Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (14) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: MakingTrax One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121114  
Subject: Re: Work Offering HSA Date: 10/17/2012 6:14 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 4
Inparadise -

I’ll weigh in with my experience.

I’ve had my high deductible/HSA for about 5 years. I’ve been fortunate in that: 1) we’re relatively healthy and have only minor medical expenses; 2) we’ve been able to contribute substantially to the HSA (up to the maximum most years); and 3) we’ve been able to pay medical expenses (so far) out of pocket without needing to tap the HSA funds.

As jeffbrig points out, the biggest financial risk is during those early years while you are trying to build up a large enough pot of cash to cover your annual medical insurance deductible. But keep in mind that if you have the funds on hand, you can fully fund your HSA all at one time at the beginning of the year (or upon establishing the account); you don’t have to stretch out the funding on a monthly basis.

From a tax planning perspective, the HSA contribution is deductible as a gross income adjustment (probably only for your personal contributions, not employer contributions). FYI, 2012 contribution cap is $3,100 (for individual or $6,250 for family) with an additional catch-up allowed at age 55. As intended, funds can be withdrawn to reimburse (or pay for) qualified medical expenses and those funds are not subject to any federal tax or penalty. If you become unemployed, the HSA funds may be used to pay your medical insurance premiums (without any early withdraw penalty).

The HSA functions somewhat similar to an IRA. Interest/dividends/cap gains earned by the account grow tax deferred in the account. Also, you could incur “early withdraw” penalties for non-qualified withdraws. However, at age 65 you may withdraw the funds for any purpose without penalty (not sure if you need to pay federal tax if used for non medical expenses or not, I expect so…maybe someone else can answer that).

My personal financial goal is to take advantage of the annual tax deduction through HSA contributions for now and let the fund stockpile to cover future medical expenses once I’m on medicare (if it still exists at that point). Otherwise, I view it as a supplemental retirement account.

Within an HSA, you should have investment options such as mutual funds or brokerage/equities, in addition to the standard savings account/money market. My observation is that investment expenses seem to be higher and there are fewer options within HSA accounts (as compared to a traditional IRA). I do not know whether investment costs for HSA’s can be itemized as with IRA expenses…again, perhaps someone else can respond.

I do not see any negative tax implications....the paperwork/filing hassle mentioned in previous responses seems very minor relative to the many positive aspects.

That’s my story and I’m sticking to it.

Making Trax
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (14) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
Post of the Day:
Berkshire Hathaway

Starting a Small Business
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement