Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
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.
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.
Got one. Self Invest it. Not in RE. Have not heard of anyone investing their HSA savings into RE. Guessing there would be some pretty specific challenges.
I would not say they are challenges, just a necessary process. You simply must have a self-directed account and then you may invest in anything you choose, excluding life insurance policies and collectibles. Just as you can in an IRA. Roll it over to a self-directed account and start buying RE! Its that easy. The "challenge" is finding and negotiating a deal that makes sense financially.
I am surprised that there is not more nationwide interest in this HSA for RE topic yet. I have had recent interest in SDIRA's and realized that the same applies to HSA. I know that at a seminar it was indicated that some doctors had rolled IRA or other money into HSA plans and then were investing them by self-directing. I think it will catch more interest. My clients have not accumulated much in HSA plans yet. But the right to a one-time rollover from IRA to HSA (with limitations) is very interesting as a way to get some funds started. The idea is to start paying for future medical expenses now getting a deduction now and tax-free later when taken out. If you have enough in an HSA then it can be a source to invest in real estate. The challenge might be to have enough funds available when needed for medical expenses.
I currently have an HSA and it keeps my premium very low. I was not aware of the ability to use it in conjunction with RE, but it is a great program in its own right.
I'm not sure how the whole self-directed account thing works, is the self-directed part the HSA itself or do you roll the funds into another account through which you purchase RE?
Or would you be investing in your company that is purchasing the RE via the self-directed account?
Generally, you need a non-traditional investment custodian that will allow you to keep the funds as an HSA and invest in non-traditional investments. There are many such custodians now.
I agree that the program is good in it's own right with traditional investments. You should likely do the RE investments only in an account that you have other funds available. ROTH IRA's that are self-directed are now the hot topic as it is a way to avoid capital gains on real estate. That is catching some attention and anyone can pay tax and convert IRAs to ROTH next year.
Sheldon
You would have to roll your HSA into a self directed account through a TPA (third party administrator) and then invest it in the choices of your liking, including RE.
As far as the do's and dont's, you must follow the IRS rules and guidelines as they pertain to qulaified retirement accounts.
I do have another thread here on BP talking about self directed IRA's, you may want to read up on them. I believe it is in "the retirement secret".
I too am surprised more people did not respond to this thread right off. Self-directing your accounts for retirement is a great way to take control of your retirement and the HSA plan is a great one.
Hope this new revival sparks more interest and questions.
You would have to roll your HSA into a self directed account through a TPA (third party administrator) and then invest it in the choices of your liking, including RE.
As far as the do's and dont's, you must follow the IRS rules and guidelines as they pertain to qulaified retirement accounts.
I do have another thread here on BP talking about self directed IRA's, you may want to read up on them. I believe it is in "the retirement secret".
I too am surprised more people did not respond to this thread right off. Self-directing your accounts for retirement is a great way to take control of your retirement and the HSA plan is a great one.
Hope this new revival sparks more interest and questions.
It's my understanding that in order to have an HSA you have to have a high deductible ins. policy in place as well allowing you to use the HSA to cover out of pocket expenses. I have my medical through my wife's employer and it is not a high deductible plan. Does that mean I have to switch over to a high deductible plan which can only be done once a year, or would I need to take out an additional high deductible policy, then set up the HSA? Would love to get some advice on this because my guy at Equity Trust really couldn't answer it.
I am not positive on which would be correct or if you could do either. HSA's do require a high deductible insurance plan, as to paying for a second in addition to the one provided by your employer or switching is something you should verify with your financial advisor or by looking up the HSA guidelines on qualified insurance plans.
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.
Interesting, I suppose after you cancel your High Deductible plan they wouldn't have any way of knowing, assuming you had one when you started. However, it seems like a loophole that they would fix quickly, but how I wonder?
The high-deductible plan can be cancelled. You then have to pay a maintenance fee to the third party administrator for administration of the dormant account.
As to the question regarding a person having coverage at the same time under both HSA and traditional health insurance, I believe that is prohibited. It certainly gets to the gray area of which insurer is to pay the claim when a claim occurs; most likely, both would point at the other!
I'm not certain about the statement made earlier that the funds can be pulled out like a Roth IRA; for medical purposes, yes - but otherwise I was under the impression that HSA was more like a traditional IRA when it comes to withdrawals. But I could be mistaken regarding this. Anybody have a link that can clarify this?
Old thread but I wanted to ask some questions on HSA's:
1. Can you roll a traditional IRA into a self-directed HSA? That way I can use it for RE and medical expenses.
2. Any recommendations on third party administrators?
3. Any recommendations on healthcare coverage providers?
Thanks
Justin,
You can use your IRA to do a one time rollover to your HSA. You can not however rollover the entire account into an HSA. Instead, you can use the IRA to fund a one year family or individual contribution. For 2010, that's $6150 for families and $3050 for individuals. This is how my wife and I funded our HSA.
My retirement accounts are with Equity Trust and I've had nothing but great experiences with them. They have low annual fees and they don't nickel and dime you like many TPA's will for check writing and what not.
As far as health care plans are concerned, that's going to largely depend on what's offered in your state. My family has a plan with Anthem that has s 5k deductible and it runs us about $180 per month. We pay mostly for everything up to 5k should we actually use that much, and the plan kicks in after that. It's a plan meant to cover accidents and other unforeseen medical expenses.
I would caution you to research these before signing up due to provisions in the new health care bill. There are requirements in place that dictate insurance companies spending a certain amount of premiums on care related expenses. That tends not to be the case with high deductible plans because they are intended as more of a back stop so there is a chance these plans may not be offered in the future. Whether or not that means you'll still be able to open an HSA is beyond me.