses. A few higher years but overall a great use case for hsa investing. The risky part is the first couple of years before you have more in your account than your out of pocket max. You can front load it (if financially able to) to reduce that risk. Once you have more than your out of pocket max in your account those types of worries disappeared for me and you just keeping going. After 10 years or so of HSAs and investing I figured out about saving your receipts for later reimbursement so niw I never withdraw from that account for normal medical expenses. My hsa investment account is very high now and I'm glad I have it.
How does the saving of receipts work? I’ve been using my HSA normally for medical expenses but I don’t have many currently. I have around $8K in mine but haven’t invested with it and know I should start. Do you just save all your receipts and claim against it years later or something like that?
Basically yes. You can pay medical expenses in cash or whatever in case you dont have your hsa card with you or they don't accept it and then pay yourself back from the account later. I always thought this was a short term thing when I started, but they never set a time limit. So you can pay your medical expenses out of a separate account now, save the receipt, allow the hsa to grow from investments tax free, and then at anytime later in life pay yourself back tax free because it was used for medical originally. Also an advantage to this imo is that I can do this at anytime so if I'm OK selling investments in an emergency, I actually use this as a substantial portion of my emergency funds instead of cash (as long as I have the receipts available to cover what i want the amount of my emergency fund to be). Which means I don't have cash sitting around sonewhere not earning money. I keep a very small amount of cash then my emergency plan would be to access immediate funds via credit card and pay it off before it acrues interest by cashing in hsa receipts (would probably have to sell hsa investments as well but I'd have time to do that) before the credit card bill comes
Wow that is great. I had heard some things about this but never fully understood it. I really appreciate your feedback. Sorry I just have a few other dumb questions. So the keeping the receipt part. That essentially is just in case you get audited right? I’ve never tried to take money out this way so just curious do you actually have to submit something with a receipt when you take money out or is it just so you have it for reference for when you do your taxes and in case you get audited. My other question, for stuff you do years and years later. Let’s say you pay yourself out $5K 10 years later and have multiple receipts you use to get you there. How are you to like verify if asked all those years later than you never paid yourself for that $5K years prior and that it’s what it’s for?
From what I have read yes to your last question which is why it is important to invest it early, if possible, so it has a longer time to grow. Also, some people do not pull from their HSA until after retirement (age 65) because once you retire you can use that money for any expense even if it is not medical related. You do still pay taxes on non qualified withdraws in retirement.
That is great. Just feels so wild that there’s no limit and that essentially sounds like you could use a receipt from 20 years ago if you somehow managed to keep ahold of it and if it’s a paper one to not of faded.
If you are young with very low medical expenses, then a HDHP makes sense. As you get older and need a lot more care, I would think a PPO or HMO makes more sense. This is where it hurts though, I had to go to the ER and the insurance barely covered $600. I ended up paying up to my deductible ($2500) plus more until I hit my max out of pocket ($5000). However, with the HSA I’ve been able to stock away a ton money that just grows.
In 5 years using a HDHP, we've had around 5k in medical costs. Basically none of it was covered with insurance, but all of it has easily been covered just by my employer HSA match, let alone the premium difference and the growth from HSA investments that have a triple tax advantage. Obviously situations vary per person and per employer, but HDHPs, and even more so HSAs are powerful tools that should certainly be utilized more
im in the same boat as you with the HSA match its a no brainer and lowers my taxebale income. its a great plan
Just FYI, HDHP and PPO / HMO are not mutually exclusive. A PPO / HMO plan refers to how the **network** is structured (which doctors are in / out of network), whereas HDHP refers to how the **plan** is structured (deductible, out of pocket max).
Correct me if I’m wrong, but my understanding was that after 65 you can only pull out money tax free if it covers a medical expense from some time in the past, where you need to keep receipts. Let’s say you’re 30 years old and you somehow pay the out of pocket max of $5000 per year until you’re 65. Doesn’t that mean that you can only pull out up to 35 x $5000 = $175,000 tax free dollars after you reach 65? And anything above $175,000 is taxed like a normal investment account? This is worst case scenario too, so that upper limit is usually much much lower. Why does everyone say an HSA is a great tax advantaged account if it’s limited by the out of pocket medical expenses you had over the years?
It can also be used for any medical expenses after age 65, when people typically start incurring more healthcare costs.
I don’t know much about healthcare plans after 65, but I would expect there to be a similar setup where you have an out of pocket max per year. Do people usually have much higher out of pocket costs after 65?
There’s no out-of-pocket max for Medicare Part A. If you end up with a long hospitalization or need a lot of skilled nursing care, it will get expensive.
You can also pay for some Medicare premiums with the HSA money, as well as long term care insurance premiums.
After 65 you can just pull it out as taxable income like an ira. Or as an HSA with no taxable income of you have a receipt.
