HSA basics—what you wish you would have known sooner

[marahuta]

Just starting out with researching HSAs—what’s your best advice?

Hi all

I am in the beginning stages of working through the prime directive steps from r/personalfinance and have now gotten to the HSA step and it seems like quite a learning curve on this one.

I’m a federal employee and I think I have access to HDHPs and HSAs etc but not sure where to start with research. What are good companies? How will I act differently from being in a normal PPO? Just feels like a totally different (risky?? No??) way to come at health care.

I’d appreciate any best practices, advice, any experiences or pitfalls y’all can share in your HSA journey!

TIA!!

 

[shawnab]

@marahuta Here's what I learned:

There are vast differences between HSA providers. Some are excellent, like Fidelity (no fees, access to low cost index funds) , and others are awful (high fees, can't invest all your money, terrible investment choices). So it pays to shop around.

Your employer will choose a HSA provider where they will deposit funds from your paycheck. You have no say in that. However, you are allowed to open a second HSA and then roll over your money from the awful HSA into the excellent one. I do this once per year.

I should also mention that the best way to use a HSA is to use it as an extra retirement account. It has triple tax benefit: money goes in tax free, investments grow tax free, and the kicker is that you can also withdraw money tax free in the end (decades from now), as long as you can show medical receipts.

In practice this means to never pay medical expenses with your HSA card (I cut mine up), but use other money and save copies of itemized receipts (I use google drive for this).

I hope this helps!

 

[meadowdance]

@shawnab Ok so tampons are a qualified expense.. you’re saying I could save two decades worth of tampon receipts and at some point in retirement, withdrawal the total expense and it would be tax free?

 

[shawnab]

@meadowdance Correct. Probably more worthwhile for big ticket items but yes, every receipt you collect can be deducted from taxable income in any tax year you choose to do so.

 

[deborahl5255]

@shawnab That's the big difference between the HSA and the now defunct FSA. The FSA had to be spent in the year you saved it.