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

Health Savings Accounts (HSAs) - Triple Tax Free Retirement Savings
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#62

I think the suggestion mentioned upthread to use the HSA to pay for Medicare premiums makes the most sense. This is seen by savvy investors as a retirement vehicle anyway.

I expect such premiums to very quickly eat up the balance.

Rasheed


#63

OMG I did not know that. That just saves me almost $1100.

I feel like a fool for having thrown away a thousand bucks every year (15.2% FICA + 1.5% Corp Income tax) for so many years.
THANK YOU THANK YOU THANK YOU !!

BTW This is my problem with the CPAs. I have worked with 3 so far (paid two of them upwards of $1100 each for ‘advice’).
But none of them told me this.

PS: I just verified. Even 2% share holders are eligible for this.
PPS: I have already contributed for 2017 so I thought I won’t be able to use this for current year.
But then I thought of the following work around.

  1. My s-corp contributes on Monday resulting in excess contribution.
  2. I withdraw the excess next day
  3. If the investment value changes in one day, I include pro-rated gains (or losses) as income on my 2017 tax return.
    Do you think this is correct strategy for 2017?

#64

Not a CPA and not defending CPAs generally, but sounds like you had someone who didn’t know what they were doing, they thought you only wanted them to prepare your return, or you didn’t explain all the facts correctly, or something in between. Even if it was completely the CPA’s fault (which I don’t doubt) that doesn’t mean that CPAs are bad. Also, FYI, CPAs work in a wide range of fields. Even within the tax field, there are dozens of areas they could possibly specialize in. Maybe you got someone who doesn’t specialize in the area you need. This would be the fault of the CPA, in my opinion, to not turn you away or refer you to someone else, but you also need to be conscious of the fact that just because someone is a CPA doesn’t mean they can handle your specific tax issues.

Just a note, it’s still treated as compensation, just not subject to FICA. There may be certain situations where this distinction is relevant so just pointing this out.


#65

After age 65, your HSA can become like a regular IRA. You can withdraw without penalty, but must pay income taxes on the withdrawal amount.


#66

Or use the HSA to fund your Medicare payments tax free.


#67

Anyone found a sound strategy for using an HSA when you don’t have an HDHP? Here was my thought…

I am a minimal healthcare consumer, so, I could pick me and one minimal healthcare consuming child in my household and could do an HDHP and the max contributions to the HSA; the spouse could get a PPO and have the other kids on it, since she is a heavy consumer of healthcare.

We tried the HDHP w/ HSA route in the past and we just couldn’t keep money in it due to the high costs incurred by my spouse.


#68

Those leaving Alliant for HealthEquity HSAs, what investments are you putting your funds in ?


#69

My company is offering HSA account and even giving some credit. But it is only allowed with insurance plan with high deductibles. HSA account is not allowed with basic insurance plan. I have to opt for high deductible plan in order to qualify for HSA account. is it worth it.
Another problem, spouse insurance is with her employer. Deductibles are only 2 tiered (employee, employee + family). I think, it makes sense if all of us move into one high deductible plan.


#70

Whether it’s worth it or not depends on you’re specific situation. How much can you afford to spend in a year on health care if something happens (look at both the deductible and OOP max)? What are your expected medical costs? What are the costs of the various plans you’re eligible for and what benefits do they provide? What’s your expected tax benefit for contributing to the HSA? For me, the single year tax benefit significantly dwarfs the costs of premiums for the HDHP, expected medical expenses are minimal, and having to pay the full deductible in the first year (before the HSA was funded up to that amount) would not have been catastrophic.

Also, the requirement of having a high deductible plan in order to contribute to an HSA is statutory; your employer isn’t trying to stop you from taking advantage of the HSA benefit.


#71

You’re on the right track here. One thing that is interesting: All of your spouse’s expenses (co-pays, co-insurance, etc) on the PPO plan are eligible to be paid out of your HSA.


#72

I found there is only a small window where the traditional health plan ends up costing less than the HDHP with the OOP maximum and HSA contribution my employer makes into my account…


#73

WSJ has an article on HSAs today. https://www.wsj.com/articles/how-to-get-entirely-tax-free-retirement-income-1510315200
Someone posted the whole article on Reddit.

First 401k to match, then HSA, then top off 401k.

Upon your death, if invested in the market, do your heirs get a stepped up basis? Do they have to cash out? Sorry, I didn’t find the info online.


#74

If you inherited a tax-advantaged account, the withdrawals are taxed at ordinary income rates. Stepped-up basis doesn’t apply. Here is some basic info:

http://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/inherited_ira/withdrawal_rules

Plan rules might govern as to whether the assets can be rolled over to an inherited IRA or if they have to be liquidated first.

If a spouse inherits an HSA, they can treat it as their own. If someone else inherits an HSA, it stops being an HSA and is distributed to the beneficiary and becomes taxable as ordinary income.


#75

Thank you for that link. I will look it over more closely later.

I know that real estate and non-tax-advantaged accounts get a stepped up basis, so it’s good to leave those to your heirs, and I thought that IRAs, ROTHs, and 401Ks operated the same, but maybe not.

This might make for a good thread: How to save for your heirs (taxable vs non-taxable and stepped up basis) Spend the things that don’t get a stepped-up basis, but save the rest.


#76

Let’s wait to see what they pass, or not, in terms of tax reform. The proposals would vastly simplify estate planning since it would remove the estate tax in a few years. Otherwise, there are lots more complicated things along the current lines.


#77

Thanks for the information. I can save some premium by keeping spouse on his own plan with his employer. My insurance premium with children is relatively less than with family. I am thinking about keeping spouse with his own basic plan from his employer. We have $6900 limit for HSA account. Is it good idea to max it?


#78

Any inputs regarding maxing out HSA account? Is it possible to take out money like 401k if we are not using it for medical expenses?


#79

We’ve been maxing out my husband’s HSA for several years through payroll deductions. If you take out money for non-medical expenses, there’s a hefty penalty on top of the taxes if you’re younger than 65. After the age of 65, you can withdraw money for any reason and just pay taxes, no penalties.


#80

Thanks for the information. I singed up for max limit which is $5900 plus $1000 from employer as a incentive.


#81

The max you can [quote=“ritholtz, post:80, topic:1251, full:true”]
Thanks for the information. I singed up for max limit which is $5900 plus $1000 from employer as a incentive.
[/quote]

The mandated maximum federal limit for 2017 is $6,750. You cannot put in more than this combined no matter the mix of employee and employer contributions.