My personal plan is to stuff the HSA with Solo 401K conversions during early retirement at age 55. Then I’ll use the HSA to reimburse myself for Medicare premiums and other medical expenses after age 65. I wouldn’t want to put too much in there though. I’d definitely prioritize a Roth IRA and a taxable brokerage account for the liquidity, access to leverage, ability to convert to real estate and better tax treatment on withdrawal for high income families in retirement.
Thanks for the in depth response as usual! Hmmm I think if you do conversions you can only do the yearly maximum though right? So with 10 years you wouldn’t have that much in your HSA… ( I could be wrong on conversions but I thought that’s how it worked). Also, in terms of liquidity, I haven’t heard of anyone having issues pulling money out of their HSA investments, or the account…. Lastly, what better tax treatment is there than 0 taxes at all? The Roth is great I agree, and a taxable brokerage is great for long term capital gains/ qualified dividends… but with a Roth or HSA you don’t pay any taxes at all so how is it better?
@@MMuniz oh man, where to begin.. haha! A few things to consider: I have a family of 5 with young children. We go to the doctor several times a year for various reasons and our risk is higher that someone will break a bone or require some type of treatment that would require an expensive solution. My employer also offers very good health insurance options, so the out-of-pocket cost is relatively low for what we get. Main point: the HSA savings would likely be eclipsed by higher out-of-pocket expenses on an annual basis, including any tax deductions. Liquidity - by putting your money in an HSA for investment purposes, you're tying those funds up until you're at least 65. And if you don't use the funds for medical purposes after 65, your paying taxes at the regular income tax rates. It's no different than a traditional IRA or 401K. During that time, those funds are trapped. You can use them to buy real estate, pay down debt, use margin/leverage, start a business, etc. I'd rather have a very large taxable brokerage account so I can use leverage, have immediate, tax-controlled liquidity and have the ability to peel off funds for real estate investment as opportunities present themselves. Penalties - withdrawing funds from an HSA for non-medical purposes before age 65 comes with a nasty 20% penalty on top of the taxes you'll owe. Horrible. Another example of why opening joint accounts with the government is bad. It's a trap, unless you have a very strategic and well-monitored plan for deploying the funds for medical expenses. Retirement tax trap - Since an HSA is basically a glorified 401K if it isn't used for medical expenses, you're potentially creating another tax bomb during your retirement years if you want to access those funds. Withdrawals could be taxed at a high rate, increase how much your SS is taxed, increase Medicare IRRMA costs, etc. This tax bomb also applies to your heirs if they are inheriting it since they will likely get those tax-trapped funds when they are earning a high salary, meaning HSA distributions get hammered at a high tax rate for them as well. Particularly devastating if this occurs after one spouse dies... widow's tax trap. I would say the HSA works best if all those factors are thought through and you can fund it with what you legitimately expect to spend on medical expenses, Medicare part B premiums and any long term care insurance premiums or expenses. Stuffing it so full it ends up being a traditional IRA-like asset during retirement may be a bad call though, depending on how much income you expect to generate from investments, pensions, SS, etc. in retirement. For me personally, I will have a high income in retirement, so I'd like as much of my retirement assets to be tax free or low tax as possible. Dividend income (0-15%), rental real estate (0%), Roth accounts (0%) and a late-funded HSA to cover Medicare premiums, medical expenses and long term care expenses/insurance (0%). The HSA will be late-funded because it's a better financial decision to not have an HSA while my kids are in the house. Having dividend income only also saves my wife (or me) from the widow's tax trap because those dividends will stay in the 15% tax bracket even when she falls to a single filer. Kids will inherit the portfolio with a stepped-up basis and dividends also getting taxed at 0% or 15% with immediate financial independence. I'm sure it's not the best plan ever, but I think it'll work!
@@CalmerThanYouAre1 I love how you explained every position so in depth I agree with all of your points. And I also especially agree with determining risk on which plan works best for your family. Currently we are not on an HDHP also because we knew my wife would be having twins and weren’t sure what complications come with that. But we are considering going back to hdhp next year now that they are here and healthy. Once again I agree with all your points especially if you plan on having a large income in retirement. As much as I would love to plan on that, my current calculations have me at anywhere from 3-5 million dollars, which would net me around 90-150k if I pull out 3% per year, and then we have to add in my wife’s pension which will be great but not a massive amount. But this is all if nothing changes in our life, including contribution limits and catch up contributions, as well as when we actually decide to stop working. So you never know! Lastly, thanks for the in depth response, it’s honestly just cool to have someone that has their future planned out, just like my wife and I have ours planned out hahah (though yours and my plans are quite different - which is how investing should be). Have a great Friday!
