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

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


Presumably 3-6 years after you make the qualified withdrawal that relied on those expenses. In other words, forever if you’re using this as a retirement account.


I’d probably keep them forever, but I wonder what would happen if you have 10k in medical expenses prior to Y1, take a distribution of 5k in Y1, discard receipts for the 5k in Y5, take a distribution for 5k in Y6 and IRS audits your Y6 return and asserts that the 5k of receipts you use to prove the Y6 distribution are the receipts related to the Y1 distribution.

You would seem to be at an impasse. I personally wouldn’t want to rely on burden-shifting principles (if any), unless there is some other principle that would apply.

Why don’t people want to save receipts? For businesses it makes more sense, but for individuals, is there some potential liability associated with not destroying old records?


Outside of not filing returns or filing fraudulent ones, IRS does not seem to require in their documentation retention guidelines anything beyond 7 years. I think the reasoning behind these rules is that past 7 years, it’s difficult for the IRS to ask any service provider or institution to provide accurate records.

I agree that it seems wise to keep records indefinitely but outside of electronically (and even then), most people won’t.

To verify claims, you’d need to keeping HSA statements which would show the timing of contributions (and prove that expenses that year were eligible for withdrawals down the line). If done through payroll, I guess paystubs would also qualify as proof of HSA contributions. Then you’d have to keep records of what the procedures were (to verify that those were medical - at least before age 65), how much you paid for them, whether you were reimbursed by insurance or not. That sounds like a very high burden of proof to me.

Now further curve ball question. With my spouse, in our family, I’m the official owner of the HSA account due to carrying the family HDHP. If I die before my spouse, my account becomes my spouse’s HSA. But then what if I had expenses during years I contributed to the HSA (thus eligible for withdrawal) BEFORE getting married. Can my surviving spouse make withdrawals based on those pre-marriage expenses even though we were not married at the time and he did not incur those expenses himself?


Agreed. I have not setup an HSA yet. However, I would get a good scanner and store them on a drive that is backed up. Seems enough. You could easily burn it every 5 or 10 years to physical media as well if you wanted. (You may have to keep upgrading your physical media as things go by the wayside though).


This is certainly a muddy situation. I suspect because it is unwritten that some liberty is afforded as long as all of the dates of HSA eligibility (by person be them alive or dead) are tracked as well as all of the medical receipts. I would think if you change from a family plan to a single plan HSA contribution then take a family size deferred withdrawal later that could raise some eyebrows, but I think solid record would negate the risk.

When making deferred withdrawals I would do them a year at a time with the oldest year first. FIFO (First in First Out). Then mark the receipts from that year as reimbursed from the HSA. (Just my two cents)


I have used mine for purchasing prescription medication in pharmacy. Do i need to keep these receipts as well. I have received some bills from doctor office this year. But these bills are related to last year visits. I am assuming, we can not use our HSA (Started this year) to pay off these bills?



Correct. The date of service must be in the year you owned the HSA.


One additional caveat. According to my CPA, the services need to occur after the HSA is opened and funded. Let’s say I sign up for an HSA eligible plan on 1/1/18. Don’t actually open and fund the HSA until 10/1/2018. Ay services prior to 10/1/2018 can’t be paid by HSA.


That’s not true. The establishment, not the funding, date is what matters. See IRS Pub 969 which states:

“For HSA purposes, expenses incurred before you establish your HSA aren’t qualified medical expenses.”


“…only those expenses incurred after you actually establish your HSA are qualified medical expenses.”


Thanks for clarifying that. No big deal either way. I opened mine and put in $10. I’ll get around to putting in a legit sum of money over the next few months.

I’m wondering if there are many HSA providers that would allow you to open an account without putting in something.

So, maybe, for all intents and purposes, opening versus funding (even if minutely) are one in the same.


Yeah, I wouldn’t expect a bank to open an account without at least a token opening deposit.

The important thing to note, is that the funding amount does not necessarily need to exceed the expense, making the below entirely allowable:

01/01/2018- Open HSA with $10 deposit.
01/15/2018 - Incur $100 expense for Dr visit
01/30/2018 - Deposit $100 to HSA
01/31/2018 - Withdraw $100 from HSA


I think, I have paid my balance which includes previous year visits using my HSA card? Do i need to go back to doctors office and fix it.


Make note of the difference and short a payment that would normally qualify. Just keep good records in case it is ever challenged.


Thanks. Looks like I need to have $2k minimum to start invest into some fund. I am going to wait for few more months. My account is with healthsavings. Please suggest some stable funds to invest.


I’ve got mine in a retirement target date fund. I don’t think you can go wrong with those, but depends on what you mean by ‘stable.’


Hi, Can you please suggest some target date funds. I am trying to avoid fund which is strongly correlated to stock market. Would like to go with some stable fund which can return around 2-4% for some time.
Is it possible to roll over again to some other bank and get some bonus.


2-4% is CD rate territory. Maybe set up a ladder?


I can invest into some retirement fund. Probably early retirement fund which won’t have much downside for time being. Is it possible to transfer my IRA balance from Charles Schwab to some other bank with some bonus offer? Trying to find out target retirement funds in Schwab. Thanks for the help.


I would like to get away from HSA Administrators. Maybe we can all send a message to Vanguard at the same time and try to get them to consider offering HSAs directly. Comments?


I opened an HSA account in 2018, due to a change in employer offered health benefits. This year I’m now in an High Deductible Health Plan, so I’m going to put the full $6,900 in through payroll deductions. My question is, on the HSA Bank website it indicates I can make a direct contribution for 2017, but I wasn’t in a HDHP. Can I still put money into my HSA for 2017?