PBS Frontline : The Retirement Gamble, sorta Must See (3 Viewers)

[James Daulton]

I think most of you 'get what's mine' / 'don't leave money on the table' / 'spend it while I am young' guys filing at 62 are making a mistake.  I don't expect to change your minds, but I do think it's a mistake.  

If you haven't looked at the cost of a retirement home, take a few minutes and look it up.  It's not cheap.

If you haven't compared what a nice retiremement home looks like vs an inexpensive one, you should take a look.  There is a stark difference, not only in facility, personnel, but ultimately in the condition of the retirees / elderly.  These inexepnsive homes are filled with old zombies staring at a television, while the nice ones have people socializing, listening to musicians who come in, organizing outings, etc.  Some of that is selection bias, but not all of it.  

My point is, it is not about having money to travel / see the world / etc while you're young.  It's the reality of choosing between a crappy end-of-life and a comfortable one.  If you aren't financially planning to live into your 90s you are making a mistake in my opinion

Edit to add: Many in here have discussed pros/cons of buying long-term-care-insurance (LTCI).  There is no better 'insurance' than simply delaying SS til 70, you won't get a better price.

Retirement home?  WTF did I have kids if they're not going to take care of me in my decrepit state?  It's the least the ungrateful bastards can do after all I've done for them!

 

[ghostguy123]

Just  make sure you give all your assets away before you hit the nursing home stage, just leave yourself enough to pick a halfway decent place (medicare approved) and pay your own way for a year, them boom, on medicare

 

[ghostguy123]

My mom and here siblings were not able to get my grandmother to sign over her house a few years ago, now all the money she just got for it is a total waste and will pay for her eventual nursing home.  So sad.  She will get the exact same care yet her kids will be 100 grand lighter just because she didn't transfer the title to someone else a dew years ago. 

Not enough talk about this kind of thing in this thread regarding our older relatives and how they are just giving money away when they don't have to, when some of that would go a long way towards helping their kids and grandchildren.

Sure, a lot of people have enough money to pay for a nice nursing home for a long long time, but for those that only have the funds to do it for a year or two, that is basically 100-200 grand down the drain.

 

[Doctor Detroit]

Yeah that's what I want to spend my life savings on, a retirement home. 

I'll take mine at 62 and then check back in at 80 to tell you I was wrong.  Maybe one of you whipper snappers will come visit me in the Armed Forces Retirement home with an sign as a gift. 

 

[NutterButter]

Just  make sure you give all your assets away before you hit the nursing home stage, just leave yourself enough to pick a halfway decent place (medicare approved) and pay your own way for a year, them boom, on medicare

I don't believe Medicare does long term care; medicaid does.   

 

[inca911]

For those who have stated they do not qualify for a Roth IRA due to the income limit phase out, there is currently a "backdoor Roth IRA" option where you are still allowed to open a traditional IRA for the full Roth IRA amount (no income restrictions) and then transfer that traditional IRA to a Roth IRA.  The government has been talking about closing this option; however, it is currently still wide open.  Anyone can still get access to a Roth IRA via the "backdoor Roth IRA" loophole.  It takes maybe 15 total minutes to do this on Vanguard, and their customer service is always available to help.  Roth IRA money does not count as income in retirement, so it's an incredible advantage to have this type of income as a retirement option.  Make it happen!

 

[Steve Tasker]

For those who have stated they do not qualify for a Roth IRA due to the income limit phase out, there is currently a "backdoor Roth IRA" option where you are still allowed to open a traditional IRA for the full Roth IRA amount (no income restrictions) and then transfer that traditional IRA to a Roth IRA.  The government has been talking about closing this option; however, it is currently still wide open.  Anyone can still get access to a Roth IRA via the "backdoor Roth IRA" loophole.  It takes maybe 15 total minutes to do this on Vanguard, and their customer service is always available to help.  Roth IRA money does not count as income in retirement, so it's an incredible advantage to have this type of income as a retirement option.  Make it happen!

While this is a good option and should certainly be considered, it can cause tax implications if a taxpayer already has a traditional IRA.  I strongly recommend doing your due diligence to understand the tax implications before just jumping in headfirst.

 

[eoMMan]

My mom and here siblings were not able to get my grandmother to sign over her house a few years ago, now all the money she just got for it is a total waste and will pay for her eventual nursing home.  So sad.  She will get the exact same care yet her kids will be 100 grand lighter just because she didn't transfer the title to someone else a dew years ago. 

