You might feel that leverage speeds up compounding. The problem is that leverage is more like compounding's hidden enemy: One million times zero equals zero.
- Manlobbi
Personal Finance Topics / Retirement Investing
No. of Recommendations: 2
Although our marketplace family plan premium has absolutely skyrocketed (no subsidy, nearly $2800/month!🙁), at least our Bronze plan is now HSA Eligible. I literally opened up a Fidelity HSA account and funded it $9750 (max family >55yo) from another established Fidelity acct in under 10 min. I read some info on Fidelity as well as watched a few related YouTube videos on the subject.
I hope to mainly use it mainly as tax deduction & another tax-free growth investing vehicle and not touch the compounding value for many years until we truly need to tap it for major medical expenses. Please feel free to share any pearls of wisdom that you more experienced folks feel may be beneficial this early retiree and first time HSA user. Many Thanks!
No. of Recommendations: 3
I hope to mainly use it mainly as tax deduction & another tax-free growth investing vehicle and not touch the compounding value for many years until we truly need to tap it for major medical expenses. Please feel free to share any pearls of wisdom that you more experienced folks feel may be beneficial this early retiree and first time HSA user. Many Thanks!
I think you hit the main pearl of wisdom: Save your receipts and let it compound tax free. The HSA is the ultimate early retirement vehicle. Tax free contributions. Tax free compounding. Tax free withdrawals. I use a Google Sheet to track and Google drive to store receipts should anyone ask.
The only other thing I can think of to add is that a huge number of everyday products and services are HSA eligible. OTC medications of course, but also things like sunscreen, contact solution, bathroom scales, transportation to and from medical visits...the list is pretty long.
No. of Recommendations: 1
and funded it $9750 (max family >55yo)
Only 1 of you is over 55? If both are, you should be able to raise that $1,000 as each 55+ person is eligible for $1,000 catch up provision.
IP
No. of Recommendations: 1
Thanks, IP. Correct, my better half is “only 50” and doesn’t want to learn about all of this just yet! 😁
No. of Recommendations: 0
Although our marketplace family plan premium has absolutely skyrocketed (no subsidy, nearly $2800/month!🙁), at least our Bronze plan is now HSA Eligible. I literally opened up a Fidelity HSA account and funded it $9750 (max family >55yo) from another established Fidelity acct in under 10 min. I tried to open a Fidelity HSA yesterday. I guess lots of folks had the same idea...mine failed. I'll try again today.
https://www.fidelity.com/learning-center/smart-mon...For 2025, the IRS contribution limits for HSAs are $4,300 for individual coverage and $8,550 for family coverage. For 2026, the limits rise to $4,400 and $8,750, respectively. If you're 55 or older and not enrolled in Medicare during either tax year, you may be able to make a catch-up contribution of up to $1,000 per year. Your spouse, if age 55 or older and not enrolled in Medicare, could also make a catch-up contribution, but will need to open their own HSA.Family coverage (5 of us). Both parents are over 55. So, $8750 for family, catch-up for me $1000, catch-up for spouse $1000 in a separate account.
Can we split it to $5375 in each account? Or does one have to be $9750, the other $1000?
Our marketplace family plan premium is now $3430.40/mo!
No. of Recommendations: 3
The only other thing I can think of to add is that a huge number of everyday products and services are HSA eligible. OTC medications of course, but also things like sunscreen, contact solution, bathroom scales, transportation to and from medical visits...the list is pretty long.
We've had an HSA for several years, courtesy of my wife's employer before she retired (we both have been for several years). That list of incidentals can be a heavy drain on the HSA if it's used for those. We keep our HSA for serious medical expenses (of which we've had none, so far, the most expensive being a minor meniscus tear in my wife's knee.) We pay for those incidentals, including the meniscus tear, which wasn't that expensive and mostly covered by our insurance, out of our everyday expenses category.
We'll use the HSA for something truly serious, something requiring hospitalization that our insurance doesn't cover.
Eric Hines
No. of Recommendations: 0
While I am eligible to open an HSA, DH, who has one from his working days, is on Medicare. I turn 65 in 3 years, and don't see the point of opening yet another account to maintain, that I will only be eligible to contribute less than $20K into. I already have a TIRA, Roth, Inherited IRA, 2 joint taxable brokerage accounts, in addition to DH's 401K, TIRA, Roth, HSA, Trust...
