Maxing Out HSA Contributions, Buying Everything Out of Pocket & Saving Receipts

Did you know that you can maximize the long-term power of your health savings account (HSA) savings by storing your receipts and covering eligible healthcare expenses out of pocket?

This long-term saving strategy is used by many people trying to maximize the tax-free growth of their HSA, so they are better prepared to pay for healthcare expenses into retirement. By paying for eligible expenses out of pocket, you are allowing your pre-tax HSA contributions to grow untouched thanks to tax-free interest. 

Pro tip: When purchasing these eligible items out of pocket, opt for a credit card that earns you rewards points for all of your daily purchases.

Increasing spending power

These types of account holders have a big advantage over most people: the ability to budget for expenses. Because these users are familiar with budgeting and anticipating annual medical, dental, or vision expenses, they are more likely to be successful at creating that same budget, but with dollars from their paycheck as opposed to their HSA. They may also question, “Why do that?” Well, this is how you increase your spending power.

You can either pay for all of your eligible expense with your paycheck dollars (or taxed income), a 50/50 split between your paycheck dollars and your pre-tax HSA dollars, or whatever combination of spending works best for you so long as at least some of your eligible expense are paid out of pocket without using your HSA funds. But the important thing to keep in mind here is that the more you spend out of pocket, the more your HSA funds grow untouched, tax-free. This gives you a bigger bank of pre-tax funds to borrow against whenever you need it, thanks to HSA reimbursement (we’ll get to this later).

Pro tip: When purchasing these eligible items out of pocket, opt for a credit card that earns you rewards points for all of your daily purchases. 

How does saving receipts work? 

The key to this strategy is the fact that there are no time restraints or cutoffs for submitting past eligible purchases (made after enrolling in your HSA) for HSA reimbursement, so the sooner you can start to store and organize receipts from eligible (according to IRS 213(d) guidelines), out-of-pocket purchases, the better. 

Here’s an example: you have a receipt for an eligible, out-of-pocket purchase for $100 made back in 2015. It’s now 2022 and you have to cover for an unexpected expense of $100 out of pocket without disrupting your cash flow. So long as you were enrolled in your HSA back in 2015, you can use the receipt from 2015 to reimburse yourself from your HSA in the present day for the same amount it was purchased for, thus making your cash flow whole again. So, by saving all of your qualified out-of-pocket receipts, you can withdraw funds from your HSA for any other need (medical or not) whenever you need by simply reimbursing yourself. 

This strategy comes in handy if you decide to retire early and don't want to collect Social Security retirement benefits just yet. You can withdraw funds from your HSA against past eligible expenses to cover your needs so long as you don’t reimburse yourself in excess of the value of those past purchases.

Getting HSA reimbursement right

Chances are, a lot of the items you are already buying are HSA eligible. So that means you must explore the world of eligibility and just how many of your everyday essentials and medicine cabinet favorites are eligible. The best place to start is with our Eligibility List — the web’s most comprehensive list of products and services eligible for tax-free spending. 

Once you’ve done this, simply continue to buy these items as you are today — from eligible pain relievers to sunscreen, baby & mom products and much more, HSA Store carries all of your favorites and offers a 100% eligible guarantee. It gets better. We even help you track and store all of your receipts from purchases made at HSA Store in one safe place: our Expense Dashboard.

From this point, if you ever need to pull funds from your HSA for any purpose, you can request a reimbursement from the HSA into your checking account, for any amount you have as "Eligible for Reimbursement" (assuming you have that amount in your HSA)

  • Match up the amount you pulled to receipts you have for expenses paid out of pocket
  • With our Expense Dashboard, you can keep easy records: simply mark the items as "Reimbursed from HSA" and your “Eligible for Reimbursement” value is automatically updated

 And just like that, you have effectively increased the power of your HSA. You can use HSA funds for any purpose at any time with your unreimbursed expenses you tallied up, including pulling funds for early retirement.

In summary, you can benefit from your HSA in many different ways into retirement. Just make sure your HSA is open, save receipts when you purchase eligible items, maximize contributions, and reimburse yourself when needed.

Note, we are not tax professionals, nor should this article be considered professional tax or financial advice. To find the best solutions for your needs, be sure to speak to a qualified tax or financial professional before making any decisions.


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