Author Topic: Is HSA plan right for me? Benefits?  (Read 4166 times)

cbr shadow

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Is HSA plan right for me? Benefits?
« on: November 06, 2013, 12:19:54 PM »
My current employer doesn't offer an HSA plan, but I'm going through a benefits package of a company that make me a job offer and they have an HSA plan available.  Can someone explain how this works, and if I would benefit from it?  I'm 30 yr old and almost never go to the doctor or have medical related expenses.  No kids, wife is on her own plan at her employer.
We max our 401k's and Roth IRA's and have a bit of money leftover.  I was considering starting a taxable account w/ vanguard but I've heard good things.  There was even an article that I read a long time ago titled something like "HSA, the ultimate retirement plan".

Thanks for any info.
-Ryan

jpo

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Re: Is HSA plan right for me? Benefits?
« Reply #1 on: November 06, 2013, 12:35:39 PM »
HSA allows you to put a few thousand each year tax-free aside that can be used for eligible medical expenses.

You can invest the funds in the account.

If you don't use the funds, when you're 60ish, you can withdraw without penalty and use it for whatever you please.

atlantalee

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Re: Is HSA plan right for me? Benefits?
« Reply #2 on: November 06, 2013, 12:36:39 PM »
My understanding of an HSA (based on experience with my company) is that it is kind of like a 401k for health expenses.  Although not necessarily invested, you can invest the funds once you reach a certain amount.  The benefits are: 1) pre-tax dollars 2) you can take it with you if you leave your company 3) you don't have to use the money within a certain amount of time.  I've heard people recommend that youngish people like you and me contribute the max amount so that we have a tax-free way to pay for inevitably increasing health costs as we age (or when we retire early).

I think this is the article to which you were referring: http://www.madfientist.com/ultimate-retirement-account/

Iron Mike Sharpe

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Re: Is HSA plan right for me? Benefits?
« Reply #3 on: November 06, 2013, 01:37:29 PM »
Not only is it free from federal income tax, it's free from most state income tax AND it's free from the 7.65% FICA tax.

You invest it, and it grows over time with the returns going untaxed.  AND if you withdraw it to use for medical or nursing expenses, it doesn't get taxed then.  And it can be invested like in a 401K or an IRA. 

If you don't use that money for medical or nursing expenses, at 65 you can withdraw it and only pay income tax on it.  So, you completely avoid the FICA tax.

Here's the really cool part.  Say you have to go to see a doctor a few times over the years and get charged.  You do not have to use your HSA money to pay for your medical costs.  You can pay for them out of pocket and save the receipts.  You can let that money grow over time and then pay yourself back tax free. 

Also, Medicare premiums can be paid with HSA dollars.

After your 401K employer match, this is the best investment one can make.


conpewter

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Re: Is HSA plan right for me? Benefits?
« Reply #4 on: November 06, 2013, 02:21:41 PM »
I have a high deductible account outside of work, is it still a good idea to open the HSA account?  I wouldn't avoid FICA, but I would avoid (above the line deduction) federal and state income tax

Edit:
Currently funding 401k only up to match
Plan to fully fund roth IRA
Also wanting to save up money to buy property to build my own house on (planned to take a couple years) and have two rentals (Currently just have one) when we move out of our current home.  So FIRE is planned more on the back of a bit of landlording.  Current age 30
« Last Edit: November 06, 2013, 02:57:10 PM by conpewter »

gotaholen1

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Re: Is HSA plan right for me? Benefits?
« Reply #5 on: November 06, 2013, 07:23:42 PM »
Please note:  It seems with Obamacare, they have changed some of the terms of the health insurance plans that allow you to contribute to an HSA.  For instance, I used to have a plan with a copay for doctor visits.  This is no longer an option for me in a reasonably priced HSA eligible plan.  My premium is also slated to go up from $100 a month to about $200 a month for less coverage and more possible out of pocket costs for basic doctor visits or medication.

This has forced me to seriously consider dropping my HSA eligible plan and go with my group policy through my employer.  I would highly recommend being diligent in comparison shopping before making the decision.

Conceptually there are a lot of good things about an HSA, but it may not be beneficial if you are only any prescriptions or visit the doctor fairly frequently.

Iron Mike Sharpe

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Re: Is HSA plan right for me? Benefits?
« Reply #6 on: November 07, 2013, 08:08:35 AM »
Yes, definitely check plans to see if they meet your needs.

My employer actually offers a great plan for my needs.  I switched from our Silver plan ($1100 deductible, $4K year max) to our Bronze HDHP ($2100 deductible, $5K max out of pocket).  But preventative care remains free under the Bronze plan.  So, my deductible and max go up by only $1000.  However, I am saving $1160 in taxes by using the HSA and my employer is chipping in $300 to the HSA.  So, I'm getting $1460 in free money each year and I would only have to spend an extra $1K per year. 

I wish I would have been financially aware last year and made the switch then.  But, I didn't have the tools then to think things through.

Dr. A

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Re: Is HSA plan right for me? Benefits?
« Reply #7 on: November 07, 2013, 08:45:40 AM »
In my experience, the only way to answer this question is to lay out your typical healthcare expenses, model a year under each plan option, and figure out which one has the lowest cost. For extra certainty, you could check a "worst likely case" (i.e. if you typically use very little care, assume you'll go to the emergency room, or have to get a few tests run at a specialist and start a prescription). With the HSA, this analysis should estimate the tax benefit of putting your pre-tax money in the account.

In my case, I'm pretty sure my employer structures the premium contributions to make it so the HSA always wins. They offer a PPO, but I can't come up with a scenario where it is appropriate for anyone (young, old, healthy or comatose), so rules of thumb like "young and healthy people should do an HSA" are not necessarily true. Doing the math is the only way to know.

Rural

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Re: Is HSA plan right for me? Benefits?
« Reply #8 on: November 08, 2013, 07:04:49 AM »
+1.

The premiums for the PPO, which is the only other option from my employer, come to more than the max out of pocket amount for the high deductible plan with HSA. I assume the only reason anyone is on the PPO is that they lack the savings to cover the out of pocket costs. So they pay the higher premiums plus copays.

monarda

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Re: Is HSA plan right for me? Benefits?
« Reply #9 on: November 09, 2013, 10:21:12 PM »
I signed up for a HSA plus HDHP between jobs when I had no other coverage. I will start a job with health benefits this week, and can no longer contribute to my HSA once that insurance starts. So I'm trying to decide how much I should feed my HSA this week, while I can.  Sometime in the next several years I will need dental work- my dentist is watching 3 of my teeth for crowns. It might be over 5 years before it's "time".  Crowns are pricey. I don't anticipate other health expenses in the near future. Should I feed my HSA to the max this week? Or should I just be sure there's 3 crowns worth of balance?