Madison MoneySports - Personal Finance Thread

[DavidM]

Experience investing one's HSA? Anyone regret it because you ended up with less than you contributed?

Actually just did this with my girlfriend's HSA, maybe a year ago (great timing!).  We only did it because her company puts in some insane amount as long as you put in the minimum so its basically free money and I figured the long term gains outweighed the risk of needing to pull it all out real short term, especially since the company contributes annually.

That said, most of the HSA investment options I found were relatively high fee, so I can't imagine its better than whatever normal investments you have going (or more in the 401k/IRA if tax deferral is your preference) unless you're in a similar situation.

[Apoc]

Investing, no - using it in conjunction with a HDHP, yes.  With the latter its fairly seamless and easy, but there has never been enough set aside to leave anything leftover.  I'd be curious to see the math there for investing there pre-tax vs post-tax in an index fund.

We're on a HDHP and the family deductible is $2700, but Google contributes $2000 annually. I elected to put in another $2000 of my paycheck, based on the deductible and our historical annual spend (assuming 10% coinsurance). I have the option to invest any money in the HSA to grow tax free, but my brain is getting caught up because I'll have about as much money as I intend to spend in a given year. Given the short term use, it feels like protecting the balance is more important than growing the balance. 

The investment vehicles are pretty much the same as my 401k options. Maybe I should divert a bit more cash to the HSA in case we encounter a large medical expense down the line, given it would grow identically to my 401k? It just feels weird to gamble medical monies in the market.

[JPolen01]

I think the weird feeling is your gut telling you this may not be the best course of action. How much would it suck if you did incur an unexpected medical issue at the same time a dip in the market occurred? Depending on how much money you're talking (doesn't seem like much of we are talking HSA) you might kick yourself for not having all of that money present and available. Though it might not be a big deal if you have other savings.

IMO it seems like an unnecessary gamble.

[Kaan]

we look at our HSA as a long term investment. yes we use it from time to time... but I increased my pre tax contributions and the "plan" is to keep it growing the best we can into retirement.

I'll be fortunate enough to have medical insurance with a Medicaid as a secondary (year right) in retirement. My pension will easily cover me medical insurance cost with money to spare (outside of my roth and 401k). The HSA account will be able to cover all sorts of stuff over the next 22 years. Sylvia jokes its my "blue pill" saving account.

[.RJ]

I dont think you can pay for your off-label blue pills in mexico from your HSA

[Kaan]

I dont think you can pay for your off-label blue pills in mexico from your HSA

we will likely retire to TN... I think the local rite aid has me covered.

[Evan]

we look at our HSA as a long term investment. yes we use it from time to time... but I increased my pre tax contributions and the "plan" is to keep it growing the best we can into retirement.

This. IMO the HSA is best thought of as a health 401k. You get to put in pre-tax dollars, and can make additional payments into it up to a an annual cap. If we were on a HDHP I would be contributing the max into it to keep my taxable income as low as possible.

[V1GiLaNtE]

we look at our HSA as a long term investment. yes we use it from time to time... but I increased my pre tax contributions and the "plan" is to keep it growing the best we can into retirement.

This.   IMO the HSA is best thought of as a health 401k.    You get to put in pre-tax dollars, and can make additional payments into it up to a an annual cap.   If we were on a HDHP I would be contributing the max into it to keep my taxable income as low as possible.

Which as a side note about HSA's. Does the yearly contribution limit INCLUDE any employer contributions. I scaled back my paycheck contribution because I realized for the full year I would over contribute if my employers contribution counts towards it.

[Kaan]

we look at our HSA as a long term investment. yes we use it from time to time... but I increased my pre tax contributions and the "plan" is to keep it growing the best we can into retirement.

This.   IMO the HSA is best thought of as a health 401k.    You get to put in pre-tax dollars, and can make additional payments into it up to a an annual cap.   If we were on a HDHP I would be contributing the max into it to keep my taxable income as low as possible.

Which as a side note about HSA's. Does the yearly contribution limit INCLUDE any employer contributions. I scaled back my paycheck contribution because I realized for the full year I would over contribute if my employers contribution counts towards it.

yes is the internet answer, your employers contribution counts toward the cap. BUT I, like you, have contributed the "maximum" and my employer matched... so I'm not sure how that all worked out

My rule is, always reduce your taxable income as much as you can... it reduces the yearly sting. Take your "spare" investment post tax dollars and toss it at the Roth... because taxes always go up, so you might as well have some "tax free" dollars somewhere.

[DavidM]

we look at our HSA as a long term investment. yes we use it from time to time... but I increased my pre tax contributions and the "plan" is to keep it growing the best we can into retirement.

This.   IMO the HSA is best thought of as a health 401k.    You get to put in pre-tax dollars, and can make additional payments into it up to a an annual cap.   If we were on a HDHP I would be contributing the max into it to keep my taxable income as low as possible.

Is there a long term benefit to contributing to the HSA as opposed to 401k/IRA/any other tax deferred vehicle?  Is it tax free at withdrawal in the future if its used for medical expenses?

