HSA basics—what you wish you would have known sooner


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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!

@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!
@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?
@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.
@meadowdance This is actually good to know. We actually pay all of our medical bills through our HSA, but we could probably start collecting receipts for things that we are paying for and keep that available for future use.
@shawnab Thank you for writing this up!!

So to be clear, you say I broke my arm in 2023, paid my HDHP out of pocket (say $5k) then in 2050 I submit that receipt from 2023 and get $5k tax free distributed to me? Is that how it works?
@marahuta Yup. And instead of having used that 5k in 2023. It's now grown to 20k in 2050 and you have an extra 15k for other health expenses.
@marahuta From my understanding you can either pay bills direct from the HSA account with the debit card or you can pay out of pocket (ideally so you leave tax free $ invested) and keep receipts and are allowed at any time in the future to reimburse yourself (transfer HSA funds to your checking)
@trapsouregi1986 I’m not trying to keep up with receipts for 30 years so I use my HSA to pay for medical bills now. Still plenty left over to invest. People tend to get lost in what’s the optimal way vs. what’s practical.
@menorah This is my thought. My employer is the only one depositing to our HSA. I am not at least yet. So I'm going down this rabbit hole of looking at other hsa strategies. Am I leaving a lot of money on the table by just paying all medical expenses out of the hsa now for me, wife and son? I expect minimal expenses after we pay some current minor recurring medical bills. They will be paid off soon. We receive roughly 2k/yr from my employer. Is this something I should research and chase or is it close to a wash in the long run?

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