Not enough talk about this kind of thing in this thread regarding our older relatives and how they are just giving money away when they don't have to, when some of that would go a long way towards helping their kids and grandchildren.

Sure, a lot of people have enough money to pay for a nice nursing home for a long long time, but for those that only have the funds to do it for a year or two, that is basically 100-200 grand down the drain.

Signing over your house, stocks, etc before you die is usually a horrible idea.

 

[Doctor Detroit]

Yeah I've talked to people who did the back door and then they realize they have to pony up $15k in taxes.  I think a lot of times people think they are better off with Roth money when tax deferred money is actually better for them.  I think if you are moving a large sum it is in your best interest to consult a financial advisor. 

 

[ghostguy123]

Signing over your house, stocks, etc before you die is usually a horrible idea.

Right, but would you rather your kids/grandkids get that or the government when you need a nursing home.  Either way it is gone.

 

[RUSF18]

While this is a good option and should certainly be considered, it can cause tax implications if a taxpayer already has a traditional IRA.  I strongly recommend doing your due diligence to understand the tax implications before just jumping in headfirst.

This is the part of the backdoor Roth I never fully understood. So if I have a few current/former 401Ks from employers, those are not considered "traditional IRAs" for this purpose right?

I set up a Roth IRA for both me and my wife back before we were under the limit. When she moved to a job that didn't offer a 401K, I set up a true traditional IRA for her so at least we had something to fund. 

My read is that I cannot backdoor her (HAHA) Roth account because this traditional IRA has been set up, but I could for my own, not already having a traditional IRA established in my name. 

I'll obviously follow up and do the DD but am I on the right path here? Thanks. 

 

[NutterButter]

Right, but would you rather your kids/grandkids get that or the government when you need a nursing home.  Either way it is gone.

Depends what kind of nursing home you want to live in.   Do you want a medicaid provided one which I guarantee you isn't going to be very nice if you know anything about medicaid or do you want something nice if you can afford it.

 

[Niles Standish]

This is the part of the backdoor Roth I never fully understood. So if I have a few current/former 401Ks from employers, those are not considered "traditional IRAs" for this purpose right?

I set up a Roth IRA for both me and my wife back before we were under the limit. When she moved to a job that didn't offer a 401K, I set up a true traditional IRA for her so at least we had something to fund. 

My read is that I cannot backdoor her (HAHA) Roth account because this traditional IRA has been set up, but I could for my own, not already having a traditional IRA established in my name. 

I'll obviously follow up and do the DD but am I on the right path here? Thanks. 

If you're in a high tax bracket today the Traditional is probably a better option anyway.  Backdoors are great when you're in a low tax bracket.  So always talk to a tax professional before you do something like this.

 

[ghostguy123]

Depends what kind of nursing home you want to live in.   Do you want a medicaid provided one which I guarantee you isn't going to be very nice if you know anything about medicaid or do you want something nice if you can afford it.

Some of the homes that accept medicaid are pretty nice.  Look around.

 

[Wooderson]

If you're in a high tax bracket today the Traditional is probably a better option anyway.  Backdoors are great when you're in a low tax bracket.  So always talk to a tax professional before you do something like this.

Thus my thinking we are at the top bracket now. I want to shelter as much money as I can. 

Sorry if this a dumb question. So the first full year my wife and I have no income. Do we immediately drop to the lowest income and then can start cashing out the IRA's at a low tax rate. 

If this the case just need enough cash on hand to get to that first year of no income.  

 

[Niles Standish]

Thus my thinking we are at the top bracket now. I want to shelter as much money as I can. 

Sorry if this a dumb question. So the first full year my wife and I have no income. Do we immediately drop to the lowest income and then can start cashing out the IRA's at a low tax rate. 

If this the case just need enough cash on hand to get to that first year of no income.  

Your tax is calculated on your income for the previous year.  So if you made $1 million in 2015 and $0 in 2016 you'll be in the lowest bracket when you are paying 2016 taxes.

 

[Philo]

Yeah that's what I want to spend my life savings on, a retirement home. 

I don't think anyone wants/plans to live out the remainder of their years in a home. Yet, there they all are.

 

[Tom Hagen]

This is the part of the backdoor Roth I never fully understood. So if I have a few current/former 401Ks from employers, those are not considered "traditional IRAs" for this purpose right?

I set up a Roth IRA for both me and my wife back before we were under the limit. When she moved to a job that didn't offer a 401K, I set up a true traditional IRA for her so at least we had something to fund. 

