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You certainly CAN do this but it's not to your advantage to do it if you have any other money you can use instead.
What I'm trying to do is get people to look at the BIG picture. I would think the object would be to spend as little as you can on healthcare costs and save the MOST you can on taxes and save the MOST you can for retirement. Following my suggestions is the ONLY way to do that. Anything else will mean higher costs for the user of the account.
It is a free country. People can do whatever they want and will do whatver they want. I'm just offering my professional opinion as a licensed insurance broker with more than 20 year experience and someone who helps my clients on a daily basis with HSA plans, and before that MSA plans and many other kinds of tax advantaged treatments when it comes to health insurance.
If you are taking optimum advantage of your HSA account you will want to, every year, make the MAXIMUM contribution you can and LEAVE THE MONEY THERE until you reach retirement age because the money in the account will grow and compound tax free!
An HSA is for health care. Any use of the money for other than health care is taxable plus you pay a 10% penalty... regardles of your age.
IRAs is the way to save for retirement.
Yes, I would never use an HSA that charges a transaction fee.
An HSA is for health care. Any use of the money for other than health care is taxable plus you pay a 10% penalty... regardles of your age.
IRAs is the way to save for retirement.
Yes, I would never use an HSA that charges a transaction fee.
Yes Cdelena, IRAs are one way to save for retirement but the IRS is letting us ALSO use HSAs, so why not do BOTH????? HSAs are NOT STRICTLY for health care although, you are right, if you take the money out prior to retiring, you do pay income tax AND a 10% penalty on the withdrawal. However, if you make your maximum contributions and let them grow and compound for years and years, at retirement age you will have a nice little nest egg to say the least which at THAT time, you will NOT HAVE TO PAY THE PENALTY to withdraw $$$ to use for whatever you wish. You will only have to pay income tax on the withdrawal.
Yes Cdelena, IRAs are one way to save for retirement but the IRS is letting us ALSO use HSAs, so why not do BOTH????? HSAs are NOT STRICTLY for health care although, you are right, if you take the money out prior to retiring, you do pay income tax AND a 10% penalty on the withdrawal. However, if you make your maximum contributions and let them grow and compound for years and years, at retirement age you will have a nice little nest egg to say the least which at THAT time, you will NOT HAVE TO PAY THE PENALTY to withdraw $$$ to use for whatever you wish. You will only have to pay income tax on the withdrawal.
So you are saying it is useful as a substandard (available at 65 instead of 59.5) retirement account. I suggest people max their Roth and 401/IRA before looking for tax deferred saving using this back door method.
Many people don’t recognize the growing liability using tax deferred accounts and get pushed into higher brackets in retirement than they were in when working (with the combination of SS and RMD’s). That is the big picture to look at!
So you are saying it is useful as a substandard (available at 65 instead of 59.5) retirement account. I suggest people max their Roth and 401/IRA before looking for tax deferred saving using this back door method.
Many people don’t recognize the growing liability using tax deferred accounts and get pushed into higher brackets in retirement than they were in when working (with the combination of SS and RMD’s). That is the big picture to look at!
l The problem you describe is a problem we all wish we were going to have! The tax bracket you'll be in at retirement is determined by what you take out of the retirement account to live on not what you've accumulated. So what if you've accumulated a lot and you take out a lot and are in a higher tax bracket. Everyone wants to have that problem. Sure, Roth IRAs are great, but if people need deductions now and if they have an HSA account, there is no reason why they shouldn't make maximum contributions into it to save for retirement IN ADDITION to all other retirement vehicles available to them and put cash back in their pocket from money saved on taxes.
A far worse problem would be to not save enough and not have enough money to live on during retirement. Having an HSA for someone who is otherwise not inclined to save their money at least helps them save more than they would without it.
l The problem you describe is a problem we all wish we were going to have! The tax bracket you'll be in at retirement is determined by what you take out of the retirement account to live on not what you've accumulated. So what if you've accumulated a lot and you take out a lot and are in a higher tax bracket. Everyone wants to have that problem. Sure, Roth IRAs are great, but if people need deductions now and if they have an HSA account, there is no reason why they shouldn't make maximum contributions into it to save for retirement IN ADDITION to all other retirement vehicles available to them and put cash back in their pocket from money saved on taxes.
A far worse problem would be to not save enough and not have enough money to live on during retirement. Having an HSA for someone who is otherwise not inclined to save their money at least helps them save more than they would without it.
Since you must have a High Deductible Health Plan in order to have a HSA, I don't think it will be very popular or practical as a retirement savings plan for most.
