HSA right for me?

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Topic Author
zmcpherson
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Joined: Tue Apr 17, 2012 8:20 pm

HSA right for me?

Post by zmcpherson »

Hey guys I need to resign up for benefits this year and my employer just started offering a HD/HSA and I want to know if in my situation it makes sense and if there is a deductible/Max that makes that HSA not worth it.

Im been looking through all the board posts and it sounds like HSA's are highly favored in this community (sometimes even above 401k's), so I just wanted to double check before I picked one up and maxed it out.

I am 28 yo with currently 10k in my 401k and 10k into roth ira and another 15k in cash. Before taxes I gross almost 94k/year (I just started investing/saving a year and a half ago)

I havent had to go to a doctor in 3+ years and Im maybe sick once a year

The break down looks like this:

Plan: HD Standard Premium
Deductible: 2000 1500 500
Max: 4000 3000 1500
Coinsurance: 80% 80% 80%
Premium: $275.16 $322.20 $382.72

I see most people on the boards recommend getting one, maxing it out, claiming as much as legally possible, and then putting the reimbursement into a Roth. The trouble I am seeing with that plan for me is that I never need to buy anything that's medical, including medicine, or even Ibuprofen, so the money would kind of be sitting there until I turn 65.

Im currently looking into whether I can invest the money myself or if its a fixed savings account (1% or whatever).

Say though its currently like a 1% thing, I know that HSA's are an above the line deduction, but even then, would 1% be worth it or should I look into maxing out my 401K?

At 65 I know the money could go towards medicaid, but at only increasing at 1% when the rate of inflation is 2.5-3% doesnt seem like the best investment even if its an above the line deduction. So are HSA's only worth it if you can pick the investment vehicles?

As always, any and all help is always appreciated.
Lake Living
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Re: HSA right for me?

Post by Lake Living »

Is there a traditional plan being offered as well? If so, how much is the premium?
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jasonv
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Location: Austin, Texas

Re: HSA right for me?

Post by jasonv »

Personally, I would enjoy having the ability to save in an HSA, but I would only sign up for a HDHP if the total cost was really cheaper than the alternatives. If I understand correctly, your HDHP would be $47 cheaper than the standard plan while carrying a $500 higher deductible and $1000 higher max out of pocket. Are the premiums you listed monthly or annually?

It sounds like you hardly ever have any claims which would make the HSA more advantageous, but others with more experience can probably offer better advice on that.

One of the great things about an HSA is that the account can serve double duty as an emergency fund, and currently you actually can get savings rates in excess of 1%:

http://www.depositaccounts.com/savings/ ... ounts.html
porcupine
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Re: HSA right for me?

Post by porcupine »

zmcpherson wrote:[...]

Plan: HD Standard Premium
Deductible: 2000 1500 500
Max: 4000 3000 1500
Coinsurance: 80% 80% 80%
Premium: $275.16 $322.20 $382.72

[...]
As always, any and all help is always appreciated.
Am I correct in assuming that the "Max" listed is the out of pocket max for the year? Second question I have is whether the premiums listed are per month, twice a month, biweekly, or ...?

An easy back of the envelope calculation involves comparing the annual difference between the premiums and see where exactly that value lies, then assume that you will spend anywhere from $1500 to $2500 more for the HDHP than you would using the Premium (for instance) plan. If you can save more than $2500 in annual premiums with the HDHP, you are ahead of the curve. You appear to be saving about $1200 or $2600 (depending on frequency of the premium). In that case, if you don't go to see the doctor at all, you would be better off with the HDHP, but for other scenarios, you would need to do a comparison of each one ...

- Porcupine
Topic Author
zmcpherson
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Joined: Tue Apr 17, 2012 8:20 pm

Re: HSA right for me?

Post by zmcpherson »

Sorry I suppose I should of listed that Premium frequency is monthly (btw, thank you guys for the quick responses)

Actually going back and doing the calculations - annually, the standard is $611.52 more, and the Premium is $1,398.28 more than the HD/HSA.

I'm still trying to get a hold of the HR person to see what the APY on the HSA is.