My read is that I cannot backdoor her (HAHA) Roth account because this traditional IRA has been set up, but I could for my own, not already having a traditional IRA established in my name. 

I'll obviously follow up and do the DD but am I on the right path here? Thanks. 

401(k) accounts are not Traditional IRA's so you can do a backdoor Roth without tax consequences.  One thing to be very careful of, if you ever worked for a small employer SEP and SIMPLE IRA accounts are considered Traditional IRA's. 

Your wife would be allowed to do a backdoor Roth but a pro-rated portion of the conversion would be taxable income. For example, let's say she has $11,000 in a traditional IRA, contributes another $5,500 non-deductible and immediately converts the $5,500 to a Roth.  2/3 of the conversion ($11,000/$16,500) would be taxable as ordinary income.

 

[RUSF18]

401(k) accounts are not Traditional IRA's so you can do a backdoor Roth without tax consequences.  One thing to be very careful of, if you ever worked for a small employer SEP and SIMPLE IRA accounts are considered Traditional IRA's. 

Your wife would be allowed to do a backdoor Roth but a pro-rated portion of the conversion would be taxable income. For example, let's say she has $11,000 in a traditional IRA, contributes another $5,500 non-deductible and immediately converts the $5,500 to a Roth.  2/3 of the conversion ($11,000/$16,500) would be taxable as ordinary income.

Thanks. So let's say we do all the above for her during 2016. She's then left with a $11K traditional IRA and also she has a $5,500 Roth. 2017 we have to repeat the process and again 2/3 of the converted would be taxable? 

 

[Tom Hagen]

Thanks. So let's say we do all the above for her during 2016. She's then left with a $11K traditional IRA and also she has a $5,500 Roth. 2017 we have to repeat the process and again 2/3 of the converted would be taxable? 

Not exactly.  The remaining $11,000 would now include some non-deductible contributions so the same series of transactions the next year would result in something less than 2/3 being taxable.  Each year you do a backdoor Roth the amount of the conversion that is taxable should decrease.

 

[Niles Standish]

401(k) accounts are not Traditional IRA's so you can do a backdoor Roth without tax consequences.  One thing to be very careful of, if you ever worked for a small employer SEP and SIMPLE IRA accounts are considered Traditional IRA's. 

Your wife would be allowed to do a backdoor Roth but a pro-rated portion of the conversion would be taxable income. For example, let's say she has $11,000 in a traditional IRA, contributes another $5,500 non-deductible and immediately converts the $5,500 to a Roth.  2/3 of the conversion ($11,000/$16,500) would be taxable as ordinary income.

I might be misunderstanding what you're saying.  But if you took advantage of a traditional 401K and used pre tax money.  You're going to trigger a taxable event if you convert it to a backdoor Roth.  Since a Roth has to be funded with post tax money.

 

[Tom Hagen]

I might be misunderstanding what you're saying.  But if you took advantage of a traditional 401K and used pre tax money.  You're going to trigger a taxable event if you convert it to a backdoor Roth.  Since a Roth has to be funded with post tax money.

If you are converting from a 401(k) to a Roth you are correct, it would most likely be a taxable transaction but that is not how a backdoor Roth usual works.  Typically taxpayer's over the Roth contribution income limit make a non-deductible Traditional IRA contribution and then immediately convert that money to a Roth.  In that case the 401(k) is irrelevant. 

 

[RUSF18]

If you are converting from a 401(k) to a Roth you are correct, it would most likely be a taxable transaction but that is not how a backdoor Roth usual works.  Typically taxpayer's over the Roth contribution income limit make a non-deductible Traditional IRA contribution and then immediately convert that money to a Roth.  In that case the 401(k) is irrelevant. 

Yeah this is what I did for my wife last year. The $5500 into the traditional IRA was non-deductible. Thanks for the additional info in the prior post as well. 

 

[Niles Standish]

Yeah this is what I did for my wife last year. The $5500 into the traditional IRA was non-deductible. Thanks for the additional info in the prior post as well. 

Oh sorry I misread.  If you have already paid taxes on the money then yes the backdoor Roth is going to be a non-taxable event.  At least to the limits.

 

[netnalp]

My point is, it is not about having money to travel / see the world / etc while you're young.  It's the reality of choosing between a crappy end-of-life and a comfortable one.  If you aren't financially planning to live into your 90s you are making a mistake in my opinion

Yup. The inexpensive ones have the look and feel of an old hospital. The good ones can feel like a hotel and high end like a resort.

