Author Topic: Insurance plan choice/first career job with benifits  (Read 1100 times)

zoochadookdook

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Insurance plan choice/first career job with benifits
« on: October 22, 2019, 11:41:22 AM »
Hi all. I'm 27. No major health issues. Fairly active. Do compete in sports so stitches happen and such occasionally/antibiotics for staph. May tear something here and there.
Comparing a HSA and a non HSA (190/240) with no employee contribution to the HSA. HSA is capped/3500 year.
Any advice on what to choose? Dental is attached as well-but i'm thinking if you can use an HSA.....it's a moot point to go seperate dental. May be making this a case study and will continue updating for reference.  Thanks

Other relevent info:
Net worth: 190k
       -30k roth, 60k cash, 100k expected after house sale in + equity
Income: 65000 year
Take home: $4350/m
Expenses (estimate-in transition selling house now)
-1200/m living
-500/m roth ira
-x amount insurance
-x amount 401k k
-x amount set aside for real estate ventures
Marginal Tax Rate: 22%
Effective Tax rate: 11%
FICA: 7.65%
State tax: 0%



Health:

https://photos.app.goo.gl/RkALTQDdtM8Crzch7

https://photos.app.goo.gl/6BkV8zUwFpws9gov7

Dental:

https://photos.app.goo.gl/qb7mp6amkjLvZdVv6
« Last Edit: October 23, 2019, 10:54:08 AM by zoochadookdook »

terran

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Re: Insurance plan choice/first career job with benifits
« Reply #1 on: October 22, 2019, 12:05:25 PM »
Looks like going with the HSA you'll have premium saving of $574 (assuming those are monthly premiums) and tax savings of $3500 times your marginal income tax rates. Don't forget to include FICA savings if applicable under your employers plan for HSA payroll deduction. How much would that be for you?

The premium savings more than make up for the $500 out of pocket maximum increase under the HSA plan, so if you end up with high medical expenses one year the HSA plan is at least somewhat better. If you end up with very low medical expenses the HSA plan is also obviously better. So having a medium level of medical spending is the only way the other plan is better, which is pretty typical. 

Say you had $3500 of expenses. You'd spend all $3500 on the HSA plan minus $574 premium savings for a total of $2926, and $500 deductible plus $300 for a total of $800. So the other plan would be $2126 cheaper, minus your tax savings on a $3500 HSA contribution. You might save a little more with the other plan if some of the spending was covered by copays instead of the 10% deductible, but other that that, I think that's just about a bad as the HSA plan could get. Under higher or lower spending the HSA plan probably starts doing better.

zoochadookdook

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Re: Insurance plan choice/first career job with benifits
« Reply #2 on: October 22, 2019, 12:40:46 PM »
Looks like going with the HSA you'll have premium saving of $574 (assuming those are monthly premiums) and tax savings of $3500 times your marginal income tax rates. Don't forget to include FICA savings if applicable under your employers plan for HSA payroll deduction. How much would that be for you?

The premium savings more than make up for the $500 out of pocket maximum increase under the HSA plan, so if you end up with high medical expenses one year the HSA plan is at least somewhat better. If you end up with very low medical expenses the HSA plan is also obviously better. So having a medium level of medical spending is the only way the other plan is better, which is pretty typical. 

Say you had $3500 of expenses. You'd spend all $3500 on the HSA plan minus $574 premium savings for a total of $2926, and $500 deductible plus $300 for a total of $800. So the other plan would be $2126 cheaper, minus your tax savings on a $3500 HSA contribution. You might save a little more with the other plan if some of the spending was covered by copays instead of the 10% deductible, but other that that, I think that's just about a bad as the HSA plan could get. Under higher or lower spending the HSA plan probably starts doing better.

I find insurance confusing a bit- I guess partially it's the deductible vs max out of pocket. Obviously the 500 difference of hte max out of pocket is covered by the premium difference.

I'd assume they plan for the deduction as it's their plan; but possibly not. My marginal tax rate is 22%/ FICA is 7.65/No state.

So assuming a HSA we're assuming I max the 3500 contribution per year (because tax advantaged yes), so 770 on marginal right there. 3500-770=2730 out of pocket=another  227.5/month I have to budget in.

zoochadookdook

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Re: Insurance plan choice/first career job with benifits
« Reply #3 on: October 22, 2019, 12:53:45 PM »
Ah so the company does contribute 50% of the employee premium

kei te pai

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Re: Insurance plan choice/first career job with benifits
« Reply #4 on: October 22, 2019, 01:14:48 PM »
Know absolutely nothing about your insurance, but good to see you around. How is it going?

ysette9

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Re: Insurance plan choice/first career job with benifits
« Reply #5 on: October 22, 2019, 04:24:00 PM »
Know absolutely nothing about your insurance, but good to see you around. How is it going?
Agreed! How is the job and new environment?

We are rooting for you.

zoochadookdook

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Re: Insurance plan choice/first career job with benifits
« Reply #6 on: October 23, 2019, 10:33:12 AM »
Know absolutely nothing about your insurance, but good to see you around. How is it going?
Agreed! How is the job and new environment?

We are rooting for you.