Since we have plenty of taxable funds to cover expenses, we are letting DH's HSA accumulate along with paid receipts not submitted. I realize I am ignoring the potential for 15-20K of tax free accruals, but am having a hard time seeing the point given the short time frame until Medicare. Many of the above accounts are small. I don't see adding another layer of complexity to an already over complex set up that is tough to simplify. Other than tax free compounding, for which I will pay in labor, what am I missing?
IP
No. of Recommendations: 2
We've had an HSA for several years, courtesy of my wife's employer before she retired (we both have been for several years). That list of incidentals can be a heavy drain on the HSA if it's used for those.
I might not have been clear on the strategy. There's no requirement when you make the HSA withdrawal. The delayed reimbursement is the superpower. So money for things like contact solution and sunscreen that you're buying today anyway can be withdrawn in the future after years of tax free compounding. You simply have to track those expenses.
No. of Recommendations: 2
Family coverage (5 of us). Both parents are over 55. So, $8750 for family, catch-up for me $1000, catch-up for spouse $1000 in a separate account.
Can we split it to $5375 in each account? Or does one have to be $9750, the other $1000?
Answering my own question: Has to be two accounts, can split the money however we want as long as the catch-up amounts are separate. We opened two accounts at Fidelity, put $5375 in each.
No. of Recommendations: 2
Other than tax free compounding, for which I will pay in labor, what am I missing?
The compounding can add up. Even after you're on Medicare, the HSA remains available and will continue to accumulate (or shrink) along with the market. It still can be used on those major expenses that Medicare and whatever additional insurance you might decide to have doesn't cover.
Regarding simplifying, I assume DH is no longer employed by the company with which he has his 401(k). That can be rolled into his TIRA, and if that 401(k) includes a Roth 401(k), that can be rolled into his Roth.
In our case, my wife has the HSA, a TIRA into which she rolled her 401(k), and an IRA, into which she rolled her Roth 401(k). I have a TIRA into which I rolled my 401(k) and a Roth (no Roth 401(k) when I retired). We have a single taxable Joint brokerage account (Schwab) and a separate taxable mutual fund account with Fidelity.
Fewer accounts than yours, but Quicken makes it all easy to manage. There are other packages on the market besides Quicken.
Eric Hines
No. of Recommendations: 0
There's no requirement when you make the HSA withdrawal.
I understood your plan. Where we differ--and differences are what make a market--is that I consider withdrawing to pay for incidentals, whether currently or accumulated into a single larger withdrawal, being money no longer available for use on major expenses, to be suboptimal. Doing the incidentals in the end game when you're going to die "tomorrow" would be viable under my plan, but I intend to go suddenly and without warning, yelling "Wahoo, what a ride."
More seriously than that last, money remaining in your HSA when you die is money your heirs or other beneficiaries could inherit, although the rules for handling the HSA by the inheritor vary broadly depending on who the inheritor is.
Eric Hines
No. of Recommendations: 1
I understood your plan. Where we differ--and differences are what make a market--is that I consider withdrawing to pay for incidentals, whether currently or accumulated into a single larger withdrawal, being money no longer available for use on major expenses, to be suboptimal.
It is all the same money, right? Let's say you retire early (which I mostly did, with some addition earned income), in that case ACA subsidies are based on MAGI which includes IRA/401k withdrawals, Social Security, capital gains, interest and dividends, and Roth conversions, but does NOT include HSA withdrawals. So having available HSA dollars from incidentals can save many thousands in taxes/lost subsidies. That means I have more money for major expenses, not less.
Similarly, HSA withdrawals from incidentals don’t trigger NIIT and importantly do not affect IRMAA. Again, potentially saving many thousands in taxes. HSA withdrawals also don't trigger Social Security taxes up to 85% of SS if you exceed "provisional income."
It gets better. Many retirees live on capital gains. HSA withdrawals from incidentals don't affect capital gains tax brackets.
Then to your point about major expenses, under the ACA the maximum out of pocket (if I understand the rules correctly) is $17,000. I'm not Medicare-eligible so I haven't looked deeply into the rules, but if you have a Medigap plan the OPP is $7,450, but there might be drug costs above that, I don't know. So that's about as big as the major expenses are. Anything more than that is gravy.
But bottom line, it is all the same money. The IRS doesn't care if I use the HSA to pay for a trip to Aruba or for colonoscopy. The major medical expenses in retirement are more or less capped.