@@MMuniz yeah man, absolutely! YT is great for getting lots of different ideas, perspectives and approaches. I learn something new or have something I alrady knew reinforced every time a I watch a vide or exchange with someone here. It's all about sharing information and helping each other learn, IMO. Your plan is obviously very solid as well. Lots of ways to go about planning for FI and retirement, and honestly none of us are going to get it 100% right for our particular situations. Just too many unknowns and variables that happen over the course of a life. However, when it comes to FI, you don't have to win the race, you just have to cross the finish line! 🏁
You do need a HDHP plan, but I think most families/ individuals would be surprised at the end of the year if they spent more or saved more vs a traditional style plan. Obviously this is assuming good health and not constant doctor visits or medicine based on an underlying condition. This is magnified when you have an employer that contributes a large amount to your HSA every year. My old employer used to give me 1500 every year, 750 for the hdhp plan and 750 for being a member of a local gym. I went to the doctor once a year for my physical, which was free, and I was profiting 1500 bucks a year for almost 4 years! (Sadly I didn’t know to invest the funds at the time though) 😢
@@MMuniz yeah I’m on a union health plan so the out of pocket expenses are minimal. But no 401k either! It almost makes me want to get another job that has a 401k and an option to enroll in a HSA !! For tax purposes of course lol.
@@jegm1118 ah yes that’s tough without the 401k, but at least your health plan sounds powerful! Does your work give you access to a 403b or any other tax advantaged accounts? If not you still have access to the traditional IRA or Roth IRA…. Or maybe your union job has pension ?
Great video. Love my HSA. Wish I had access to it for 35 years. Loved your pull out joke. Lol.
😂😂😂
0:58 amen to that Lmfaooooooooo
😂😂
Very informative. 👍 And thx for the family pics! 🎉
Thanks for being first supporter!
@@MMuniz 🙌🤜🤛
My personal plan is to stuff the HSA with Solo 401K conversions during early retirement at age 55. Then I’ll use the HSA to reimburse myself for Medicare premiums and other medical expenses after age 65.
I wouldn’t want to put too much in there though. I’d definitely prioritize a Roth IRA and a taxable brokerage account for the liquidity, access to leverage, ability to convert to real estate and better tax treatment on withdrawal for high income families in retirement.
Thanks for the in depth response as usual! Hmmm I think if you do conversions you can only do the yearly maximum though right? So with 10 years you wouldn’t have that much in your HSA… ( I could be wrong on conversions but I thought that’s how it worked). Also, in terms of liquidity, I haven’t heard of anyone having issues pulling money out of their HSA investments, or the account…. Lastly, what better tax treatment is there than 0 taxes at all? The Roth is great I agree, and a taxable brokerage is great for long term capital gains/ qualified dividends… but with a Roth or HSA you don’t pay any taxes at all so how is it better?
@@MMuniz oh man, where to begin.. haha! A few things to consider:
I have a family of 5 with young children. We go to the doctor several times a year for various reasons and our risk is higher that someone will break a bone or require some type of treatment that would require an expensive solution. My employer also offers very good health insurance options, so the out-of-pocket cost is relatively low for what we get. Main point: the HSA savings would likely be eclipsed by higher out-of-pocket expenses on an annual basis, including any tax deductions.
Liquidity - by putting your money in an HSA for investment purposes, you're tying those funds up until you're at least 65. And if you don't use the funds for medical purposes after 65, your paying taxes at the regular income tax rates. It's no different than a traditional IRA or 401K. During that time, those funds are trapped. You can use them to buy real estate, pay down debt, use margin/leverage, start a business, etc. I'd rather have a very large taxable brokerage account so I can use leverage, have immediate, tax-controlled liquidity and have the ability to peel off funds for real estate investment as opportunities present themselves.
Penalties - withdrawing funds from an HSA for non-medical purposes before age 65 comes with a nasty 20% penalty on top of the taxes you'll owe. Horrible. Another example of why opening joint accounts with the government is bad. It's a trap, unless you have a very strategic and well-monitored plan for deploying the funds for medical expenses.