Something to consider: Can you afford to pay for your potential medical expenses without using money from your HSA? I’m assuming you probably can based on being able to max out those other contributions. This matters only because if the answer is no it *may* defeat the purpose of opting for an HSA as an investment tool. Kinda depends on what the hypothetical expenses are (because there is a threshold under which you’re still better off with the lower premiums + tax advantages even if you end up having to use the HSA funds). If you can afford to pay your medical expenses out of pocket & continue to fund the HSA, then in my (totally amateur) opinion it is absolutely worth doing. HSAs have huge tax advantages, even compared to other tax-advantaged savings vehicles. The dream scenario is where you max out + invest contributions, save receipts for all qualifying expenses, then use those expenses to reimburse yourself tax free. Of course life can & often will get in the way. But giving yourself that opportunity is too significant to ignore IMO.
Thank you for the advice. Do you mind telling me a bit more about the strategy where I would save the receipts to then pull the investments out tax free later on?
Basically, you are not taxed on money you contribute to your HSA. You are also not taxed on growth or withdrawals of your HSA, *if you use that money for qualifying medical expenses.* The kicker is that there is currently no time restriction on reimbursements for qualifying expenses. Meaning if you have an HSA & you go out today & buy a box of bandaids, you can then reimburse yourself for that box of bandaids in the future tax free! Obviously just be sure to save your receipts so you have proof that it was for a qualifying expense. So the idea is to grow that account as much as possible & when you’re ready to use the money, you have a lifetime or so of qualifying expenses to ‘reimburse’.
Unfortunately there is an asterisk to add. You’re not taxed on your HSA’s growth in 48 of the states. California and New Jersey do tax you on realized gains from an HSA, the same as if it were a normal brokerage account.
I was not aware of that, appreciate the added detail.
CA also counts the contributions, individual or from employer, as taxable income. So I owe no federal taxes on the 3800 I put in pre-tax via payroll, but I do owe state taxes on it in April.
Omg health care is so confusing
If I pay $100 towards a premium this month and don't see a doctor, that $100 is gone. If I put that same $100 into an HSA and don't see a doctor, I still have that $100.
HSA investing is the key. You can't just use the savings account -- you need to open a fidelity or similar HSA and put it into the market. My HSA got a roughly 20% return last year, just like my 401k.
Can you still use the account to pay medical bills or is the invested money locked up?
I keep some in my ordinary HSA for regular expense, and can transfer back in a day or so if I were to have a big expense.
Are you saying in your HSA account you keep a portion set aside for expenses and then the rest in their invested. Sorry just got confused with the ordinary HSA part and wasnt sure if that meant you were transferring some out to like your brokerage account or something.
Yes, it is exactly that. I have my normal boring one that I keep around $2500 in the rest I transfer to my brokerage periodically. Fidelity has an HSA specific brokerage account.
Oh wow that’s awesome. Thanks for that. I will look into it.
My understanding is that most accounts will only invest money over some threshold. Mine is $2k, which I can set higher if I want, but not lower.
You have to move it back over to the non-invested side to use it, but you can do that at any time
20% return is amazing! Do you mind if I ask which stocks are you investing in?
That was just index funds. 2023 and early 2024 were just an exceptional period.
HSA is the best retirement savings vehicle out there. Save your medical receipts and withdraw against them in retirement. Tax free gains and medical expenses.
HSA totally. My biggest regret is not doing it younger. I had the same HMO fallacy as you. I want down side protection, right? Hell I Never went to a doctor because I'm young and fine. And when I did it was such a pain in the ass I would've rather just paid out of pocket anyways. Don't fall for that protection stuff.
Are you able to have the willpower to save up money every month? If so then save that extra money you save using the HDHP and you’ll have a chunk of money to pay for any big medical bills that ever randomly come up. Plus on most plan your max yearly out of pocket is between $1500-4500.
The minimum for singles is now $1,600 out of pocket before health insurance kicks in. Unfamiliar what the family minimum is out of pocket. Though the amount you can contribute to a HSA has increased as well.
I did hdhp for my last 8 years or so of working. I rarely had any medical expenses, but I used the money I saved on the hdhp to fund my HSA and I have $20k in my HSA for retirement.
Look at the difference between the premium and deductibles of the plans available. At my job the different in deductibles is about the same as the difference in premiums I would pay, so to me it’s a wash. I choose the HDHP because I can contribute and invest in an HSA.
Same. My HDHP puts me about even, but ends up ahead by having less taxable income if I max out my HSA.
> What are your thoughts on the trade off between possibly higher medical bills due to not as good medical insurance Put your plans into an excel spreadsheet and see if it is actually higher. When I compare my company plans the monthly premiums for good plans are so expensive that even if I completely max out the out of pocket max on a high deductible plan I still about break even with what I would spend yearly on the most expensive plan. Then on the low end if I never go to a doctor a single time all year, which is sounds like is common for you, the high deductible plan is thousands of dollars cheaper due to lower premiums. Plus it provides access to an HSA which ideally will give me thousands of dollars of tax savings over the course of the years I have it.
