[Matthew]

Health Savings Accounts
Two-part question.
First. I love our HSAs. My wife remains skeptical. We both max our contributions. She doesn’t think it’s ‘worth it’ because she gets ~$100 bill from her Dr visit every few months, and has a monthly ~$30 prescription.

When she was on a traditional plan she would only have a $20 copay for her office visit and her scripts were $15.

I’ve tried explaining the bigger picture about tax free growth, etc. She only sees it as it’s costing us more out of pocket now that she’s on a HDHP. Her HDHP premiums are half of what the traditional plan would be.

1. What suggestions do you have where I can try and get it to ‘click’ for her?

The second part of my question is around withdrawal strategy.

This is where I don’t fully understand the big picture.
For the past few years my methodology has always been to pay for expenses out of pocket.

Let the HSA grow tax free, then when we are nearing retirement age we will claim a reimbursement for those qualified expenses.

I’m assuming our tax bracket will not be higher than it is today.

It seems like a daunting task to hold onto receipts, bills, EOBs, etc for ~20 years, assuming the IRS doesn’t change guidelines between then.

Should we instead be taking a reimbursement out at the end of each year?

It seems like we would be missing several years of tax free growth this way?

Between the two of us we have ~40k in our accounts, and we have less than $1k in qualified expenses annually.

[Lexi]

It seems like a highly individualized choice but ultimately you have to decide in your partnership what is your modus of operandum.

If that’s optimizing total money output after “fixed” estimated usage/cost it’s a math problem.

If it is more of an emotional decision of feeling more freedom to use health services rather than put them off that could be the route to go.

I just had to pick from 200+ marketplace plans and that was super stressful. Ended up picking no HSA because it would cost a ridiculous amount more with how the tax credits and “discounts” work out.

Sounds like you prob have not the same situation and hsa could be way better in the long run.

Print your purchase confirmations to pdf or save in a folder on phone and upload once a month or whatever to cloud storage on the computer.

I like to label all my receipts yyyy.mm.dd business name – short description etc if it’s all receipts or statements from the same account I just put a date as the file name because the easier it is to name it the more likely it will be organized.

Kinda 2 basic methods file names very specific and searchable or simplistic file names in strategically nested folders.

[Erica]

Convincing someone who doesn’t want to be convinced is a losing battle. However, if she’s willing to hear you, show her the money.

As you said, premiums are lower and overall, you’re paying less for medical, so pull out the documents, put it on paper and let her explore and run scenarios.

Don’t keep receipts, keep electronic copies, backed up! We only keep larger receipts, as we’re convinced we will need ever penny we can save for medical in retirement!

My mom has a fabulous med that she can’t afford ($1200/month after Medicare).

It breaks my heart, but I certainly don’t want to be in that position, so we’re saving!

As someone else said, if you’re not maxing out your ROTHs every year, you could reimburse from the HSA and move the money over there to grow, but it’s 6 one way, half dozen the other.

Last note: you mentioned each having your own HDHP.

I’d encourage you to run the numbers and confirm it’s in your best interest to pay two premiums and two high deductibles/OOP Max.

[Michelle]

Are you maxing all other tax-preferred space? If not, it doesn’t make sense to not use the funds to pay expenses. I made a spreadsheet that compared total costs.

With the difference in premiums and the employer contribution to the HSA I have to have almost 5K out of pocket expenses for the low deductible.

plan to break even (and that is assuming NO out of pocket costs on the low deductible plan).

This also isn’t figuring in the tax savings at all.

I pay all my family medical expenses out of the HSA and don’t save any receipts, but it still has grown a lot in 5 years.

[Heather]

At the very least, it’s always there and always your money to use.
You never know when jobs, insurance plans, life circumstances, whatever may change and that money will come in handy.

We had a different HSA years ago that when my husband left that job and we moved to a different country (but had expat insurance) we were able to use that money for the things we paid out of pocket for.

With our current HSA we only use it for big bills we get but in the end our goal is not only to invest part of it but for it to also be another tax free safety net for our health care in the distant future.

[Ed]

Make a spreadsheet of actual costs with your plan vs the other. Tally for a year and present it that way. Add in the gains on the HSA account to sweeten the pot.

While HSAs are good when you’re young and healthy, they’re not a great choice if you have a lot of medical issues, so utilize it while you can.

Many employers let you play with different levels of visits and surgeries. Add a few emergency room visits in and you’ll see what I mean.

I wouldn’t worry about saving receipts. When you’re closer to retirement, you will likely have ample opportunity to start drawing from it, but if you do have some big expenses, I would save those.

[Ellie]

It’s the tax advantage that matters a lot – before-tax contributions lower your taxable income now. Keep that money in the HSA and let it grown. You will need it one day.

You can use it to pay your Medicare premiums when you’re retired. And you can use it for later-in-life health expenses.

It also will pass tax-free to one of you, when the other dies.

One abundant-thinking scenario – save up your receipts now, and do a reimbursement of those qualified medical expenses to help fund an upgrade to business class on your vacation.

[Keshia]

I’ve read that people create a folder on their laptop and scan receipts for safekeeping. I need to start this way as well.

Right now, I’m just using a folder as I don’t have many receipts that I need to keep record of.

[Tim]

Demonstrate the costs of each program. Amount saved in premiums on HSA is… then compare how much more Dr visits and prescriptions are costing out of pocket.

The difference could be annual savings into HSA that is tax free (pre-tax) $$.

And your take home pay is still net 0 change.

[Barry]

I have never had an HSA, but I think you’ve got the basic idea right: Make sure your HSA is invested and don’t get the reimbursement for a long time.

his means keeping track of those receipts (the scanning idea seems like a must).

But to me, I wonder if it is worth the trouble. Maybe it’s my lack of administrative acumen, but I would hate to keep track of all of that. YMMV.

[Rick]

A few options to consider
1. Don’t bother explaining and just say let you handle it and trust you that would would only do it if it was a win

2. Explain that it is the same cost for both options.

Take the non hdhp, let’s call it the ppo option, and it’s premium of say $600 a month. Add $100 for monthly use, maybe $200 if you feel that is more correct.

So, $800 is the cost of either option. Then explain for hdhp, of the $800 only $300 goes to premium and $500 goes to your account to use or save as you wish.

So, one is prepaid money gone plan and one is only partially prepaid with rest flexible to keep as you can.

3. Let her go ppo and you stay hdhp+hsa. Not ideal but peace in the house may be worth it.

[Michelle]

I do not save any receipts and assume that my medical costs in the future will be higher and I will utilize it then.

It also acts like an IRA come retirement, so you can pull out penalty free (but not tax free if not a qualified medical expense).

[Jenifer]

Ugh I would kill to have an HSA plan at my job again. Just compare the yearly premiums for her. Even though you have that deductible it works out better in the end.

It’s such a great option for people without major health issues.

[Bill]

If the difference between being united on a FI journey vs arguing about insurance plans is the taxes on $2k of medical expenses, just pay it out of the hsa if that gets your wife on board.

Not everything needs to be mathematical perfect as long as the overall plan is getting you where you want to go.

[Malinda]

When I started contributing to my HSA I would use the $ to pay medical bills but felt like I wasn’t making progress. Then spoke to someone who told me not to touch it.

I then hit myself on the head when I realized that if I couldn’t pay the bills at that time (we were both well paid), how would I manage once retired (no pension, only 403b and other retirement accounts).

Since that time that account had grown like crazy. Now that I’m retired and using it, it has enough to continue growth at the same or higher rate as we are spending it.

And it’s tax free coming, growing and going!!!

[Author]

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