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HSA as an IRA


gjangal
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http://en.wikipedia.org/wiki/Health_savings_account

 

http://whitecoatinvestor.com/retirement-accounts/the-stealth-ira/

 

I wanted to get the board's opinion on using HSA as an IRA. I am trying to defer income as much as possible. My personal situation is that I don't have a mortgage, no student loans or any major deductions that can be itemized. Would appreciate any feedback from people who have done this. Thanks in advance

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You should also be able to roll funds over once every 365 days.  I set-up a non-employer HSA account.  I then roll funds from the employer HSA to this non-employer HSA once a year since the investment options with my employer are not great. 

 

One advantage that is not often discussed - you can track medical expenses but not distribute the funds each year.  This allows for the investments to continue to grow and compound tax-free.  If the need for cash ever arises, just take a HSA distribution.  Expenses and distributions don't have to occur in the same year - the distribution can be made at any point in the future.  You can even wait until death and have your estate reimburse the qualified medical expenses incurred during your lifetime.

 

A HSA is one of the only tax-free (no income or payroll taxes) vehicle for the non self-employed.

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You should also be able to roll funds over once every 365 days.  I set-up a non-employer HSA account.  I then roll funds from the employer HSA to this non-employer HSA once a year since the investment options with my employer are not great. 

 

One advantage that is not often discussed - you can track medical expenses but not distribute the funds each year.  This allows for the investments to continue to grow and compound tax-free.  If the need for cash ever arises, just take a HSA distribution.  Expenses and distributions don't have to occur in the same year - the distribution can be made at any point in the future.  You can even wait until death and have your estate reimburse the qualified medical expenses incurred during your lifetime.

 

A HSA is one of the only tax-free (no income or payroll taxes) vehicle for the non self-employed.

 

Alright, that sounds awesome to a degree. So you could have a Roth IRA with post-tax and a HSA with pre-tax beyond a employer's 401k limit and then never touch the money in it? Can you setup a HSA without having health insurance associated with it?

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Do the fund options typically suck on an HSA?

 

Yes; but I have one set up with HSA Bank, where you can open a sub-account with Ameritrade and trade individual stocks/bonds/options just like an IRA.  I've now got about $25k in my HSA...I max out the contribution each year, and then pay all medical expenses out of pocket and do not withdrawal anything from HSA.  If you run the numbers it is the best tax-advantaged account available. 

 

To answer someone else's question - there is a difference between rollover and direct transfer; for HSA's you can do as many direct transfers as you want in a year.  My employer generally contributes $200/quarter to a Aetna/Chase HSA.  I'll make the remainder of the annual max contribution at the beginning of the year to my HSA Bank account (already done for 2014).  Then I'll transfer the $ from the Aetna/Chase employer HSA over every now and then using a direct transfer.

 

Definitely something I recommend doing. 

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I just found out about the HSA this year as  I just switch to a High Deductible Health Plan.  My company's accounts are with Fidelity, and they let you buy whatever you want in it.  Individual stocks and all that.  Really happy to hear that you can just save receipts from previous years and take out the money whenever you need it. 

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I just started last year and funded one outside of my employers, I'm inside this year and plan on doing a rollover at the end of the year.

 

I have my account eli lilly federal credit union and they allow me to use TD Ameritrade to buy individual stocks.

 

 

Here's where I go for my info: http://www.madfientist.com/ultimate-retirement-account/

 

eli lilly federal credit union? Sounds like a weird name.

Do you know other HSA admins that can allow me to have a brokerage option in the HSA account?

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I just started last year and funded one outside of my employers, I'm inside this year and plan on doing a rollover at the end of the year.

 

I have my account eli lilly federal credit union and they allow me to use TD Ameritrade to buy individual stocks.

 

 

Here's where I go for my info: http://www.madfientist.com/ultimate-retirement-account/

 

eli lilly federal credit union? Sounds like a weird name.

Do you know other HSA admins that can allow me to have a brokerage option in the HSA account?

 

Right, I thought so too. But I checked it out and didn't like how HSA Bank nickel and dime'd people.

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  • 2 weeks later...

I just started last year and funded one outside of my employers, I'm inside this year and plan on doing a rollover at the end of the year.

 

I have my account eli lilly federal credit union and they allow me to use TD Ameritrade to buy individual stocks.

 

 

Here's where I go for my info: http://www.madfientist.com/ultimate-retirement-account/

 

eli lilly federal credit union? Sounds like a weird name.

Do you know other HSA admins that can allow me to have a brokerage option in the HSA account?

 

Right, I thought so too. But I checked it out and didn't like how HSA Bank nickel and dime'd people.

 

I went to eli lilly federal credit union's website but didn't see that they have stocks as an investment option in HSA. I will call them to make sure.

So this CU doesn't have the fees that HSA banks have?

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I opened an account with Eli Lily last week.  There customer service has been exceptional so far.  They call and email (real person) to make sure you are happy.  The process to open the TD Ameritrade account has been pretty seamless so far - still waiting on funds to move over from the bank to the broker.

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I opened an account with Eli Lily last week.  There customer service has been exceptional so far.  They call and email (real person) to make sure you are happy.  The process to open the TD Ameritrade account has been pretty seamless so far - still waiting on funds to move over from the bank to the broker.

 

Thank you! I just verified with my employer's HSA admin that they use HSA bank. So I will just stick with them. :D

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  • 1 month later...

No issues with hsabank.  They do charge $3.00 a month unless a balance of $4,925 is maintained with the bank.  (that excludes investment account balance maintained at TDA).

 

Seriously? That excludes investment account balance at TDA? My current employer is using hsabank, so I bet they pay the $3 per month admin fee. But if I leave my current employer, I would definitely transfer to another place that doesn't nickle and dime me.

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