Open Enrollment Question

[HairyUpperLip]

It's open enrollment time and I was thinking about switching from my normal health care plan to a high deductible one, but I had a couple questions which are at the bottom of my post. Thanks.

Married - 1 kid. Wife is SAHM.
Salary - 96.5k
401k - Contributing 20%

Insurance =

Currently paying $528.60/mo pre-tax

If I do HDHP and HSA the cost would be $291.40/mo plus $554.16/mo for HSA.
Total would be $845.56

$96500 - 18000 (401k) =
$78500

HDHP = 845.56/mo = 10,145.72/year

78500-10145 =
68355

This would be in the 15% federal tax bracket, I believe.

68355 (.85) =
58101.75

Georgia Tax = For earnings over $10,000.00, you'll pay 6.00% plus $340.00

So 58101.75 @ 6% = 3486.06+340 =
$3826.11

58101 - 3526 =
$54,575

I'm paid twice a month, so 24 pay periods

54575/24 =
$2273.96 per check after taxes.


Questions -
1. Math whizs, did I do all that correctly? No embarrassment or shame if I am wrong.

2. Does doing the HDHP and HSA seem to work for people in a similar life situation, 1 worker, 1 SAHM, 1 baby (maybe a 2nd later)?

3. Always open to advice and face punches.


Thank you everyone for your help in advance! :)

[mxt0133]

Regarding #1, HSA contribution if deducted from your paycheck avoids SS and Medicare taxes.  Did you take that into account?  Use a paycheck calculator to do more accurate estimates like: http://www.paycheckcity.com/calculator/salary/

Also i'm going to assume that the HSA at 554/mo is maxing is out, does your employer contribute as well, that is pretty standard.  If they do then your monthly HSA contribution will be lower because the limit is employer and employee contributions combined.


Regarding #2.  I have a HDHP as well, wife and two kids, one on the way.  And it makes sense for us because we are very healthy no chronic illness, no ongoing medications, occasional ER visit, ect.  As long as you can cash flow the out of pocket expenses, which is what your HSA is for then i think you will be fine.

[HairyUpperLip]

Regarding #1, HSA contribution if deducted from your paycheck avoids SS and Medicare taxes.  Did you take that into account?  Use a paycheck calculator to do more accurate estimates like: http://www.paycheckcity.com/calculator/salary/

Also i'm going to assume that the HSA at 554/mo is maxing is out, does your employer contribute as well, that is pretty standard.  If they do then your monthly HSA contribution will be lower because the limit is employer and employee contributions combined.


Regarding #2.  I have a HDHP as well, wife and two kids, one on the way.  And it makes sense for us because we are very healthy no chronic illness, no ongoing medications, occasional ER visit, ect.  As long as you can cash flow the out of pocket expenses, which is what your HSA is for then i think you will be fine.

Thanks, I know I should have used a paycheck calculator but wanted to test my own understanding of all this I guess. I'll check and compare numbers.

I don't think my employer is offering a match on it. I didn't see any information when I "signed up" for it regarding them contributing. I was just asked to entire the amount I want to contribute, so I did the max (6650) and it spit out the monthly rate for me.

Thanks on 2. That's what I was hoping to hear.

[HairyUpperLip]

Regarding #1, HSA contribution if deducted from your paycheck avoids SS and Medicare taxes.  Did you take that into account? 

No, I wasn't aware of this.

[HairyUpperLip]

This is what the calculator spit out...

Semi-monthly Gross Pay
$4,020.83
Federal Withholding
$308.47
Social Security
$164.96
Medicare
$38.58
Georgia
$145.97

HSA
$556.00

401k
$804.17

Net Pay
Net Pay$2,002.68

[themagicman]

You also did not include the standard deduction and person exemptions for each of you all! $12,600 (for standard deduc) and $12,000 ($4,000x3) for personal exemption should be taken out of your adjusted gross income

[HairyUpperLip]

can someone hold my hand and help me? I clearly have no idea how to correctly calculate this... Damn, that's bad. :(

[MDM]

Here's a rough estimate based on what I think is in your posts.  The state tax is likely wrong, but the federal items have a good chance of being correct (for 2014).  See http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/msg274228/#msg274228 if you would like to use the spreadsheet tool linked there and refine the numbers.

Good luck!

Category	Monthly amt.	Comments	Annual
Salary/Wages	$8,042		$96,500
Pretax Health Ins.	$291		$3,497
HSA/Pension	$554		$6,650
FICA base salary/wages	$7,196		$86,353
401(k) / 403(b) / 457(b) / etc.	$1,608	Above IRS limit?	$19,300
Income subject to IRS tax	$5,588		$67,053
Federal Adj. Gross Inc.	$5,588		$67,053
Federal tax	$376	2014 rates, stand. ded., 3 exemptions	$4,513
State/City tax	$335	Guess, using 0.06 * Fed. AGI	$4,023
Soc. Sec.	$446	Assumes 1 earner paying	$5,354
Medicare	$104		$1,252
Total income taxes	$1,262		$15,142
Income before other expenses	$4,326		$51,911