Health Savings Account (HSA) contribution

Do you max out your HSA?

  • Yes

  • No

  • Don't have an HSA option


Results are only viewable after voting.

Elganja

Platinum Member
May 21, 2007
2,143
24
81
My company just started to offer a HSA vs a FSA... in the past I never put anything in the FSA (never get sick, usually see the doctor one a year for a physical)

But with the HSA, things change since you don't "lose" the money if you don't use it

I'm trying to find the downside of just maxing it every year, on the assumption that when I get older, my medical bills will rise

Anyone else invest in their HSA? What strategy do you follow?
 

IronWing

No Lifer
Jul 20, 2001
69,007
26,885
136
I max it out but also use it to pay health expenses as I go so the fund only grows by the amount excess to my healthcare costs each year.

Another approach is to max it out and let the funds grow while paying for ongoing expenses with post-tax dollars. With the second approach, it is important to save all your medical receipts so when you eventually want to tap the fund you can demonstrate that you are withdrawing the funds to cover legitimate healthcare costs (even if they were incurred years in the past).

My HSA has a debit card option to pay for healthcare expenses directly from the fund. While the debit card is convenient, I use a CC instead to get the rewards points.
 

purbeast0

No Lifer
Sep 13, 2001
52,851
5,725
126
i dont, but i put enough in there to meet my deductible each year, which is $3k.

my company contributes $110/mo, and then i contribute $150/mo ($75/check).

i am on advair and i have to pay full price before deductible is met, and it's like $280 so this definitely helps. now with a kid too i want to be sure i have enough in there. right now i probably have like $2k sitting in there though which should help for a rainy day or when the deductible is back to 0 next month. i met it this year in march with the birth of my son.
 

overst33r

Diamond Member
Oct 3, 2004
5,762
12
81
I max it out but also use it to pay health expenses as I go so the fund only grows by the amount excess to my healthcare costs each year.

Another approach is to max it out and let the funds grow while paying for ongoing expenses with post-tax dollars. With the second approach, it is important to save all your medical receipts so when you eventually want to tap the fund you can demonstrate that you are withdrawing the funds to cover legitimate healthcare costs (even if they were incurred years in the past).

My HSA has a debit card option to pay for healthcare expenses directly from the fund. While the debit card is convenient, I use a CC instead to get the rewards points.

^winning

OP, read this.

http://www.madfientist.com/ultimate-retirement-account/
 
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Elganja

Platinum Member
May 21, 2007
2,143
24
81
I max it out but also use it to pay health expenses as I go so the fund only grows by the amount excess to my healthcare costs each year.

Another approach is to max it out and let the funds grow while paying for ongoing expenses with post-tax dollars. With the second approach, it is important to save all your medical receipts so when you eventually want to tap the fund you can demonstrate that you are withdrawing the funds to cover legitimate healthcare costs (even if they were incurred years in the past).

My HSA has a debit card option to pay for healthcare expenses directly from the fund. While the debit card is convenient, I use a CC instead to get the rewards points.

very interesting ... the link below that overst33r posted, also talks about this. it seems like a loophole for now, but a loophole to take advantage of!


thanks!
 

edro

Lifer
Apr 5, 2002
24,328
68
91
Definitely try to max it out ($3350/yr or $280/mo).
It is one of the only tax free growth options available to you other than 401k and IRA.
 

Elganja

Platinum Member
May 21, 2007
2,143
24
81
Definitely try to max it out ($3350/yr or $280/mo).
It is one of the only tax free growth options available to you other than 401k and IRA.

I was leaning that way, all but certain I will now
 

overst33r

Diamond Member
Oct 3, 2004
5,762
12
81
Why? Can't you simply claim your contributions on your tax return?

If I understand correctly, that's for income tax only, not FICA.

It will basically function like a traditional IRA. My contributions (after-tax) themselves are deductible which will lower my taxable income, but I still have to pay SS and medicare taxes on the contributions.

Conversely, someone with an employer HSA is paying pre-tax dollars and isn't paying FICA.

I don't think I will get the FICA taxes I paid back. Not fair :(

Can someone confirm?

EDIT:

From the horses mouth:

Employee contributions to their HSAs or MSAs through a payroll deduction plan must be included in wages and are subject to social security, Medicare, and FUTA taxes and income tax withholding. However, HSA contributions made under a salary reduction arrangement in a section 125 cafeteria plan are not wages and are not subject to employment taxes or withholding. For more information, see the Instructions for Form 8889, Health Savings Accounts (HSAs).

https://www.irs.gov/publications/p15/ar02.html
 
Last edited:

dullard

Elite Member
May 21, 2001
25,054
3,408
126
A HSA is the best legal tax dodge available. Max it out!