 

[Instinctive]

I feel like all this talk about how your tax brackets should influence your decision making misses the key value of a Roth IRA a bit. I'll write up an example later, but someone said the two methods are equal if you're in the same tax bracket the entire time. 

Thats not not entirely true. It's true if you only have $5500 of pre-tax money to save (or you can pay tax on that $5500 and then save what's left in a Roth), but for many that's not the question. The true value of the Roth is that it lets you save more money than a traditional precisely because it is post-tax savings. If you have enough that you can make a full $5500 contribution to a Roth IRA, it is basically always better to do so (the tax points at which it would no longer be better are above the phaseout where IRA contributions are no longer allowed), because you are saving $5500/(1-tax rate) in pre tax money. You can only save $5500 in pre-tax money with a traditional. If you have the ability to fully fund a Roth and you're in a 25% tax bracket then, you're effectively saving 25% more money in a tax advantaged space than you are with a traditional. AND then you don't pay tax on it or earnings when you pull from it. 

 

[Zegras11]

So all this talk about different types of IRAS. Why would you put all your eggs in something that has a cap on the yearly amount you can contribute?  And how much would a normal person wind up with to draw from?

 

[Tiger Fan]

Ok it would be nice for schools to teach finance, but I think we all know that won't happen in our lifetimes.  I can only imagine how  much money credit card companies are throwing out there to pay off schools to NOT teach this stuff. 

So I guess that begs the question, how do WE capitalize on the rest of the country being financial idiots?  Even with my stupid late start I still want to retire at 55 (60 at the absolute latest).  How do I make this happen?  Will maxing out a 403b from ages 32-55 along with a small-ish pension be enough?

I just got finished reading Rise of the Robots...very enlightening.  If I could sum it up, technology is increasing at such a rapid rate, and new companies being formed have so few employees compared to 20-30 years ago, so their valuations per employee are astronomical in comparison (Ex. Snapchat has a $48mln/employee valuation, where Google has $8mln/employee - Source)

Long story short, I think more "lower/middle class" Americans will be out of jobs over the course of the next 20 years than we've ever seen (I know...not necessarily a huge revelation)...and will become more dependent on social programs.  I'm actively looking at obtaining some section 8 housing (i.e. guaranteed income by gov't and the demand far exceeds the supply where I am).  Just one thing to look at.

I don't believe teaching personal finance in school is going to have a profound effect on the majority. The best comparison I can find is sex ed. High school kids continue to have unprotected sex. My kids were all home schooled. They had one formal semester on Personal Financial Literacy and we developed independent exercises to supplement that. (had them run the family budget for three months, made mock investments, and had full access to our retirement allocations. Each of my three kids have different opinions about money. But, they all understand the ramifications of overspending and under saving. I know our situation is unique since we took the time to home school our kids. As someone mentioned, it isn't always what a parent knows, but how much time they are willing to invest. Too many parents are expecting the village to raise their children. We need to change this.

An interesting comparison....but is sex ed really being taught in schools like it should be?

Sure, the problem is that I don't think 8/10 people know what an index fund is, how to get one, or even why it matters.

I mean let's be real,  expense ratios aren't the reason people either are or are not going to be able to retire.

It comes down to discipline.    Active Management/Passive Management... expense ratios...    these are like top 20-25% types of problems.

And beyond discipline it also comes down to taking risk....   I've got employees who if I could just convince to invest at all in ANY fund it would be an improvement over 100% money market guarantee 1% 4 life!!!!! ZOMG!

And if people's work plans suck...  who cares...  how many people really invest up to reach the match,  then max a Roth IRA, then actually have enough money to dip back into the 401k...  5%?  

The real issue is that most people simply don't care, and don't care to learn...   but then by the time they decide it might be a good time to start caring, they are 50+ and by then passive vs. active management doesn't even matter...   you're screwed and doomed to a craptirement.

See I look at it differently.  I don't worry about dying early (I'll be dead - won't bother me!).  I worry about living a long time.  A guy I work with was telling me about his great grandmother, 109 years old.  Still kickin, living by herself in fact.  You think she might wish she had waited til 70 to start SS instead of 62?  Her monthly payment difference might be $2000/month instead of $1200/month, maybe the difference between having someone come by once a day to cook her a meal and help around the house.

