Should I sign up for a HSA?

[krapht]

Hi,

I'm about to enter the workforce, and my company offers a traditional PPO as well a HDHP + HSA. The catch is, I'm not interested in their health plans, because my parents can cover me via their work plan PPO without extra cost to themselves until I turn 26, which is a great deal for me.

However, I'm interested in stashing money in a HSA, as I understand the money inside is never taxed, and can be withdrawn without penalty at 65, making it a "super retirement account".

What I don't understand is the coordination of benefits issues that would come up from being double insured. Depending on how the coordination of benefits is done, I could end up paying more money than if I was simply insured under one plan, especially if my work plan is the primary insurer. I'm done some looking around online but the medical billing information from my parent's insurer is pretty murky. Can anyone advise me about the problems involved?

[bluemarlin08]

I would suggest getting your own HDHP now. What if you have a health change prior to age 26, then you are in a mess. You can't contribute to a HSA without a HDHP.

[archbish99]

You also can't contribute to an HSA if you're covered by traditional insurance, even if it's someone else's policy. Run the numbers; my inclination would be to go ahead and have your parents drop you and get onto your own insurance. However, it might make sense to take whatever money you can from your current employer for declining insurance until the last open enrollment before your 26th birthday.

(You can also check whether "turning 26" would be considered a qualified life change that would let you change insurance elections mid-year; my guess is not.)

[BL]

Hi,


However, I'm interested in stashing money in a HSA, as I understand the money inside is never taxed, and can be withdrawn without penalty at 65, making it a "super retirement account".

As I understand it, you can only withdraw it for approved medical expenses, such as those mentioned in IRS itemized tax deductions, no matter what your age is.

[redLiner]

However, I'm interested in stashing money in a HSA, as I understand the money inside is never taxed, and can be withdrawn without penalty at 65, making it a "super retirement account".
... Can anyone advise me about the problems involved?

Pay very close attention to the fees. The fees can exceed the interest substantially if you're not careful, and suck the account dry by the time you're 65. On top of that there's inflation to consider.

[BruDude]

You also can't contribute to an HSA if you are claimed as a dependent on your parents' taxes.

[pinetops]

However, I'm interested in stashing money in a HSA, as I understand the money inside is never taxed, and can be withdrawn without penalty at 65, making it a "super retirement account".
... Can anyone advise me about the problems involved?

Pay very close attention to the fees. The fees can exceed the interest substantially if you're not careful, and suck the account dry by the time you're 65. On top of that there's inflation to consider.

It is possible to get HSAs that have vanguard funds (and therefore low fees), as described on their site. Search for 'hsa vanguard' (sorry, new member so can't post links). The provider is called hsaadministrators.

[grabiner]

However, I'm interested in stashing money in a HSA, as I understand the money inside is never taxed, and can be withdrawn without penalty at 65, making it a "super retirement account".
... Can anyone advise me about the problems involved?

Pay very close attention to the fees. The fees can exceed the interest substantially if you're not careful, and suck the account dry by the time you're 65. On top of that there's inflation to consider.

Once the HSA is large enough to be worth investing, you can invest it in TIPS (mutual funds or ETFs); since it grows tax-free, you no longer have to worry about it not covering inflation, and TIPS are exempt from state taxes in those states which tax HSAs.

[PaddyMac]

I thought that the new rule that you can cover your kids up until they turn 26 only applies if they do NOT get health insurance at their own job? You might check this.