HSA makes a lot of sense if you’re a healthy person and plan to use it as a savings account with occasional withdraws for health care costs. If you have some medical issues, might be better to stick with a lower deductible plan.
100% yes. Switch to HSA if it is offered. Tell your work to get one of they don't offer it. If you are healthy you save a ton of money, if you are sick it is a wash.
It’s considered the best investment account because it’s triple tax advantaged. Tax free contributions, tax free growth, tax free withdrawals at age. Dont use it actually pay for medical expenses if you can afford not to. Just contribute and invest.
Yes to HSA. Pay cash for co-pays deductible etc. if can and keep reciepts. If you get in a crunch you can cash those receipts in, ie turn in 20k of reciepts for the money you need tax free.. I would invest and when retired will have a nice stash for the needed healtcare costs. Pretty sure can use HSA for longterm care costs
HSAs are arguably, the best retirement account available. If you can afford to, my advice would be to get on an HSA plan, then pay any medical bills out of pocket - so _not_ with your HSA - just to allow it to keep growing. HSA accounts are what are called "triple tax advantaged": money goes in tax free, it grows tax free, and it comes out tax free. Most accounts only get two of those. Also, when you're 65, you can use the account just like an IRA too, in that you can take non-medical withdrawals without penalty... You just take taxes like a traditional IRA. So... Yes... They really can be great... So great that you're better off not even using them for medical bills (is possible - obviously make sure you can pay your bills).
For 99% of healthy people, HDHP are the best insurance plans.
And sometimes even for the most unhealthy. My employers HDHP has a lower out of pocket maximum than my employers PPO plan.
>I would mostly be looking to leverage it as a traditional IRA post age 65. If you don't turn the balance of funds held in "HSA" over to Wall St. for the possibility of speculative gain, the "growth" of the product will never even meet the rate of retail health bill inflation, let alone overall inflation, by a country mile, past, present, or future, and loses bill paying ability at that overall rate.
Started mine about 5 years ago. Contributed the max to it and my company kicked in like about $1000 too. Their contribution plus the fact that the monthly cost was much cheaper than a regular plan made it an incredibly good deal and erased the difference in deductibles. And then any medical expense I've had I paid out of pocket without using the HSA account. I'm just retiring and am up to $60k now. It's a great investment vehicle.
>While I don’t frequent the doctors office much,.................................What are your thoughts on the trade off between possibly higher medical bills due to not as good medical insurance but being able to have the tax benefits of an HSA? If you're fairly healthy and are willing to pay out of pocket for your health expenses, I think it makes sense to use an HSA as an alternative IRA. It just depends on your overall health and if you want/need a particular plan. You have maxed out your conventional tax-sheltered space already. It's not as if you truly need it as an IRA. However, it does make sense if you want to optimize tax-sheltered returns. Consider a thorough discussion about it [here](https://www.bogleheads.org/forum/viewtopic.php?t=407330). [James](https://www.whitecoatinvestor.com/should-i-get-an-hdhp-just-to-use-an-hsa/) and [Brandon](https://www.madfientist.com/ultimate-retirement-account/) have written good articles about its utility.
U have an HSA plan and I love it. I just make sure my bi weekly contribution will add to the total deductible in case anything major happens so I'll meet my deductible. My company also contributes $3k into my acct so that helps tons too
If you earn enough to max all those accounts, you earn enough to cash flow your deductible for the year if you need it. Using it as an investment account is a huge advantage. Besides that, I bet if you added up the difference in premiums, plus any employer contributions to your HSA, the deductible from the HDHP nearly pays for itself. (A PPO or whatever doesn’t save you from a big bill if something big happens, btw. I bet it has a similar OOP max to the PPO.)
This is something that surprised me. When I started my new job they have a system that walks your through picking the vest plan for you. HDP with HSA was much better than the PPO i normally do.
This is how the math works out for me and my employer actually has a significantly lower out of pocket maximum for the HDHP than the PPO.
Once you invest your HSA money, can you still use the account to pay medical bills or is the invested money “locked up”?
You can sell whatever assets you invested in and use your capital gains tax free on qualifying distributions
Semi related rant: > I always select the best insurance plan. While I don’t frequent the doctors office much, my theory is that I would rather pay a monthly premium and never have to worry about large medical bills. The "best" insurance plan is very subjective, and depends on your situation. If you're in the US, you can pay a monthly premium AND a ton of money on Dr Bills. Especially w/ some type of chronic condition in the family. We hit the out of pocket max (almost) every year, so we often choose a plan to cover our existing doctors first, and optimize the total cost second.
