Reader Case Study - health insurance with chronic illness, next steps, and long-

[edmundblackadder]

Life Situation: 29F, single, no dependents, live with a roommate in New York City, employed in higher-ed technology, no debts -- I paid off 10K of student loans a few years ago, and got a late start on my career after a few rough years, health-wise.

Gross Salary/Wages: 70K

Pre-tax deductions:

• 403b: 1050/month (this is lower than it will be in 2016 because I screwed up, see below; my employer matches 100% up to 5% contribution)
• Insurance: 72/month
• FSA: 213/month
• Transit Reimbursement: 117 (see http://www.pace.edu/human-resources/compensation-benefits/full-time-faculty-staff/work-life/commuter-reimbursement; it's not my employer's policy but it's close enough)

Adjusted Gross Income: 52,576

Taxes:

• Federal: 1040/month
• State: 260/month
• City: 160/month

Current expenses:

• Rent: 1125/month
• Cleaning service: 60/month (for the sake of domestic harmony)
• Groceries: 200/month (I cook, from the farmer's market, almost exclusively, but my social life is largely having friends over for dinner, so I'm often cooking for two or three instead of one; my roommate and I share bulk items but not day-to-day cooking)
• Medical: 460/month (psychotherapy + medication for mental illness; I'm hoping to significantly decrease the therapy expense over the next year, but even if I can do that in the near future, I'll need treatment on and off for the rest of my life)
• Utilities: 150/month (usually lower, but I'd rather budget extra and throw the rest into the emergency fund at the end of the month, and there's always that one month when the A/C was on a lot)
• Phone: $26/month
• Monthly subway pass: 117/month
• Gift: 100 (I give my sister $100 a month to help her get rid of her undergrad loans; we're very close, I trust her to use it in the spirit I've offered it, I make 2.5x her income and undergrad loans can go fuck themselves)
• Misc.: 100/month (entertainment, wine, tailoring, presents for friends, etc.)

Annual:

• Travel: 3000 (my annual vacation is volunteering abroad; I have to pay for my flights, but room and board are covered for two weeks. Also I try to see my sister & best friend, who live in Boston and DC, respectively, at least once a year)
• Medical: 200 (copays for checkups, etc.)
• Clothes: 200 (95% from thrift stores, but I'm getting into the part of my career where I need to wear clothes that aren't jeans-and-t-shirts to work, even if I am in tech, so I'm trying to invest in long-term high-quality pieces)

Total: 2340/month, 31,500/year

Assets:

• Checking account: generally around 1.5K

• Money Market account (emergency fund): 10.3K, .2% APR

• Vanguard 403b: 30K, Target Retirement Fund 2050 (90/10 stock/bond)

• Vanguard Roth 403b: 5K, Target Retirement Fund 2050 (90/10 stock/bond)

I'm comfortable with 90/10 + emergency fund for now, since my timeline is pretty long.

Specific Question(s):

• Right now I'm trying to figure out how to handle health insurance for 2016; my employer offers both an FSA and an HDHP/HSA, but I can't use both (alas). Since I have fairly high medical expenses, but not enough to reach the deductible for the HDHP, I think my best plan is to stick with the maximum deduction for the FSA for next year, but would appreciate a sanity check on this.

• I screwed up my deductions for 2015 and maxed out my Roth 403b contributions first (I misunderstood the plan documents and thought the Roth 403b was a straight-up Roth IRA and I could contribute 18K to the regular 403b and 5.5K to the Roth; this is not the case and I'm really mad about it), so next year I will be putting 31% of my pre-tax salary into the 403b until I hit the 18K limit in October (or earlier if I get a raise!).  Spare money otherwise goes into the emergency fund, and will do so until I have 15K there (six months of expenses), and I'm not sure what to do next: a traditional IRA at Vanguard? A Roth IRA at Vanguard? A 529 for grad school, which I'm 70% sure I want to do?

• While I love my job and want to stay at my current institution indefinitely, I'm a novelist who is hoping to have that as a second-life career -- my calculations suggest I would be able to retire from my current career in twenty-ish-plus-or-minus years, and I'm not sure how to plan for a post-traditional-retirement career in the arts, when I have literally no idea what my income from it would be, if any.

(Sorry about the formatting fail, y'all, I swear that did not show up on preview.)

[Sibley]

First, you accidentally shrank the last part. Can you unshrink it for everyone else, who can't copy and paste into word and resize?

