How should we enter savings in our HSA?

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How should we enter savings in a Health Savings Account (HSA)? I doubt it would be treated completely appropriately under "Supplemental Retirement Accounts" especially when it's more of a family account than an individual account.

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dan royer's picture

The program does have an easy way to enter these deposits and withdrawals. The way I'm doing is to enter the accumulating saving (the amount I'm contributing each year) as special expenditures that are excludable from AGI. Then I did a side calculation based on the interest I earn on those amounts and gave these new amounts back to myself as a series of non-tax related special receipts in the future.

And I would think that if you're like me and use the HSA as a stealth ROTH IRA that I should add it as a ROTH contribution as well. Is that correct?

dan royer's picture

Yes, I think that is correct. I believe the tax consequences are the same. It's just that on the spending end you must use them on medical or pay the taxes as you know. The thing that's confused me a little bit is that when we give them money back to ourselves in the future, that stream of money should really be offset with (medical) expenses right? It's not just money that dumps into discretionary spending without an equivalent expense on medical to match it. So I guess there's different ways to look at it. I distributed mine to more or less match my Medicare Part B premiums.

Yes, that's a great idea to match the Part B premiums.

Here's a good article on HSA accounts and why they might be even better than IRAs: http://whitecoatinvestor.com/retirement-accounts/the-stealth-ira/

After age 65, you can use the funds for whatever you want, not just medical expenses. It's basically an IRA at that point (must pay taxes on withdrawls. But, yes, no taxes if you use it for medical expenses. I understnad that you can save all your medical expense receipts from before age 65 and then apply them after 65 to withdraw the money tax free.

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