Our situation: my wife and I (both 30) are expecting to incur substantial health expenses this year for some upcoming dental surgeries she needs, somewhere in the range of $12k-$14k. We're currently on a low-deductible plan, but I have ~$6,500 in a HSA from a previous job (where we had a HDHP at the time). Given the fixed principal and small size of the account, I don't really see the account as a major part of our retirement strategy. We have sufficient savings in the bank to pay for the surgeries without needing to draw down our emergency fund. Those savings were otherwise earmarked for upgrades to our home we were wanting to start next year. In short, we could fund $6500 worth of the surgeries out of either my HSA or our home upgrade savings.
My question is: should we take a distribution from the HSA to (partially) reimburse ourselves?
I see a few options:
- The very conservative approach would be to treat the HSA as a retirement account and refuse to touch it. This would delay when we could make those home upgrades by 4-6 months (assuming no changes to our current savings rates), but the account could continue to grow tax-free until retirement.
- If we took the distribution now, we would put the money into CDs and eliminate the market risk, guaranteeing the money would be available when we want to fund the upgrades.
- Since there's no time limit on distributions, we could hold the option to take the distribution at some point in the future (such as to make those home upgrades earlier). This would be subject to market risk. If the value of the account increases, we could even reimburse a larger amount. If the value of the account declined materially (indicating a broader, sustained recession as the account is holding total market index funds) we might wish to delay the upgrades anyway.
After writing all that out, I'm leaning toward option 3 (delay the decision), but want to know if there's anything else I should be thinking about?