Retirement tax trap - Since an HSA is basically a glorified 401K if it isn't used for medical expenses, you're potentially creating another tax bomb during your retirement years if you want to access those funds. Withdrawals could be taxed at a high rate, increase how much your SS is taxed, increase Medicare IRRMA costs, etc. This tax bomb also applies to your heirs if they are inheriting it since they will likely get those tax-trapped funds when they are earning a high salary, meaning HSA distributions get hammered at a high tax rate for them as well. Particularly devastating if this occurs after one spouse dies... widow's tax trap.
I would say the HSA works best if all those factors are thought through and you can fund it with what you legitimately expect to spend on medical expenses, Medicare part B premiums and any long term care insurance premiums or expenses. Stuffing it so full it ends up being a traditional IRA-like asset during retirement may be a bad call though, depending on how much income you expect to generate from investments, pensions, SS, etc. in retirement.
For me personally, I will have a high income in retirement, so I'd like as much of my retirement assets to be tax free or low tax as possible. Dividend income (0-15%), rental real estate (0%), Roth accounts (0%) and a late-funded HSA to cover Medicare premiums, medical expenses and long term care expenses/insurance (0%). The HSA will be late-funded because it's a better financial decision to not have an HSA while my kids are in the house. Having dividend income only also saves my wife (or me) from the widow's tax trap because those dividends will stay in the 15% tax bracket even when she falls to a single filer. Kids will inherit the portfolio with a stepped-up basis and dividends also getting taxed at 0% or 15% with immediate financial independence.
I'm sure it's not the best plan ever, but I think it'll work!
@@CalmerThanYouAre1 I love how you explained every position so in depth I agree with all of your points. And I also especially agree with determining risk on which plan works best for your family. Currently we are not on an HDHP also because we knew my wife would be having twins and weren’t sure what complications come with that. But we are considering going back to hdhp next year now that they are here and healthy.
Once again I agree with all your points especially if you plan on having a large income in retirement. As much as I would love to plan on that, my current calculations have me at anywhere from 3-5 million dollars, which would net me around 90-150k if I pull out 3% per year, and then we have to add in my wife’s pension which will be great but not a massive amount. But this is all if nothing changes in our life, including contribution limits and catch up contributions, as well as when we actually decide to stop working. So you never know!
Lastly, thanks for the in depth response, it’s honestly just cool to have someone that has their future planned out, just like my wife and I have ours planned out hahah (though yours and my plans are quite different - which is how investing should be).
Have a great Friday!
@@MMuniz yeah man, absolutely! YT is great for getting lots of different ideas, perspectives and approaches. I learn something new or have something I alrady knew reinforced every time a I watch a vide or exchange with someone here. It's all about sharing information and helping each other learn, IMO.
Your plan is obviously very solid as well. Lots of ways to go about planning for FI and retirement, and honestly none of us are going to get it 100% right for our particular situations. Just too many unknowns and variables that happen over the course of a life. However, when it comes to FI, you don't have to win the race, you just have to cross the finish line! 🏁
@@CalmerThanYouAre1 couldn’t have said it any better!
Yeah but don’t you need a high deductible medical plan to open an HSA?
You do need a HDHP plan, but I think most families/ individuals would be surprised at the end of the year if they spent more or saved more vs a traditional style plan. Obviously this is assuming good health and not constant doctor visits or medicine based on an underlying condition. This is magnified when you have an employer that contributes a large amount to your HSA every year. My old employer used to give me 1500 every year, 750 for the hdhp plan and 750 for being a member of a local gym. I went to the doctor once a year for my physical, which was free, and I was profiting 1500 bucks a year for almost 4 years! (Sadly I didn’t know to invest the funds at the time though) 😢
@@MMuniz yeah I’m on a union health plan so the out of pocket expenses are minimal. But no 401k either! It almost makes me want to get another job that has a 401k and an option to enroll in a HSA !! For tax purposes of course lol.
@@jegm1118 ah yes that’s tough without the 401k, but at least your health plan sounds powerful! Does your work give you access to a 403b or any other tax advantaged accounts? If not you still have access to the traditional IRA or Roth IRA…. Or maybe your union job has pension ?