I recently had this realization as I snapped yet another picture of a medical receipt... have been doing this stupid charade all this time unnecessarily? It feels like I surely must be overlooking some benefit to this receipt game over just withdrawing the HSA money immediately and using it to replace the same amount of paycheck income which I simultaneously put toward mega backdoor Roth.
Here's our scenario: both early 40's, 2 kids 7 & 10yo, health plan is through wife's employer, HSA is deducted from payroll (we do about $5k including employer contribution), hsa is invested at a brokerage, we always max Roth IRAs via regular backdoor, we don't max 401k's quite (about $20k each but that includes employer match), we save $10-20k in taxable (saving for a new house, emergency, etc), and I usually tack on another $5k to Roth via mega backdoor. NO, we do NOT max 401k, that is intentional, not interested in debating it.
So why not instead of saving all these receipts (that no one will do anything with if I get killed by a bus tomorrow), and simply withdraw the HSA funds as we incur medical expenses (or just once a year) use it for the necessities and make an equivalent temporary increase in my after-tax contribution to be mega backdoored to Roth? The way I see it, looks like we get the triple tax benefit of the HSA, don't need to save receipts, don't need to rely on my existence/cognition/record keeping 20 years from now to actually "cash-in" on the receipts, and the monies end up in the most golden, grandest, tax advantaged account of them all, certainly my favorite account, THE Roth IRA! It's so obvious now, can't believe this is the first time I've thought about it. Which gives me a sneaking suspicion that I must be overlooking something stupid obvious that makes this either 1) not work/possible or 2) there's some glaring disadvantage vs just leaving it in the Hsa and playing the stupid receipt & spreadsheet game for decades. So tell me, am I on to something smart or way too far out in front of my skis?
Here's our scenario: both early 40's, 2 kids 7 & 10yo, health plan is through wife's employer, HSA is deducted from payroll (we do about $5k including employer contribution), hsa is invested at a brokerage, we always max Roth IRAs via regular backdoor, we don't max 401k's quite (about $20k each but that includes employer match), we save $10-20k in taxable (saving for a new house, emergency, etc), and I usually tack on another $5k to Roth via mega backdoor. NO, we do NOT max 401k, that is intentional, not interested in debating it.
So why not instead of saving all these receipts (that no one will do anything with if I get killed by a bus tomorrow), and simply withdraw the HSA funds as we incur medical expenses (or just once a year) use it for the necessities and make an equivalent temporary increase in my after-tax contribution to be mega backdoored to Roth? The way I see it, looks like we get the triple tax benefit of the HSA, don't need to save receipts, don't need to rely on my existence/cognition/record keeping 20 years from now to actually "cash-in" on the receipts, and the monies end up in the most golden, grandest, tax advantaged account of them all, certainly my favorite account, THE Roth IRA! It's so obvious now, can't believe this is the first time I've thought about it. Which gives me a sneaking suspicion that I must be overlooking something stupid obvious that makes this either 1) not work/possible or 2) there's some glaring disadvantage vs just leaving it in the Hsa and playing the stupid receipt & spreadsheet game for decades. So tell me, am I on to something smart or way too far out in front of my skis?
Statistics: Posted by Bulletproof — Mon Mar 11, 2024 11:15 pm — Replies 10 — Views 1056