Health Savings Accounts

[Will Barnard]

Has anyone used HSA's and if so, have you self-directed it and invested in RE? I have just recently come across this type of account and find it to be very beneficial to RE investors. It is similar to an IRA (which can be self directed) but has even better benefits in that you get a "top of the line" deduction on your taxes and the money pulled out is also tax free as in a ROTH. Of course the money must be used for med expenses, but you end up saving money on medical insurance premiums and by self-directing the account, it can grow to a sizable account for not only medical expenses in retirement, but an account which can be passed down to heirs.

Any thoughts, experiences, etc.?

[Sheldon Harding]

Readers of this thread may want to check out the link at http://www.hsainsider.com/Individual/Benefits.aspx as they claim to be a leading authority on Health Savings Accounts.

In answer to Brian, yes you do have to have a HDHP (high deductible health plan) to setup the HSA. That at least means coverage at the time you setup the HSA. You cannot have other general health insurance (only specifics like dental, vision, long-term care). You can't be in Medicare and can't be claimed as a dependent. So you might have to opt out of your wife's policy for at least a year for yourself to qualify. You should also ask your wife's employer if they will add a HDHP as some may add that with increasing acceptance of the HSA. You can now qualify in December and still get the full year contribution limit.

The annual contribution limits for 2009 are:
Self under 55 $3,000; Self over 55 $4,000
Family under 55 $5,950; family over 55 $6,950. This family coverage assumes only one spouse has a high deductible family plan.

The minimum and maximum deductibles are
Self: $1150 - $5800 with family coverage having these amounts exactly double the self-only coverage. The upper limit is the out-of-pocket expense limit. The insurance company should make sure that you are getting a qualifying HDHP when you setup a SEP. The link above can also help you review these rules and even get quotes and apply online, but likely won't help with the non-traditional investments in real estate. But it could be a good comparison and negotiation tool.

Once you get some money accumulated in an HSA, I don't think they can make you keep that HDHP plan, if you aren't contributing any more, but would have to review that rule further.