Your questions.
Insurance - Do the math. Figure out as best you can what you'd have to pay for both plans. Include premiums, copays, coinsurance, etc. My guess is that there's going to be a plan that has lower costs for you. Make sure it has your doctors in network, then go with it.

Savings - After the emergency fund, I'd recommend a tIRA. The problem with 529s is that you get locked into using it for education. You have more options with other types of accounts.

Writing - Do the best you can. It's very hard to make a living that way. If you want to be really conservative, assume you'll earn $0 until and treat anything earned as a bonus.

Other notes:
Your medical expenses are the big standout to me. Don't risk your health, but do what you can to reduce them. Get generic meds if you can, usually have a lower cost. You have a mental illness, try to keep your life and surroundings conducive to a healthy you, both physically and mentally. If you're healthy physically, maybe it'll positively effect your mental health. If you're healthy emotionally, the same. Really, this isn't so much save money, but optimize your lifestyle as much as possible to encourage health.

Travel - practice travel hacking. Don't fly to DC and Boston, take the train or bus. Also, you can volunteer closer to home! I volunteer every Saturday morning at the animal shelter. But there are thousands of opportunities in your area, look into it.

Clothes - keep looking for the high-quality pieces at thrift stores. I have a good selection of pants available at the closest Goodwill, and shirts are good at a farther one. If the regular location isn't good, try a different neighborhood.

[moneyandmillennials]

nor sure if this is the right use of words but kudos for making mental health a priority. 

for medical, does your employer offer a lower deductible or no deductible plan? it may cost you more in premiums more month but may actually be more cost effective depending on your deductible and co-pay amounts.

for the retirement, I would do the max of the 403b, the max for your Ira deductible limits (less than $5500 looking on your income) and the remainder of the $5500 to a Roth.

also I would not pay $100 for a sibling. she can get a 2nd job or look to see if she qualifies for loan forgiveness programs.

also I second sibley's suggestion, cutting down on the volunteering abroad and volunteering in your local community instead. 

[Playing with Fire UK]

   

• Gift: 100 (I give my sister $100 a month to help her get rid of her undergrad loans; we're very close, I trust her to use it in the spirit I've offered it, I make 2.5x her income and undergrad loans can go fuck themselves)

   

I love this, it seems like a way to get a lot of extra happiness for £100/mo.

Do you have a cashback/miles credit card? If you put your normal spending on this you might bring down the cost of your flights for a minor time commitment. If volunteering abroad is what you love to do for a holiday then I'd disagree with the suggestion to stop this.

I've found that the thrift stores in smarter neighbourhoods have better work clothes, not sure if it works in the same way in your area? If you can use a sewing machine that will also help you out with work clothes (fixing and resizing).

With regards to the writing, unless you plan to do freelance writing to pay the bills during your second career, I would plan to be financially independent before stopping work to write. This will mean that you can write for love of the craft rather than writing that doesn't inspire you.

While you love your work now, I would be wary of planning to stay any where forever, because managers or companies can change for the worse. By continuing to save you will give yourself options if you or the work changes.

[edmundblackadder]

Thanks, y'all, that's very helpful.

I don't have a credit card, and don't love the idea of adding yet another account to keep track of, but I do get miles via e-Rewards surveys, and use those for the international travel.

Yeah, the plan is to not be dependent on fiction to pay any bills, even after financial independence, I'm just trying to figure out if there's long-term planning I should be doing now.

[galrok]

I feel a little awkward giving advice since this will be my first post, but I'd like to comment on a couple items.

• You have a money market account at 0.2% listed as an emergency fund.
  
  Some people will say that your investments should be your emergency fund, but I'm not very comfortable with that.  You might consider laddering certificates of deposit.  Ally bank has rates at about 1% for a year term, and a no penalty option for a lower rate.  Local credit unions around here also offer promotional rates on limited amount of money (I've managed to get two 1 year, $3000, 3% certificates).  You could open 2 - 4 certificates and have them mature at different points during the year.
  
  
• You mention that you will be making Roth 403b contributions to hit the limit in October, but your employer matches your contributions at 5%.
  
  You may want to double check that your employer is matching contributions and not a percentage of your paycheck, BASED on your contribution amount.  My employer matches contributions up to 5% of my base pay, not my contribution amount.  That means I am capped at 5% of my paycheck no matter how much I contribute.  I would miss out on matching unless I contribute every pay period.

[edmundblackadder]

Thanks -- I checked my employer's docs, and they contribute regardless of my contribution. (There are reasons I want to stay in this job.)