Author Topic: Am I calculating HSA Annual Savings Correctly?  (Read 963 times)

MumRoars

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Am I calculating HSA Annual Savings Correctly?
« on: February 10, 2018, 01:28:45 PM »
I have been thinking about doing an HSA for a couple years now but can never take the plunge because of the high deductible

Comparison of the insurance plans:

Insurance Plan | Deductible | Out of Pocket Maximum
Aetna HDHP$6,000$13,100.00
Non HDHP$0$4,000.00

Annual Savings if we contribute $6,900/year
FICA Tax Savings (7.12%)$491.28
Tax Savings (25% bracket)$1,725.00
Insurance Premium Savings$2,243.80
Employer Contribution$500.00
Total Savings$4,960.08 + Compound Interest
      
   
Other notes/considerations:
  • We have maxed our contributions to 401k and IRA
  • The HSA administrator is Payflex - reviews are poor
  • We have a toddler and unsure if we will have another one

Any advice for or against an HSA? Any other benefits I missed?

terran

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Re: Am I calculating HSA Annual Savings Correctly?
« Reply #1 on: February 10, 2018, 03:49:58 PM »
A couple of things:

> FICA is 7.65%. Also, remember that this is only the case if you're under the social security wage base (about $127k). Above that you only save 2.9%, but it also then doesn't reduce your future social security benefit.
> The employer HSA contribution counts against the limit, so you'll "only" be able to contribute $6400 yourself.
> You probably don't pay income or FICA tax on your current insurance premiums, so I suppose to be completely correct you shouldn't consider tax savings on the entire HSA contribution, only amount of the contribution that exceeds the insurance premium savings.
> There is no 25% marginal tax bracket in 2018. If you were in the 25% bracket in 2017, chances are you'll be in the 22% bracket

All that together indicates you'll save (6400-2243.80)*(7.65%+22%) = $1232.31 off your taxes if you go with the HSA over the other plan.

You will need to use your employer's administrator if you want to payroll deduct, but after that you roll over to another provider. You can do as many trustee to trustee transfers as you want but there's often a hefty fee, or you can take the money out of one HSA and put it in another within 60 days, but this is limited to one such rollover every rolling one year period (starting the date you do the rollover, not a calendar year).

ender

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Re: Am I calculating HSA Annual Savings Correctly?
« Reply #2 on: February 10, 2018, 05:04:29 PM »
You also only get the FICA deduction if it's a payroll deduct HSA, not one you directly contribute to.

Arbitrage

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Re: Am I calculating HSA Annual Savings Correctly?
« Reply #3 on: February 10, 2018, 06:54:02 PM »
State taxes?  You didn't say that you live in a no-income-tax state, but almost all states also treat HSAs as tax-deductible (sadly, not my state, which also has a high income tax). 

The other thing to consider is whether you would otherwise use a Flex Spending Account.  HDHP/HSA only allows you to use a LPFSA (limited-purpose FSA, only usable for dental/vision), so if you're currently using a traditional FSA, you'll potentially miss out on some tax benefits there.

MumRoars

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Re: Am I calculating HSA Annual Savings Correctly?
« Reply #4 on: February 10, 2018, 08:15:04 PM »
Ahh... All very correct points! Thank you. I had to work a bit harder to wrap my head around your comment below but I get it now :D

You probably don't pay income or FICA tax on your current insurance premiums, so I suppose to be completely correct you shouldn't consider tax savings on the entire HSA contribution, only amount of the contribution that exceeds the insurance premium savings.

Acastus

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Re: Am I calculating HSA Annual Savings Correctly?
« Reply #5 on: February 14, 2018, 09:53:50 AM »
The missing cost is, what are your typical health costs? What is the risk of having a large cost, like pregnancy or a sky diving accident? I know there is a lot of uncertainty in forecasting these costs. My Rx is cheap, but if you take something expensive with hidden cost because of your gold plated plan, you should add that in.

With my high deductible plan, I have to pay the full cost of Dr. visits, lab fees, and other bills that you may only be paying a $30 copay now. A typical check in includes $120 doctor + $75 lab bill. If there is a fancy test in there, I get a $100 pathologist bill also. This is for monitoring "issues" and nothing is actually wrong.

Valhalla

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Re: Am I calculating HSA Annual Savings Correctly?
« Reply #6 on: February 14, 2018, 09:41:38 PM »
The missing cost is, what are your typical health costs? What is the risk of having a large cost, like pregnancy or a sky diving accident? I know there is a lot of uncertainty in forecasting these costs. My Rx is cheap, but if you take something expensive with hidden cost because of your gold plated plan, you should add that in.

With my high deductible plan, I have to pay the full cost of Dr. visits, lab fees, and other bills that you may only be paying a $30 copay now. A typical check in includes $120 doctor + $75 lab bill. If there is a fancy test in there, I get a $100 pathologist bill also. This is for monitoring "issues" and nothing is actually wrong.
Exactly.

How often does the OP go to the doctor, utilize medical services?  Even with a $0 deductible, if you never go see the doctor, you're way ahead with a HSA.

On the other hand, if you do go a moderate amount, you might be better off with the regular health plan.

I have saved over $40k in my HSA accounts from years of choosing the HSA plan, but we never go see the doctor except for annual check-ups (100% covered by HSA plan).  At our young age we just don't need a $0 deductible plan. 

By choosing HSA, I now have a $40k cushion I can use for medical expenses even if we're on a HSA plan with a high deductible, far ahead of choosing even a $0 deductible plan for the equivalent period of time.
working on my TPS reports...don't bother me, or take my red stapler!

maricela

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Re: Am I calculating HSA Annual Savings Correctly?
« Reply #7 on: February 15, 2018, 10:16:26 AM »
Definitely need to factor in the cost of average dr visits. Any upcoming health concerns (I didn’t think ahead about having vein surgery and would have been slightly better going to a PPO for that year only). Also any regular prescriptions that you’ll now pay full price for until hitting your deductible