I'm alright; Job is keeping me busy day and night. Been bouncing around between trying to finish up house stuff for sale up in MI while here (so far had a hvac company have to come out to diagnose the heat "not working" after friends and family couldn't figure out the power switch was off-$150 or so *rolls eyes+ had 4 cleaners cancel). I'm bouncing around down here-may rent month to month from a friend for a bit but eying up real estate near downtown and such-with so many colleges and military a multi family or duplex may be something I want to pursue. Just taking it day by day. Flying back to finish up house stuff and the like. Personal life has been on auto pilot as I don't have one outside of finding the new gym to teach at and such. Biggest focus is straightening out my insurance/there's now a 401k offered as to I didn't have one previously. I may have to make a case study as some of this is over my head variable wise. Thanks for asking.

erutio

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Re: Insurance plan choice/first career job with benifits
« Reply #7 on: October 23, 2019, 10:45:15 AM »
If you are single, 27, and healthy, the usual answer is the HSA. 

zoochadookdook

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Re: Insurance plan choice/first career job with benifits
« Reply #8 on: October 23, 2019, 10:55:09 AM »
If you are single, 27, and healthy, the usual answer is the HSA.

Through googling back and forth it seems like the general answer is IF you are wealthy enough to leave/max a HSA  after maxing other tax accounts/paying out of pocket and leave it as a tri tax advantaged retirement/medical account it sways? I have NO idea what my out of pocket medical would be in a emergency but it seems like it can't exceept 4500/annually which I should have set aside in case. The underneath quote is an example of what i've seen seen to be the general consensus

"This is the key point that I've seen people miss when discussing this topic. If you can't max out all other tax advantaged accounts in addition to paying medical expenses out of pocket then leaving money in the HSA is either worse or at least no better than withdrawing and contributing to another account and adds the administrative burden of tracking expenses for many years.

If you can max out all other tax advantaged accounts in addition to paying medical expenses out of pocket then leaving money in the HSA is essentially giving you another tax advantaged account that you wouldn't otherwise have which is generally better than investing that money in a taxable account."
« Last Edit: October 23, 2019, 11:00:21 AM by zoochadookdook »

ysette9

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Re: Insurance plan choice/first career job with benifits
« Reply #9 on: October 23, 2019, 11:12:38 AM »
Congrats on having access to a 401k. Stick as much as you can into that sucker.

therethere

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Re: Insurance plan choice/first career job with benifits
« Reply #10 on: October 23, 2019, 11:13:39 AM »
I would do the HSA for a year and max it out. In fact, if you have the cash you'd be able to max it for 2019 and 2020 provided you're employed Dec 2019 and Dec 2020. You have good chances of making it one year without an emergency since you're young. Then you'll have enough to pay your deductible sitting in your HSA in case you ever desperately need it. To me it was a really nice safety net to have while I was paying down debt and building up wealth. I never needed it, and I've continued to max out my HSA. I've got nearly 55k in there now.

I follow the investment order. And maxing an HSA is #3. I think the key thing you're missing is that in an HSA you're also skipping the 7.6% FICA taxes. Any contributions to 401k's and IRA's you're still paying the FICA tax. So the tax savings alone an HSA is straight up better. The real difference is the compounding earnings on that 7.6% over 10-20 years. Sure it's negligible on a 1-3 year timeline.

zoochadookdook

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Re: Insurance plan choice/first career job with benifits
« Reply #11 on: October 23, 2019, 02:05:12 PM »
Congrats on having access to a 401k. Stick as much as you can into that sucker.

It's with John Hancock and I'm putting together the numbers on it right now. Kicking myself for not doing a sep years before in self employment but oh well!

zoochadookdook

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Re: Insurance plan choice/first career job with benifits
« Reply #12 on: October 23, 2019, 02:09:03 PM »
I would do the HSA for a year and max it out. In fact, if you have the cash you'd be able to max it for 2019 and 2020 provided you're employed Dec 2019 and Dec 2020. You have good chances of making it one year without an emergency since you're young. Then you'll have enough to pay your deductible sitting in your HSA in case you ever desperately need it. To me it was a really nice safety net to have while I was paying down debt and building up wealth. I never needed it, and I've continued to max out my HSA. I've got nearly 55k in there now.

I follow the investment order. And maxing an HSA is #3. I think the key thing you're missing is that in an HSA you're also skipping the 7.6% FICA taxes. Any contributions to 401k's and IRA's you're still paying the FICA tax. So the tax savings alone an HSA is straight up better. The real difference is the compounding earnings on that 7.6% over 10-20 years. Sure it's negligible on a 1-3 year timeline.

I do have the cash to max it this year; although I'm weighing the balances of it right now as I'm thinking of attempting to max my 401k for 2019 but if it was to come out of my paycheck (which I have 3 more til end of year) I have limitations on where to allocate everything.

True you're saving on FICA as well; I'm just wondering oppertunity cost on keeping it lump sum in there vs contributing it to other areas of life (looking to get into an investment property here soon/etc)

therethere

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Re: Insurance plan choice/first career job with benifits
« Reply #13 on: October 23, 2019, 02:24:48 PM »
Just so you know, once you get above some threshold (typically $1-3k) you can invest the money that's in your HSA.You don't get a whole lot of options, but I have mine invested in an sp500 fund.  They don't always advertise this in benefits explanations.

ysette9

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Re: Insurance plan choice/first career job with benifits
« Reply #14 on: October 23, 2019, 02:32:08 PM »
Congrats on having access to a 401k. Stick as much as you can into that sucker.

It's with John Hancock and I'm putting together the numbers on it right now. Kicking myself for not doing a sep years before in self employment but oh well!
Iím sure we would collectively be happy to help select fund choices if you need a second set of eyes. Be sure to keep an eye out for fees with a provider like John Hancock