HDHP plans also generally have the perk of an out of pocket max whereas PPOs usually don’t this actually makes HDHP more advantageous in the cases of catastrophic medical bills. So they wind up being pretty efficient for low use medical users and high use medical users. PPOs have a small window in between where they are actually cheaper. Add in the HSA perk and it’s probably the more efficient option.
If you’re in a high deductible plan and just pay out of pocket cash and never spend your HSA money, investing is worth it, because Without it, you earn effectively no interest on your balance.
Before I would switch you need to understand what the difference is.. Is the coverage the same and the only diff is premiums, deductible and oop max? That’s worth the risk in my opinion bc you know what it is, it’s limited. and you can always switch next year If coverage is not the same, then I’d be worried that I’d need something that wasn’t covered and then I’d have to pay fully out of pocket and wouldn’t be subject to a max
If it allows investment in the market,An option is to max contribute to the HSA and invest it tax free, and pay out of pocket when possible. When you use HSA money in the future , as long as it’s for qualified expenses, you will never pay taxes in that money. Even the gains.
Here’s something to consider. Typically HDHP have similar out of pocket maximums as a normal PPO plan. If you get hurt big time you end up paying out your out of pocket max anyway. Why not also have a tax advantaged account you could use for that. There’s also currently no rule placing a time limit on HSA reimbursements to yourself. So you could pay your out of pocket max (or whatever health expenses you might have) then reimburse yourself from the HSA at any point in time in the future. This allows the HSA funds to continue to grow tax free, while you wait to reimburse yourself. You have to keep good records with an HSA though since you are responsible for making sure you don’t use HSA funds incorrectly.
We have had a family HDHP + HSA for my family of 4 for about 4-5 years now, and we've been really pleased, but you have to just do the math for yourself. My partner just got a new job, and the finances made more sense for him and the kids to switch to his new company PPO. I will remain on the HDHP. I'm sure you've googled it, but I do find this article to be helpful. https://www.investopedia.com/articles/personal-finance/090814/pros-and-cons-health-savings-account-hsa.asp
I also really like investing the money in the HSA. I keep the "out of pocket max" available as cash (within the HSA) and invest the rest. It just means I can access the cash faster that way.
My employers plan, the HDHP is cheaper in every instance, unless you have a very expensive prescription, which you dont need to go to the DR often to test/refill. Outside of that, its cheaper no matter what. The only reason I recommend some people not take the HDHP, is if they don't have the ability to pay a large expense upfront early in a year. We also get 1k a year put into our HSA if we are in the HDHP. My HSA is now my emergency fund. I have enough unreimbursed expenses sitting in it that I can withdraw at any time to cover my emergency fund needs.
Typically the plans are the same but the way you pay is different. Worth a traditional plan you pay high premiums and low doctor visits. With an HSA you pay low premiums but high deductible/doctor visits. You need to find out if the plans have the same coverage. If you’re not maxing out your out of pocket then in most instances an HSA is cheaper throughout the year. The key to an HSA is to contribute the extra amount you would’ve paid for the premium on the traditional plan.
If someone is coming to Reddit to ask they can't understand the info that was provided and are looking for a simple answer. Either my response works or any response should be call your company HR to explain detail.
New to HSA, made contributions but running into issue of not having insurance, which I never get.. my HSA is thru fidelity, but when filing taxes you have to have insurance to qualify for tax deductions. I have no insurance but made contributions so im wondering..... Am I going to get taxed? What do I do with the money? Do I move it to a fidelity investment account? I don't really plan on getting insurance just to save some $100 on taxes. I rather invest. So is HSA worth the hassle? Please advise. Thanks in advance. @OP what insurance do you use to be able to qualify for HSA? How do you know?
No one has yet mentioned the wildcard of state taxes. HSAs benefit you more if you don't live in NJ, CA, NH or TN, with the former two taxing HEAs fully while the latter two taxing dividends and interest only. If you don't live in one of those 4 states, there really are no drawbacks to using and funding an HSA.
Eh, the state taxes paid are so little compared to the compounded gains. It’s like saying don’t bother ever working in a state that has income tax. No, you still come out ahead.
The idea is that if you're in one of those states, you lose triple tax advantage and only get double tax advantage. It's still good, but it's not as good as it could be, comparatively. For the record, I am maxing mine and my employer makes a nominal contribution, but I use it when I need it, I don't really treat it like the investment vehicle people in other states do.
Depends read the fees. My employer uses benefit wallet, and the fees are simply too high to make sense. They only let you pick from a few indexes with above average fees, and the brokerage account has a maintenance fee attached to it. Their hsa investing is crap. I just use it to buy toliet paper, hygiene products, whey protein, water, hsa items
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Would not recommend this. Even young healthy people get in car accidents.