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PaperclipPerfector  1mo ago (text post)   2090 thread views

Small-Scale Question Sunday for September 28, 2025

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

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The so-called “Shoebox Strategy” for an HSA seems to me to be strictly wrong for most people:

  1. If you execute the shoebox strategy, your money will remain in the HSA to grow “probably, hopefully, mostly tax-free” and you will be responsible for storing the receipts for more years than you would otherwise.
  2. If you instead cash out the amount right away and then coincidentally make a Roth contribution of an equal amount, then your money will be growing “surely tax-free”, which is generally better, and you get to immediately start the 7-year timer to be allowed to throw away your receipts.
  3. If you are already maxing out every tax-advantaged channel, and so cannot implement strategy (2), you should at least consider just withdrawing it and making a straight-up investment in some tax-efficient growth asset, since you're probably in a position to take advantage of the “surely tax-free” growth of the death basis step-up.

The only case I can see where the “shoebox strategy” wins over (2) is if you anticipate HSA exhaustion before age 60, and the only case I can see where it wins over (3) is if you anticipate HSA exhaustion before death.

Am I missing anything else here?

⸻

EDIT: just to be clear, by “strictly wrong” I mean “strictly beat by another strategy”, not “strictly beat by the default 'stupid' strategy of making the withdrawal immediately and keeping the proceeds in a 0% interest checking account or taxable savings account”.

I am not very up on Roth stuff, but wpuld things change if receipt storage were completely trivial? The way my, and I assume nearly all, HSA works is that I submit receipts to the conpany that manages the HSA, and then those credits for withdrawal and ready for me whenever I want to use them. There is no receipt tracking because I just submit immediately.

would things change if receipt storage were completely trivial

Not much. Receipt storage is nearly trivial anyway. There's still a financial advantage to my strategy for anyone who doesn't fully exhaust their HSA by the time they die (as well as anyone who doesn't expect to fully exhaust their HSA by age 60, and isn't currently saturating every Roth contribution channel), I claim.

I submit receipts to the conpany that manages the HSA, and then those credits for withdrawal and ready for me whenever I want to use them

You're liable to show your receipts to the IRS in case of an audit, which could be up to 7 years after you get reimbursed / make the withdrawal. Are you sure you'll be using this HSA provider for that long? If you're burning your paper copies, you're vendor-locking yourself.

And, if you are delaying your withdrawals (so-called shoebox strategy, the topic at hand), are you sure your HSA provider keeps receipts for 7 years after the withdrawal date, not just 7 years after you submitted the receipt?

Yes, I am 100% sure that HSA providers used by big companies have procedures that will guarantee everything is fine forever. I'm more interested by the financial argument than a receipts argument.

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