Does anyone know the rule for taking some of my employer sponsored HSA money which pays next to nothing at Optum bank and moving it to a bank or credit union into a HSA cd which pays more. I have a debit card and checks from the account I can use to pay for medical expenses. My thought is if I use the debit card or the checks to open a cd there is nothing the HSA bank can do about it, it's my money. I would then only need to show the IRS I put it in another qualifying HSA account.
Answers
My HSA account was previously at Connexus. Before moving the funds out I asked Connexus if I could open a CD within my HSA account. They said I could not and that I was limited to their one specific HSA savings account. I’m pretty sure other FIs have the same policy which I why I moved my funds to Fidelity where I could buy any of their products in my HSA.
Also you mentioned “monies that [you] won’t need this year.” If you don’t already know this, you don’t have to pay for qualified expenses from your HSA in the year that you incur the expense. In fact, you can pay for the expenses out of your HSA decades later. You just have to pay for the expense personally and then at any later date you can reimburse yourself for the expense from the HSA. Just be sure to keep good records of your expenses and reimbursements. That way you can keep all your contributions in your HSA for years earning tax free income.
Why 100% in stocks? Because an HSA is a better tax deferred savings value compared to a traditional IRA or 401K. You can pass the balance on to your heirs and they will never have to pay taxes on it (as long as they spend it on health care). So you contribute tax free, grow it tax free, and spend it tax free (you and your heirs). So if you can afford it, why not be aggressive with it.
Don't move your HSA into a bank or credit union. An investment brokerage account like Fidelity is the best of all worlds for flexibility going forward. You get everything a bank will give you plus more options like stocks.
Everyone's situation is different. My situation is that I have a 50k+ balance on my HSA. It was around 25k when I retired 6 years ago. By investing in stocks I have more that doubled it without contributing, since I am not eligible without wages to contribute anymore.
I do not claim any medical expenses against my account. I do save the receipts/records from past years medical expenses. I have plenty of cash income coming from non retirement accounts to pay for my small amount of medical expenses. By saving up my receipts, I can in any future year, claim those expenses and be reimbursed from my HSA.
So my recommendation is if you are going to purchase CDs to do something like one of the following:
1. Use cash reserves (non-IRA or HSA moneys) to pay for your medical expenses if you can afford that, and wait until a CD matures before claiming the expense against your HSA.
2. If cash reserves could be an issue, then ladder your 1 year CDs to start with by putting in 25% each for 3 month, 6 month, 9 month, and 12 month CDs. When each CD matures, buy a 12 month CD with it (ladder strategy) in its place. This way you always have no more than 3 months before a CD comes due and cash becomes available for expense reimbursement.
3. If cash reserves is definitely an issue, Hold back 20% in sweep account for now (since you are getting 4.28% interest in the sweep account which is not bad compared to 1 year CDs) and ladder the remaining 80% like in example 2.
Number 2 is also good advice. Laddering is a good recommendation generally, but especially in accounts in which you may need to have access to funds sooner rather than possibly years later.
as for 3, how much reserves to hold depends on one's situation. Personally I only hold about 2k or so in the sweep account of my HSA, the rest being otherwise "invested" in order to earn more. I figure 2k will handle most of the "immediate payout" type emergencies (for example to get an emergency prescription filled) plus I have other emergency fund money I can tap if an immediate medical payout larger than 2k is needed.
Thanks for that bit of information. Not sure why i thought that i had to have wages. Must be confusiing it with some other tax savings. Anywho.
I have been retired for 6 years. For 5 years, i used Christian Healthcare Ministries (CHM) for health "insurance". Great way to save money. Last year I switched to ACA plan. Horrendous insurance but I thought I would qualify for premium subsidies since they got rid of the income cliff. Same with this year. Wished I had stayed with CHM.
Looking it up I can still contribute max to HSA for 2022 before I do my taxes. So may have to do that plus a contribution for 2023. Thanks. I have a few years before i can get medicare.
Not sure how to know for sure that I have HDHP insurance. Except that the deductible and max out of pocket is sky high.
I would caution against contributing HSA monies for a year that you do not have an eligible plan.
As long as you *only* have high deductible insurance, you can contribute to an HSA, whether that insurance is provided by your employer or bought on the ACA market, Medicare is not considered a high deductible plan, so once you start collecting that, you can no longer contribute to an HSA even if you have a high deductible supplementary plan to go with it.