[Kaan]

we look at our HSA as a long term investment. yes we use it from time to time... but I increased my pre tax contributions and the "plan" is to keep it growing the best we can into retirement.

This.   IMO the HSA is best thought of as a health 401k.    You get to put in pre-tax dollars, and can make additional payments into it up to a an annual cap.   If we were on a HDHP I would be contributing the max into it to keep my taxable income as low as possible.

Is there a long term benefit to contributing to the HSA as opposed to 401k/IRA/any other tax deferred vehicle?  Is it tax free at withdrawal in the future if its used for medical expenses?

Once you hit your max 401k contribution, its the "next place" to reduce your taxable income directly with your employer. It does have the limitation of only being spent on medical expenses, but as you get older, I promise you have more and more of them (even at 39).

you also get to contribute more to it when you get older... all my raises in the last 5 years have gone toward maxing all possible retirement contributions

[Apoc]

The IRS max for +dependents is $7000 and does not includes the employer contribution.

Kaan's right in that medical costs only go up. I think saving for medical costs 20 years from now is not something most people think of. I guess the balance going down in the short term is only relevant if you're living year-to-year with the amount you put in. I wouldn't use the full amount if I maxed at $7000 in a year, so it probably becomes a non-issue after a year.

Those of you that are maxing HSA (@7k), are you also maxing your 401k (@19k)?

[V1GiLaNtE]

The IRS max for +dependents is $7000 and does not include the employer contribution.

Kaan's right in that medical costs only go up. I think saving for medical costs 20 years from now is not something most people think of. I guess the balance going down in the short term is only relevant if you're living year-to-year with the amount you put in. I wouldn't use the full amount if I maxed at $7000 in a year, so it probably becomes a non-issue after a year.

Those of you that are maxing HSA (@7k), are you also maxing your 401k (@19k)?

No dependents so HSA max is at @3500. I don't make enough money to max 401k (one day...)

@Kaan - if you're doing the max AND employer contributions have you been hit with any penalties? Sounds like you are going over..?

Q: As the employer, can I contribute to an employee’s HSA?

 A Yes, you can contribute to your employees’ HSAs. Plus, you save on payroll and FICA taxes through taxdeductible contributions. Keep in mind, total combined employer and employee contributions to an employee’s HSA can’t exceed the annual limit set by the IRS.

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we look at our HSA as a long term investment. yes we use it from time to time... but I increased my pre tax contributions and the "plan" is to keep it growing the best we can into retirement.

This.   IMO the HSA is best thought of as a health 401k.    You get to put in pre-tax dollars, and can make additional payments into it up to a an annual cap.   If we were on a HDHP I would be contributing the max into it to keep my taxable income as low as possible.

Is there a long term benefit to contributing to the HSA as opposed to 401k/IRA/any other tax deferred vehicle?  Is it tax free at withdrawal in the future if its used for medical expenses?

General rule of thumb of investing follows as:

1) Get employer 401k match
2) Max HSA (should be fairly easy to do at our age)
3) Contribute to Roth IRA

Once you hit Roth IRA max go back to 401k and up until maxed. Keep in mind HSA is only or medical expenses, but still a tax sheltered account which can be pulled out tax free later much like a Roth IRA.

[Apoc]

I get a different answer if the employer contribution counts, depending on what website I look at. Looks like most say employer is included.

[Kaan]

I had the HSA issue last year. They just taxed the employer contribution as income... and then I got to use the medical bill write offs until that amount was met (which it wasn't so it was a little bit of a hot mess... yay accountants!).

your order of operations in correct (401k, HSA, Roth, back to 401k)... its all going to depend on employer contributions and some other stuff, but as a rule its pretty sound. I had a hard time convincing my younger employees to save for retirement in any capacity.

[Apoc]

your order of operations in correct (401k, HSA, Roth, back to 401k)... its all going to depend on employer contributions

I agree with this for most people. Mine looks different because my employer matches all 401k contributions (at 50%) up to IRS max and I'm not eligible for Roth.

[.RJ]

Can you have an HSA without having an HDHP? Does it have to be employer sponsored?

[Apoc]

Can you have an HSA without having an HDHP?  Does it have to be employer sponsored?

You need a plan with a a minimum deductible of $1350 individual or $2700 +dependents. I don't think they have to be employer sponsored.

[Kaan]

[quote pid='299717' dateline='1551199538']
 I'm not eligible for Roth.

[/quote]

We are bouncing REALLY close to not being eligible.... That's going to mean a shift in where I put my money for retirement. I'm not looking forward to that decision... math says 2020 I'm making a change. Do I just put it in a regular IRA? Do I cash save it and buy Kaantucky level of acreage?

My Roth is kind of just bonus money for retirement in my overall math (I think).

[V1GiLaNtE]

your order of operations in correct (401k, HSA, Roth, back to 401k)... its all going to depend on employer contributions

I agree with this for most people. Mine looks different because my employer matches all 401k contributions (at 50%) up to IRS max and I'm not eligible for Roth.

For sure. If no employer match on 401k then hit HSA Max --> Roth max and then I guess taxable since your options for parking tax sheltered money is slim?