I used esurance to find a pretty good high deductible health insurance plan for fiance. It has a $5K deductible. So, he's pretty much uninsured, but if he gets into a car accident or something he'll be covered and we'll be out $5K.
High deductible health insurance policies allow you to start a HSA. This is like a super-IRA. It is not taxed when you put money in (like a traditional IRA), AND it and its growth are not taxed when you take it out (like a Roth) for medical expenses. That's a pretty sweet deal.
But how do you open one?
Esurance offers four HSAs: Wells Fargo, Optum Health Bank, HSA Bank, and Bancorp Bank. All of them have awful monthly fees at least $2.50. I am not stupid enough to pay that.
The best HSA I could find was Sovereign Bank. No fees, a few decent mutual funds. That's good, I guess. There is a Fidelity HSA. It's in a lot of Fidelity documentation, but it looks like that is for companies and not the self-employed. So, Sovereign it is, I guess.
It would be nice to max out the HSA ($2,900). That money would not be taxed. But. Would we ever be able to use it? If it grows to, say, $15K in retirement, will we be able to spend it?
More importantly, do I want to disrupt my streamlined finances with a teeny account at a random bank just to leverage the tax benefits that we might not even be able to use?
7 comments:
Let's see. I spend $500 in medical bills and and the $30 for the HSA (which is tax free also). I am in the 15% tax bracket. That's $79.50 in taxes I don't pay just the first year. That $80 goes back into my HSA and earns interest tax free also and I can spend it at retirement just like my IRA if I don't have medical bills. Am I stupid enough to pay those HSA fees? You bet I am.
You speak as a 25 year old. Can you even imagine what happens if you had breast cancer? My friend is 31 and has breast cancer. She had to pay to freeze her eggs.
I say this not meanly because I feel invincible as well, it's not true. And yes you only pay $5k, but freezing eggs and taking these fertility drugs are likely not covered by your plan. You could be completely OOP it and it's expensive.
Second, not all medications/prescriptions are covered by the plan. If you want any experimental stuff like a regular insurance, you'll pay through the eye teeth. But wouldn't you want a chance?
Just stuff to consider when you write will we ever use $15k. I know how you feel, we're super healthy as well. However with 2 friends in their 30s recently diagnosed with cancer I'm rethinking my perceptions of health.
Fertility treatments are probably one of the best uses of HSA money. But I will never do that because I will be adopting anyway, and that is not covered. I wouldn't do it anyway because spending tens of thousands of dollars when there are needy children is just something I wouldn't do.
My grandmother died of breast cancer. I'm not saying there are no health expenses. More like are these badly run, expensive accounts worth it for a slight benefit and administrative hassle. I am leaning to solo K despite the HSA tax benefits. But I'm still researching.
You might check with your local banks to see if they offer HSA's; mine does. The interest rates are paltry, but they don't charge a fee. You will probably spend far more than $15,000 on health care in retirement, and under current law you also have the option of using money from an HSA to pay the premiums for long-term care insurance.
In retirement, I think you'd be surprised at how expensive medical care becomes. My grandmother just had a heart attack, and I can't imagine what the bills will look like. Plus, it would be a relief to know that even though you're old, your health care costs won't bankrupt your family members
If you get to retirement and you haven't spent it you can use the money for whatever you want, it doesn't have to be medical. Until then you can use it for dentist visits, dentures, co-pays and prescriptions. If he doesn't have any of those ever he's a lucky man indeed.
You know its not just the small banks that are offering HSAs you can actually get one at Bank of America and they pay 3.5% interest on your balance...not bad at all.
Also, if you're not interested in lasik surgery or over the counter meds and do not have any immediate health needs then you're actually the perfect candidate for an HSA, it can work as a savings vehicle for you as you invest the funds.
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