IMO, I think it is better to spend down HSA balances once you reach retirement age. If you die with a large HSA balance and someone other than your spouse inherits it, the entire balance will be taxable as income in that year to your beneficiary. From an estate planning perspective it’s better for your kids to inherit a a given 401k balance than it is to inherit the same amount in an HSA. At least for the 401k they can spread the taxable amount over multiple years to minimize the income taxes paid on the inheritance.

Anonymous wrote:The HSA is extremely powerful. Do not ever cash it out for medical expenses in real time. Cash flow them if you can, and save receipts and let your HSA money pile grow. You can “pay” yourself back in 30 years. The people that “use” it are either poor (understandable) or have no clue

I do my more aggressive investing (QQQ, individual stocks) in my HSA

Yes, nobody will be able to verify 30 year old receipts.
I predict that the law will change and this reimbursement timeframe with no time limit will not survive.

Interesting point about spending it before you die. I am adding the max and taking nothing out, but it will be my first account to withdraw from in retirement. Saving receipts isn't hard. At the end of each year log in to your health insurance account and print out your claims. Label them by year and save them somewhere digitally. I plan to cash them in my first year of retirement for tax free funds.

How high of a deductible do you need to qualify for a HSA?

no goal. we max ours out every year and have never dipped into it for expenses. Just letting it grow as long as we can. i guess i just consider it bonus money we have basically forgotten about. Will come in handy if we have medical catastrophe.

Anonymous wrote:The HSA is extremely powerful. Do not ever cash it out for medical expenses in real time. Cash flow them if you can, and save receipts and let your HSA money pile grow. You can “pay” yourself back in 30 years. The people that “use” it are either poor (understandable) or have no clue

I do my more aggressive investing (QQQ, individual stocks) in my HSA

No, I’m not keeping my receipts for 30 years - that’s ridiculous.

HSAs are fine. I do max mine out, but I use it for any out-of-pocket medical expenses. I put my aggressive investments in a Roth IRA, which is a better account than the HSA. It’s like if there were this wonderfully tax-advantaged account, but the advantages only hold if you use the money for groceries—that makes it, by definition, not an optimal account.

More importantly, ALL retirement accounts are overrated. I focused on building up my brokerage account and paying off my house. That will allow me to retire in a couple of years at age 45.

I have $222k in mine. Age 51 with similar age spouse. While you can withdraw from it like a 401k in retirement, any inherited amount left to a beneficiary is fully taxable immediately. So if you leave $400k to your child, that will bump them up several tax brackets and a big chunk will go bye-bye. Therefore, I save my receipts as I go and will use the HSA to pay for Medicare premiums and OOP expenses as soon as I'm 65. I will also withdraw my older expenses as a way to dampen my taxable income in retirement. But the goal will be to empty it out relatively soon (say 10-15 years into retirement).

The HSA is extremely powerful. Do not ever cash it out for medical expenses in real time. Cash flow them if you can, and save receipts and let your HSA money pile grow. You can “pay” yourself back in 30 years. The people that “use” it are either poor (understandable) or have no clue

I do my more aggressive investing (QQQ, individual stocks) in my HSA

Anonymous wrote:Isn’t HSA only for high deductible?

I don’t have that kind of plan available.

OP here. Yes, it's only available with high deductible plans. I only have $5k in my HSA. Going with a high deductible plan feels stressful and risky to me, so I don't know if I'll do it again, even if it makes sense on paper.

Anonymous wrote:Isn’t HSA only for high deductible?

I don’t have that kind of plan available.

Yes, I’m not positive but I believe you have to be on a high deductible health plan to be able to contribute to an HSA (not to be confused with FSA which is use or lose.)

It’s been so long since I have had a regular (not HDHP) health plan which is why I am not certain.

I’m 53 and have just over $100k. I don’t touch it and save the max every year. I’ve got 9 more years until retirement and wherever it is at that point is where it will stay. Probably just north of $200k

Isn’t HSA only for high deductible?

I don’t have that kind of plan available.

Anonymous wrote:

Anonymous wrote:HSAs are one of the most generous and flexible tax dodges available. I would think the "ideal target" would be as large a number as one can manage.

Disagree. If you don’t end up needing to spend a lot of money on medical care, then it just ends up being like a traditional 401(k), where you have to pay taxes on withdrawals.

I’d much rather have a Roth account that grows to the moon instead of an HSA.

You don't have to pay taxes on any medical expense withdrawals and can use past year expenses. Also growth can "go to the moon" like any other investment account. The upside beats any downside.

Anonymous wrote:HSAs are one of the most generous and flexible tax dodges available. I would think the "ideal target" would be as large a number as one can manage.

Disagree. If you don’t end up needing to spend a lot of money on medical care, then it just ends up being like a traditional 401(k), where you have to pay taxes on withdrawals.

I’d much rather have a Roth account that grows to the moon instead of an HSA.

Anonymous wrote:Is there a downside to accruing a high balance? What if you stay relatively healthy in retirement? (Or die on the younger side due to an accident or something). Had for me to understand what $2M would be used for if you don’t need a home health aide or expensive medical intervention.

You can cash in receipts from any time. So if you save the receipt from your dental work now, that's just free money later when you want to withdraw.