HSAs blow my mind

I have learned from surfing around that I can reimburse myself from my HSA at any point in the future based on any past eligible health expenditure that has taken place since the HSA ever existed. That blew my mind.

I started my HSA in 2010. I have been investing it aggressively, it’s mid five-figures now, it should be six figures (I would hope) in another decade.

My doctor and hospital portals have billing records going back that far. I’m asking my LTC provider for premium payment records. I’m going to record Medicare spending (HSA won’t pay for Medigap insurance, however - that seems quirky, but it is what it is).

I think in another decade or whenever I can empty out and close the account I’m going to do a mass reimbursement all at once and live off of that influx of cash for a year or two!

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I reimburse myself in a lump sum each year for all the expenses from two years prior to give the account some time to grow, yet limit the length of time I need to hang onto documentation. Plus, then the IRS sees a steady stream of HSA withdrawals, rather than zero, zero, zero, zero, zero, zero, then $50,000. Though it’s perfectly legal, it seems like the latter might raise some eyebrows. I’d prefer to avoid having to show the IRS that my $50,000 of withdrawals is for 500 individual medical expenses over ten years.

HSAs are awesome and I don’t like how Clark and others refer to them as triple tax advantaged since it’s not obvious what that means and downplays how great they can be. They are the only thing that is truly TAX FREE.

Other retirement plans are either taxed at contribution or distribution but if you jump through the hoops for an HSA there is never any taxed payed on the money when used for qualifying healthcare expenses. And you have the ability to invest the money if you pay out of pocket for those expenses now.

Mind blown indeed.

I have a nice printer/scanner that dumps scans into a google drive folder and many of my bills are online or come as emails so it’s easy for me to collect electronic copies of my HSA expenses to keep for later so I’m not worried about having over decades’ worth of expenses taken at once in the future. Nothing illegal about it.

When I get a paper receipt I use the shortcut on the printer to scan it directly to my google drive and then I update a simple spreadsheet with the details (including the filename of the scan). Doesn’t take more than a minute or 2.

One downside I’ve heard is that HSAs are not the best to inherit but I don’t have kids so I’ll make sure to spend mine at some point anyway.

Call me the man from HSA.

Lastly, I don’t treat unclaimed expenses as an emergency fund but it’s nice to know that at any time I could claim those expenses and get cash immediately.

Correction please Ray! I got another one that is truly TAX FREE!

No, I will not speak against the HSA. Put all you can while you can. There is however one window that slams down on you if you reach 65 or so. That is called medicare. ANY medicare is mutually exclusive with HSA contributions, but does not stop you from using the savings you built. HSA can also be problematical on the issue of finding a good Custodian, so choose carefully.

The other tax free thing is called the QCD, or Qualified Charitable Distribution. It also has some hoops but they are not difficult. The first is the age you must attain to use it being 70 or so. The second being how much you can claim, some $100k a year and growing.

Here is how it works: First you save money in a 401k or Traditional IRA. Pre-tax money, and they will hit you when you draw it out. Second, you ask your custodian to cut a check payable to your Qualified Charity. Third, you keep a copy and hand the check to your charity… Voila! Didn’t pay tax when you put it in or as it grew; neither you nor your charity pay tax on the distribution.

For younger people, I would suggest that this provision makes it attractive to put some money into 401k or regular IRA, just for the purpose of giving it away when the time comes. You put money in the plate, so why not effectively put more by using the QCD!

Thank you tszefr!

I tried to edit my post but I don’t see an option for that.

I’ll definitely keep QCD in mind in a few decades when I hit 70 and it’s a fantastic way to avoid taxes while helping others!

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