The HSA is the only triple tax advantaged program.
1) You don't pay taxes on contributions.
2) You don't pay taxes on investment gains.
3) You don't pay taxes when you withdraw it.
But, to qualify for the triple tax advantages, you must spend it on medical expenses at some point in your life. That doesn't seem like a very high hurdle.

401k, IRA, Roth IRA, etc. pale in comparison to an HSA since all of those other items make you pay taxes at some point. So, if you have an HSA available, and if the HSA makes sense for you, then max your contributions and milk the tax savings.

To maximize the HSA tax savings, I contribute the max, and then pay for medical bills out of pocket (note: even if you pay out of pocket, you still get the low insurance negotiated prices). Why would I want to reduce the value of something that grows tax free? Also, doing so lets you avoid fees at almost all HSA providers (usually there is a $3000 or $5000 minimum balance to avoid fees, so you have to max it out at least at the beginning or the fees destroy the whole tax savings). Leave the money in the HSA for years/decades to build up as much of the tax savings as possible. Then use it for your medical expenses when you are retired (save medical receipts then).

That said, HSAs tend to have limited investment options and higher investment fees. So be careful. For example, it is not easy (or often not even possible) to invest in the low cost Vanguard funds in an HSA.

You also have to do the leg work. The point of the HSA is to make the consumer shop around for good prices. Since you are paying for medical expenses out of pocket, or eating up your tax advantaged pile of money, minimizing the medical expenses is really in your best interest. But the whole medical field is set up to hide prices from you. The same service or the same drug may be 10x more across the street. But, you won't know unless you go to both doctors or both pharmacies in person to find out (good luck ever getting a price on the phone, you usually will just get the run-around). That can be quite a hassle. In exchange for this work, you get triple tax advantages and insurance premiums that are generally much, much cheaper than any other insurance.

One of my biggest disappointments this year is that my wife's employer dropped the HSA option and my employer doesn't have an HSA option either. My tax bill for 2016 will skyrocket by thousands of dollars and I have to pay ~$1500 more during the year for insurance. I gain nothing in exchange.
 
Last edited:

edro

Lifer
Apr 5, 2002
24,328
68
91
Wow, FICA is:
6.2% Social Security tax and
1.45% Medicare tax

7.65% saved if through employer.
 

highland145

Lifer
Oct 12, 2009
43,308
5,728
136
Employee contributions to their HSAs or MSAs through a payroll deduction plan must be included in wages and are subject to social security, Medicare, and FUTA taxes and income tax withholding. However, HSA contributions made under a salary reduction arrangement in a section 125 cafeteria plan are not wages and are not subject to employment taxes or withholding. For more information, see the Instructions for Form 8889, Health Savings Accounts (HSAs).
Does the employer also not pay SS, medi, futa on that $$.
 

Ns1

No Lifer
Jun 17, 2001
55,413
1,570
126
I maxed out my HSA for 2017 @ $5500/year + $1250 employer contribution. I hope that is going to be the right call =X
 

edro

Lifer
Apr 5, 2002
24,328
68
91
I maxed out my HSA for 2017 @ $5500/year + $1250 employer contribution. I hope that is going to be the right call =X
Employer contribution counts towards your yearly max.

Edit: You are ok.
2017 Contribution Limits:
Self-only: $3,400
Family: $6,750
 

z1ggy

Lifer
May 17, 2008
10,004
63
91
I don't have an HSA, but I have FSA. There's no contribution limit, but there's a "use it or lose" it rule at the end of each year. You can carry forward $500 but anything over you lose. So basically I just put $500 in, that way I know I won't ever risk losing money. I don't really end up going to the doctor much anyway, so usually that $500 gets partly used and the rest would carry over.
 

Ns1

No Lifer
Jun 17, 2001
55,413
1,570
126
I hated having the FSA because at the end of the year I'd drop $500 @ CVS on shit I didn't need.
 

TwiceOver

Lifer
Dec 20, 2002
13,544
44
91
When I did use an FSA I'd only put a few hundred into it. I knew I would need contacts every year so there goes $200 anyway. Eventually I just stopped bothering. The tax savings of pre-tax $200 is basically irrelevant.

I chose not to do the HSA this year because, I don't know why. It's more out of pocket if I do compared to the conventional, but less if something insane happens to me. Roll the dice.
 

zinfamous

No Lifer
Jul 12, 2006
110,562
29,171
146
FSA is garbage. HSA is magic unicorn amazing stuff. You should max it out all the time. Sadly, my insurance is too good and I can't get access to an HSA. :mad:
 

highland145

Lifer
Oct 12, 2009
43,308
5,728
136
Hmmm, my high cost insurance is so shitty that I get to put $$ in mine every year and spend it all because of the $10K deductible.