Optimal use of HSA

Ralphy · Post by **Ralphy** » Thu May 31, 2012 7:33 pm

It looks like I'll be needing some expensive dental work in the near future (poor preventive care on my part, I'm afraid). Is it better to pay for that out of pocket or from my HSA? I had read once that if you could afford to pay out of pocket, you should leave the HSA alone and treat it as extra IRA space. Is there a good rule of thumb to follow here?

Mo · Post by Mo » Thu May 31, 2012 10:21 pm

A previous thread:

viewtopic.php?t=2316
Using your HSA to pay the expenses, if qualified, means that you will never pay any taxes on that income.
If you leave the money in the HSA and use it as extra IRA space, you'll likely end up paying some amount of tax on the income when you receive it.

Dragline · Post by **Dragline** » Thu May 31, 2012 10:35 pm

I use the HSA for these sorts of things.

Ralphy · Post by **Ralphy** » Thu May 31, 2012 11:52 pm

Thanks for the link, Mo.

Mo · Post by Mo » Fri Jun 01, 2012 1:56 am

I've thought this through many times over, and generally come to the conclusion that one should use the HSA to pay medical costs as the costs arise.
However, if one can invest the HSA funds and earn a return greater than the cost of medical services inflation, perhaps investing the HSA funds is the way to go. Based on the past 30 years though, if you can beat medical inflation, please take me on as a client.

Seabourne · Post by **Seabourne** » Sat Jun 02, 2012 2:36 pm

Be sure that you consider any extra costs - my HSA plan (through work) has a $3/mo fee if the account has less than $3000. Also, since I believe that you can use HSA funds for COBRA premiums, I don't expect to have a problem spending them at some point (and thus avoiding taxes), so I tend to treat the account as another form of ROTH (i.e. post-tax money)

Mirwen · Post by **Mirwen** » Sun Jun 03, 2012 9:01 pm

I pay for everything out of my HSA. However, according to the rules, you can reimburse yourself from the HSA at any time for expenses incurred while you had the HSA, whether or not it was funded at the time. So, if you don't know what you want to do, pay out of pocket and save the receipt. You can reimburse yourself for it later (even several years later) if you decide that's best.