I am thinking the HSA will not be a mainstream vehicle for long as more and more politicians are talking about giving individuals the same tax break on health insurance that corporations get. The tax regulations will probably change substantially.
Here’s not only what you need to look for in an HSA custodian but also the smartest way to utilize your HSA account in different situations.
Because ideally you want to make maximum contributions every year into your HSA account and leave the money alone which I’ll explain later, the transaction fees that a custodian charges won’t matter to you because ideally you won’t be constantly accessing the money. So look for a custodian with low initial set up costs and low monthly or annual fees and high interest rates given on deposits. Also make sure you can invest in good no load mutual funds that you have access to right away (or that don’t have high minimum investment requirements).
Here’s why the transaction fees don’t matter. If you are taking optimum advantage of your HSA account you will want to, every year, make the MAXIMUM contribution you can and LEAVE THE MONEY THERE until you reach retirement age because the money in the account will grow and compound tax free! Why would you want to take money out of an account that does that for you? You want as much money as you are allowed to put in an account like that at all times. Another reason why you want to make the maximum contribution you can is to save the most you can in taxes. If you have a $4000 deductible and this is a family plan, you can contribute $4000 every year and if you are in a 30% tax bracket, YOU’LL SAVE $1200 EVERY YEAR in taxes. Why would you not want to save $1200 every year especially if you can afford to put $4000 away?
Now let’s say you have medical expenses, ideally you’ll still be able to leave the money in the HSA account and just use other money to pay part or all of whatever you needed to put towards your deductible or to pay for whatever other medical type expenses that you had. However if you aren’t so lucky and you do have to access your money, then try to do it just once at the end of the year or only when you really have to to a few times a year to cut down on the transaction fees you’ll have to pay.
If you think you can’t afford to make your maximum contribution each year at the very least, contribute at least what you spent that year in medical expenses. If you spent $800, contribute $800 even if you have to temporarily borrow the money from another retirement account--- (which by the way you have 60 days before any penalty will apply if you do this)----put the money into the HSA account and take it right back out again in a few days. At least this way, you’ll have gotten the maximum savings from your HSA plan you could because by depositing the money into the account, even if you take it right back out, you’ll be able to DEDUCT the contribution from your adjusted gross income and not have to pay taxes on $800 which will save you $240 at a 30% tax bracket. So even if you got the HSA plan because of the lower insurance costs and you think you can’t afford to make the maximum contributions, you’ll at least want to do this. So instead of your medical expenses costing you $800 that year, they would have only cost you $560.
I hope this helps and congratulations on choosing an HSA plan over a co-pay plan which are and always have been over-rated and over-priced and really not nearly as good protection as an HSA qualified plan. In fact I have a FLASH presentation at my website that shows how an HSA plan compares to a low deductible plan and there is no comparison. The HSA plan wins hands down for sick people healthy people young people old people rich people and poor people.
Not if you're here in NY and the high deductible ($5,000) insurance policy premium is over $900 per month before converting to an 80/20 plan with an additional max of $10,000 out of pocket expense. But I do realize NY's insurance laws are quite different than other states.
Just sent in $1,000 to open up my HSA at Delta Trust and Bank. Now I'm going to focus on opening up a $3,000 Roth IRA at Vanguard.
I've done really well this year. I've been tracking every penny I spend. I've paid all my quarterly tax estimates to date (I'm a sole proprietor), I signed up for health insurance, opened an HSA and soon I'll max out my Roth contribution for the year.
Next year, I'll make my Roth and HSA contributions automatically each month, so I don't even have to think about it !!!
Not if you're here in NY and the high deductible ($5,000) insurance policy premium is over $900 per month before converting to an 80/20 plan with an additional max of $10,000 out of pocket expense. But I do realize NY's insurance laws are quite different than other states.
You hit the nail on the head! State regulations have EVERYTHING to do with AFFORDABILITY and AVAILABILITY and CHOICE of health insurance and some states, mostly concentrated in the northeast, REALLY MESS IT UP! For people living in New York, New Jersey, Massachusetts, Rhode Island, Maine and
Vermont, state regulations make it so unbearable for insurers,that health insurances costs are 2 to 4 times what they are in most of the rest of the country and it may very well be worth relocating to a normal state where you might be able to save $5k; $10k $15k or more on health insurance costs EVERY YEAR! It might mean the difference of a retirement where you barley scrape by or actually have a very comfortable retirement with money to spare!
I recently switched to an HSA account and have been shopping for a hi-yield, no fee account. I found that Patelco Credit Union offers 5% interest with no fees. [URL="http://www.patelco.org"]www.patelco.org[/URL] Has anyone heard of them or have an opinon?
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