Say its 1% and/or say its 3%, is anyone swayed towards the HSA in my situation?
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archbish99
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Re: HSA right for me?

Post by archbish99 »

Let's say that you can afford to set aside the full amount ($3,150) for an individual HSA, and your employer isn't making any contributions. Then you've saved your tax bracket (what is that?) plus payroll taxes (if funded through payroll deduction) on that $3,150. Assuming 25% tax bracket and not over the SS cap, that's $1,029 off your tax bill, plus $611 saved on the premiums, for a net savings of $1640.

If you have no medical expenses, that savings is yours to keep. In exchange, you've locked up money in an account you can't access until you do have medical expenses, or you retire. No "worse" than an IRA contribution, so no big deal about that.

Now let's say that you're on a ski lift that accidentally smacks into a mountain, and you need a medevac and some ICU time afterward that blows you straight to your OOP max. Your out of pocket maximum is $1,000 higher under the HDHP than under the Standard, which eats into your savings. You've still saved $640 in present-year income, and you come out ahead.

Compared to your top-coverage plan, you save $1398 in premiums plus the tax savings, so $2427 total savings. The ski lift accident costs you $2500 more under the HDHP than it would under the top plan, so you stand to lose about $73 worst-case by not taking the top plan.

I'd do it regardless of your health, honestly. Those are good terms.

Note: I'm assuming that the maximum you've listed is the maximum out-of-pocket expense (including the deductible), not the maximum coinsurance (after the deductible). That seems likely, but you should confirm that. Also, a different tax bracket, or state taxes, or anticipating being over the SS cap next year would change the specific numbers a little.
I'm not a financial advisor, I just play one on the Internet.
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grabiner
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Re: HSA right for me?

Post by grabiner »

zmcpherson wrote:I see most people on the boards recommend getting one, maxing it out, claiming as much as legally possible, and then putting the reimbursement into a Roth. The trouble I am seeing with that plan for me is that I never need to buy anything that's medical, including medicine, or even Ibuprofen, so the money would kind of be sitting there until I turn 65.
You'll need to buy something medical eventually; you'll start having medical expenses when you get older (or when you have children; an HSA can be used for your dependents' expenses), and even if you don't need it all, the HSA is just as good as an IRA.
I'm currently looking into whether I can invest the money myself or if its a fixed savings account (1% or whatever).
You can transfer your HSA to a different custodian just as you can with an IRA. Once it gets large enough to be worth investing, you can find a custodian which offers low-cost mutual funds or ETFs.
Say though its currently like a 1% thing, I know that HSA's are an above the line deduction, but even then, would 1% be worth it or should I look into maxing out my 401K?
The benefit of the HSA is not just that it is an above-the-line deduction, but that withdrawals for medical expenses tax-free. If you contribute $1000 to your 401(k), that is deductible from your taxes, but you pay tax on withdrawals.
Wiki David Grabiner
Topic Author
zmcpherson
Posts: 58
Joined: Tue Apr 17, 2012 8:20 pm

Re: HSA right for me?

Post by zmcpherson »

Thanks guys I really do appreciate the help. That breakdown was exactly what I couldn't figure out.

Are there any HSA custodians that let you invest in Vanguard MF's? and what are some HSA custodians that you guys are using?
scone
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Re: HSA right for me?

Post by scone »

zmcpherson wrote:Thanks guys I really do appreciate the help. That breakdown was exactly what I couldn't figure out.

Are there any HSA custodians that let you invest in Vanguard MF's? and what are some HSA custodians that you guys are using?
Check out the credit unions. Odds on, they would have the lowest fees, as they generally do for other products.
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore
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grabiner
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Re: HSA right for me?

Post by grabiner »

zmcpherson wrote:Thanks guys I really do appreciate the help. That breakdown was exactly what I couldn't figure out.

Are there any HSA custodians that let you invest in Vanguard MF's? and what are some HSA custodians that you guys are using?
There is a list of custodians with low-cost options (such as Vanguard mutual funds or brokerage accounts allowing you to buy ETFs on the wiki: Health Savings Account
Wiki David Grabiner
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