Most 401k’s only offer 7-15 investments (and half or more are the utterly worthless target date funds), but you can invest in literally anything on the market with your IRA (since you can shop around). We know how to avoid paying a lot of money in interest, achieve and maintain an excellent credit score, refinance debt to a lower interest rate, and avoid credit card debt. Since HSAs only let you put $3400 into them a year, it is def possible to get to the point where leaving $5k in the savings account isn’t a big deal – but my HSA account is only $7k so I moved it all over to investments. I have two months worth of HSA funds at my new employer – though I’ve heard they’re actually using HSA bank now and transferring to a new system. I love the idea of paying for expenses out of pocket and letting the HSA money continue to grow though. Come 2015, assuming the $200 investment only kept up with inflation, you’d have $579.26 tax free. Any thoughts on finding an independent provider of HSA with Vanguard as an investing option? I guess I’m missing the math here. First off, I can’t take credit for this – I learned about this fantastic idea from a Mad Fientist article titled HSA – The Ultimate Retirement Account. https://www.madfientist.com/ultimate-retirement-account/ Even before 2016, I don’t have the #’s, but we would have came close similar to this year, or even hit the Out of pocket max each year. One troublesome thing about HSAs is also the requirement of having a high deductible plan at the time you decide to pull money from it in order to get all the benefits of the HSA (no penalty, no tax). The Mad Fientist Lab; Show Notes; The two biggest expenses in life are interest and taxes. (You are allowed to make withdrawals for excess contributions without penalty up until tax deadline in case you make a mistake, same for prior-year contributions. ”, Taken from https://www.bogleheads.org/wiki/Health_savings_account#Inherited_HSA. So while you had $2k in expenses this year, you can use that receipt only for withdrawals this tax year. Ooops sorry for some reason I read your total contribution would be $3950 instead of $2950 you are correct! One post that really helped her understand the importance of this account was by the Mad Fientist. I still haven’t maxed out all these accounts :P. Please keep up the great job for all the future FI guys and gals out there that still need a north star. Max out retirement accounts. Am I missing something? Let’s just hope they don’t change the tax laws over the next 30 or 40 years on this. there’s no vesting for HSA Funds like 401k or pension plans. If your average lab rats medical expenses are $200/year and he is contributing $3000/year, then the amount you can’t touch until 65 is going to be growing quite rapidly, while the amount that “becomes roth ira” is much much smaller. Also, though this is common sense: no ‘double-dipping’ allowed: using the same QME for multiple HSA distributions and/or using a QME that was deducted on Sched A in any tax year. That said, having an unused balance is a waste (you could still come out ahead due to the tax benefit depending on your tax rate). To keep it simple I won’t use numbers at all. Discussion in the Comments section is also very helpful. Yeah, keeping track of the receipts could be a pain but I’d suggest storing them all in one location and then making a digital backup of each receipt and store the digital copies in Evernote or something. This is if you don’t use your actual health insurance much… one trip to the emergency room and your numbers suddenly won’t look so good. Keep track of all your medical receipts so you know how much you are able to withdraw from your HSA. http://jlcollinsnh.com/2013/10/05/the-stock-series-gets-its-own-page/ You don’t get sick often, so you don’t hit your medical deductible or out of pocket max. An HSA is a supposedly tax-free account for healthcare costs. TSP Congratulations on such a good savings year! I think you will see that the amount in your HSA will be much larger than the amount of out of pocket expenses incurred. But it was worth it at the end. You’re smart, so you plan to invest this month over the next 40 years vs spending it from this account. But, I plan this to happen all in the same year so we max out our out of pocket. Nick (and MF), Thanks for this great information. Mike, I would say yes, IF you can put in extra HSA money. You’re absolutely right, Geoff. Thanks for sharing! My lazy question would international medical payments be considered a QME? I’m self-employed so I get screwed left and right by Uncle Sam. Ok, I’m not sure what that has to do with my comment about state taxes though. I see a different condition that maximizes the effectiveness of this strategy. So the company has to increase the rates to offset the losses. One note, the contributions are exempt from federal income tax, but some states may still count them as taxable. I was going through statements and my current $10,000 balance was earning me about $1.50/month in interest! To avoid penalties, you must remain eligible to contribute to an HSA for a full 12 months AFTER the actual contribution date (not year). I’m guessing you’ve addressed this somewhere on your site–if so, could you point us in that direction? In the best case, if I don’t go to the doctor at all, I save $1865! 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