Health Savings Accounts (HSAs) - Triple Tax Free Retirement Savings

Health Savings Accounts (HSAs) - Triple Tax Free Retirement Savings


Yes, it’s one of the only types of accounts that is tax free on contribution and on withdrawal. Payroll deductions contributed to the HSA are also not subject to FICA which saves you at least 1.45%. If you have the open space in a Roth IRA you can take distributions to pay for qualified medical expenses and just put them into the IRA if you won’t want to build up a lot of medical expenses.

But the idea is that you will have HSA-eligible expenses in the future and since you can accumulate expenses once you open the account, you have an idea each year of where your HSA is compared to your to-date medical expenses.


Would it make sense to keep my HSA alive even though I am no longer at an employer that offers HSA? I know that ones funded by an employer typically gets the monthly maintenance fee waived. Are there non employer funded no fee HSAs accounts that still accrue interest or allow investments? So far the SelectAccount mentioned in the above post has a no fee one but it doesn’t allow you to collect interest.


I believe it’s a federal rule that the balance must be at least $2000 to invest, otherwise you get some garbage rate. However, I may be mistaking “federal rule” for “typical custodian rule.” Either way, I’ve had a CIGNA HSA, a Payflex HSA, a LMCU HSA, and now a SelectAccount HSA. I believe all of them had similar floor limits. I’d just go for the cheapest one with the best rate that can get you over $2000 and then move it to the cheapest one for investing purposes. Then toss it in some fund and let it grow.

Also, when I drained my SelectAccount cash balance to near $0, it automatically pulled $1000 from my investment account to replenish the cash account. I couldn’t figure out if this was a requirement or if it was an automatic thing setup. I didn’t care, since I was in the middle of cycling all of the funds in/out of the HSA.


As a data point, at Healthequity I must only maintain $1,000 in cash. Anything over that can be invested.


Which is similar to my SelectAccount situation I mentioned above. However, there could be two requirements…

  1. $2000 minimum to invest
  2. $1000 minimum cash balance, thus requiring $3000 total?

No clue though.


I figure by the time I get old, either my wife or I will incur big medical expenses. If not, once you’re over 65 you can take money out penalty-free for non-medical expenses. You just pay ordinary income tax rates on the gains.

I look at it like a tax-free hedge: If I incur medical expenses later in life, I get them completely tax-free. If I don’t, I basically just got another version of an IRA.


Fidelity allowed me to invest my HSA in equities with less than 1k balance. However, I had balances in other personal accounts (not significant, but >$2k).


You get a once in a lifetime opportunity (:laughing:) to move money from an HSA to a Roth IRA without being required to have qualified medical expenses. IIRC the amount is limited and there are other requirements - like the requirement to maintain HDHP for a certain period of time, but it’s something.


I think you’ve got it backwards. You’re allowed a one time rollover of money from an IRA to an HSA (known as a QHFD, Qualified HSA Funding Distribution). Though I can’t really find a good reason for most people do to that.

I’m not aware of any way to transfer from an HSA to an IRA, or anything else except another HSA.


The only reason would be if you already maxed your HSA for that year, probably early in the year, and have a large traditional IRA balance…at least from what I can think of?


A QHFD still counts against the contribution limit for that year so it couldn’t be done if already maxed out.

I found an argument that might make sense is if you’re diagnosed with a serious illness and funding healthcare suddenly becomes more critical than funding retirement. One hopes not to be in that situation though.


Interesting. Welp, there goes my guess.

So based on your link, and your breif description of it, it seems that this is a scenario for someone perhaps financially struggling, or doesn’t have the means otherwise, and had already contributed to the IRA but needed the funds for medical stuff. Makes sense.


You cannot have both a HSA and a FSA for medical expenses.

But you can have a limited FSA for dental and vision expenses. We’ve done both for a few years, keeping the FSA for predictable vision+dental expenses like dental cleaning, new glasses, or orthodontics for kids . (and for dependent care but that’s separate)

As far as HSA, we max it out, just like 403b and Roth IRAs, and pay medical bills from current income. The way I see it, HSA is another IRA except better since the distributions are tax-free if used for medical expenses (which is a huge cost during retirement). Also if you become unemployed, the HSA is a semi-emergency fund (you’ll still have medical expenses very likely).


Interesting, yes, I did have it backwards. Seems bizarre. I’d be interested to know why that provision was added in.


Is there any time that you can use the funds to pay your premium? I assume no way but just wondering. My employer does not offer health insurance so going to the marketplace to get insurance.


Thanks guys - I didn’t know you can take it out after 65 for non medical expenses. Upon research, it seems like you’ll be taxed on that amount you do take out for non medical expenses. Can someone confirm?

I’ll continue scouring around for a non or low fee HSA to try to keep mine around for a while. If there are others let me know!

The other person brought up something that I also need to be clear about - It was my understanding you can not have a FSA if you have a HSA and must get a limited-FSA. However, in my case where I am no longer contributing to a HSA or have one offered by my employer, am I still confined to those same limitations? Am I not allowed to get a FSA if my HSA isn’t fully drained?


Not regular, but yes for COBRA. I’m doing this for my COBRA. About six transactions to track, instead of a bunch of other stuff like copays, etc.


No, HSA can only accept contributions when you have a HDHP. If you have a health plan that allows for FSA (and thus not HSA), you can contribute to the FSA no problem. It’s all about eligibility at that given point in time, in my understanding.

You CAN, however, max your FSA and use all the funds, then use funds from your HSA if you want, at any time. That’s the nice thing about the HSA. You can only contribute when you have a HDHP, but you can withdraw at any time, no matter your health plan type.


I’m almost certain the answer is no, but does anyone know if you can hold a short position (not an option, actual SP) in a HSA account?


I’m about 99% sure that short positions and options are not possible in an HSA. However, I don’t know if that’s because of a government rule or because of a custodian rule. I’d imagine it’s a custodian rule based on the government contribution limits.