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PaperclipPerfector  1mo ago (text post)   2090 thread views

Small-Scale Question Sunday for September 28, 2025

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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”.

You can pay your medical expenses tax free out of the hsa but not the Roth.

but not the Roth

That's only true before age 60. After age 60, you can pay any expenses tax-free out of the Roth—and do so without sacrificing the ability to deduct those expenses if you're above the 7.5% threshold!

Besides the case of “someone who anticipates HSA exhaustion before age 60”, how does the shoebox strategy help? At best, it seems to put the shoebox strategy on equal footing with the Roth-sweep strategy.

It seems to me that occasional (over years or decades) medical expenses between the ages of 21 and 60 is a pretty realistic projection. In which case, why not have the money somewhere where it can both generate wealth and be spent tax-free?

In which case, why not have the money somewhere where it can both generate wealth and be spent tax-free?

This is such a vague sentence I don't understand it. What, exactly, are you saying? (Both the shoebox strategy and my proposed strategy allow the money to continue growing, and the growth on that money to eventually be spent on medical things without incurring any capital gains or other taxes — but, unlike the shoebox strategy, my proposed strategy doesn't ruin your future self's ability to deduct those expenses when those expenses exceed 7.5% of your gross income, and my strategy additionally allows the gains to still be completely tax-free in the happy-albeit-unlikely event that you don't spend them all on medical expenses before death.)

Are you claiming that the shoebox strategy ever beats my proposed strategy for someone who doesn't anticipate HSA exhaustion before age 60? If so, please explain.

Keep in mind, the shoebox strategy (which is what I'm rebutting) only applies when someone has incurred a medical expense, doesn't particularly need reimbursement at the moment, but has the money already in their HSA such that they could take reimbursement.

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