How to Time Medical Expense Reimbursements from Your HSA

June 2, 2023

Is it possible to time your medical expense reimbursements from your HSA? In this highlight, we discuss how to time them and why it matters.

For more information, check out our free resources here.


We’ve got a question from Nick Gerdy. He says, “When do you find it okay to reimburse past medical expenses with your HSA after the money doubles or triples? Not until retirement? He’s investing in VOO, or do we say that Vu? I don’t actually know sometimes. Okay, cool. And then he says he loves the show. So, this is taking advantage of your Triple Tax Advantaged HSA deal. Do you have any insight on that? We do. I do have some insight, but I’m going to hold my insight because we fought about this the other day in the content meeting, talking about reimbursing medical expenses. We were fighting. Oh, we were fighting. We got into this heated, visceral debate around, wrong. I loved that conversation. It was just… It was helpful and interesting. So, Brian, I’m curious, what are your thoughts on when is the right time to reimburse medical expenses from a health savings account?”

Well, it’s a hard one to answer. First of all, let me give you some peace of mind, because we answered this a number of years ago. But we actually looked it up on the taxes. Yeah, if you died with a health savings account, you would have the ability to go back and essentially cash in on all your expense receipts and all your fancy spreadsheets, assuming your loved ones knew where they were. Because that was a concern. Because is there too much of a good thing? And I’m so conflicted on this because I know from just doing research on what type of growth you can expect after five to ten years of investing, it’s so small compared to the potential after 20 or 25 years. The longer you can keep it in there, that’s why I sound like a knucklehead. I know Nick, if you’re looking for an easy access point after 200 or 300 percent, I can’t give you that. Because I actually know the longer that money works, the more the compounding growth impact works. For my situation, I have a daughter who goes to a school where there are autistic kids and other alternative learners. I get a letter every year saying that this qualifies as a medical expense for your daughter based on the doctor’s letter and other stuff. The tuition at this school is through the roof. I have a lot of runway on how much compounding I could get out of my health savings account and get it out tax-free. So, I’m letting that money grow. It’s just sitting there, compounding growth, and hopefully, one day, it will be a high six-figure, maybe even seven-figure pull-out opportunity. But it’s gonna take a while, and I’m just being patient with it. I just need to make sure Bo knows where all my spreadsheets are in case something happens to me. But Bo, you sounded like you might have a different take on this one. Do you think it’s okay if somebody pulls out after 200?

“No, no, I actually love that. I am completely in agreement with that because I am of the opinion that if we don’t accumulate enough medical expenses now while we’re building the HSA, I think that HSAs will have enough medical expenses later on. We’re gonna be able to get to those dollars tax-free, especially if you’re doing both things. Daniel, you have to correct me if I’m wrong on this stat, but I think it said the average retiree today will spend $250,000. I was thinking it was $265,000. It’s indexed for inflation, $265,000 over the course of their retirement on medical expenses. Maxing out an HSA, $7,750.

It’s gonna take a while for that account to reach $250,000. So, I’m of the opinion, get the money in the HSA as early as possible. Let it grow for as long as possible. And I feel extremely confident that for most people, if you’re just doing normal things, like going to see the doctor and saving the bills, especially if you have kids and save the bills, you’ll be fully able to reimburse yourself all of those dollars tax-free, both past expenses and future. So, I agree with you completely. I think you should let the money grow as long as possible. And if you have access to an HSA, it should be one of the very first accounts you start putting dollars into. Just something to think about, though. Our maximization strategy, which only four percent of the public is actually using, involves investing in the HSA. It’s a maximization strategy, and truthfully, you have to have the cash flow and the ability to front those expenses. Now, if you ever get squeezed, because a lot of people are losing their jobs and facing other challenges right now, the HSA is still a viable source you can go to. But I don’t want you to squeeze your family in weird ways. You always have the opportunity to pull from that account if needed.

I got a comment last night that kind of hit me the wrong way. Somebody said, “What about your HSAs?” This was in response to a discussion we had on the show about life insurance, where we talked about buying insurance and letting it be insurance, and letting your investments be investments. We were discussing term versus permanent insurance. And this commenter was trying to challenge us by bringing up HSAs. It’s related to the maximization strategy and the tax code. But I don’t understand their point. If you’re using the four percent Financial Mutant strategy, where you’re actually investing, it’s an investment account, not an insurance account. Your HSA is a reimbursement for your health costs. That argument is weak. It was a YouTube commenter. A poor comment. It’s not the same as permanent life insurance and health savings accounts. They’re not even in the same category. But these are still maximization strategies. You need to have the cash flow and savings, the cash reserves, to implement them. We’re Financial Mutants. We want to help you think about money the same way we do. I love it when people challenge us on these things because it allows me to explain. There’s a reason the Financial Order of Operations is weather-tested. Everyone keeps trying to find faults, but it holds up because it works through all the different decision matrices you might be facing personally.

Want to know what to do with your next dollar, you need this free download: the Financial Order of Operations. It’s our nine tried-and-true steps that will help you secure your financial future.



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