Excellent posting.  My grandmother just passed away at the age of 87.  Her last few weeks were spent in a medicade facility and it was so depressing.  No way in hell I'm going out like that.  I have a buddy in that industry and the difference in care is night and day.  And especially if you aren't fortunate enough to have family who physically lives close to you...you better start thinking about this stuff ASAP

Great advice but not everyone can do a Roth 

Even with the tax implications, look into the backdoor Roth....Barring you being a huge outlier, might be worth paying any taxes now to start doing these.

I think most of you 'get what's mine' / 'don't leave money on the table' / 'spend it while I am young' guys filing at 62 are making a mistake.  I don't expect to change your minds, but I do think it's a mistake.  

If you haven't looked at the cost of a retirement home, take a few minutes and look it up.  It's not cheap.

If you haven't compared what a nice retiremement home looks like vs an inexpensive one, you should take a look.  There is a stark difference, not only in facility, personnel, but ultimately in the condition of the retirees / elderly.  These inexepnsive homes are filled with old zombies staring at a television, while the nice ones have people socializing, listening to musicians who come in, organizing outings, etc.  Some of that is selection bias, but not all of it.  

My point is, it is not about having money to travel / see the world / etc while you're young.  It's the reality of choosing between a crappy end-of-life and a comfortable one.  If you aren't financially planning to live into your 90s you are making a mistake in my opinion

Edit to add: Many in here have discussed pros/cons of buying long-term-care-insurance (LTCI).  There is no better 'insurance' than simply delaying SS til 70, you won't get a better price.

 

[Zegras11]

Not going to copy the above. I don't have sec 8, but my rents are at 795 for very decent places. Refi being done that will set my retirement and three kids retirement for life. 

 

[ghostguy123]

I feel like all this talk about how your tax brackets should influence your decision making misses the key value of a Roth IRA a bit. I'll write up an example later, but someone said the two methods are equal if you're in the same tax bracket the entire time. 

Thats not not entirely true. It's true if you only have $5500 of pre-tax money to save (or you can pay tax on that $5500 and then save what's left in a Roth), but for many that's not the question. The true value of the Roth is that it lets you save more money than a traditional precisely because it is post-tax savings. If you have enough that you can make a full $5500 contribution to a Roth IRA, it is basically always better to do so (the tax points at which it would no longer be better are above the phaseout where IRA contributions are no longer allowed), because you are saving $5500/(1-tax rate) in pre tax money. You can only save $5500 in pre-tax money with a traditional. If you have the ability to fully fund a Roth and you're in a 25% tax bracket then, you're effectively saving 25% more money in a tax advantaged space than you are with a traditional. AND then you don't pay tax on it or earnings when you pull from it. 

It would seem to me that it would make a lot of sense to contribute to both traditional (especially 401k and 403b) and Roth.  It would also seem like a good idea to do so based on your current tax brackets, and invest accordingly.

For example, say the cutoff from the 15% to 25% tax bracket for married couples is $75,000.  If you are pretty sure your taxable income will be above that, say around 85k, I think it would be a good idea to take that $10,000 that is going to be taxed at the 25% rate and contribute it to your 401k/403b rather than contribute money into the Roth after it is taxed at 25%.

Otherwise, it would seem the Roth option makes more sense than traditional if you are using money that was just taxed at 15%, so maxing that out before making contributions (beyond company match of course) to the 401k/403b. 

Obviously nobody can predict what tax brackets will be when they retire in 20-30 years, but here is a question.  Say for example you are not going to be bringing in a lot of money during your retirement.  Would having money be better in the traditional or the roth at that point?  To me it would seem that the traditional would be better because you will probably be taxed the lowest amount on it.  I think this is why it would make a lot of sense to have both, just in case you aren't rolling in the dough in retirement.

 

[NutterButter]

I just got finished reading Rise of the Robots...very enlightening.  If I could sum it up, technology is increasing at such a rapid rate, and new companies being formed have so few employees compared to 20-30 years ago, so their valuations per employee are astronomical in comparison (Ex. Snapchat has a $48mln/employee valuation, where Google has $8mln/employee - Source)

Long story short, I think more "lower/middle class" Americans will be out of jobs over the course of the next 20 years than we've ever seen (I know...not necessarily a huge revelation)...and will become more dependent on social programs.  I'm actively looking at obtaining some section 8 housing (i.e. guaranteed income by gov't and the demand far exceeds the supply where I am).  Just one thing to look at.

Just finished reading that myself after reading Industries of the Future.  In 100 years, most jobs are going bye bye.   I wish he would've talked more about what our economy would look like in that scenario besides just talking about BIG.

 

[Tiger Fan]

Just finished reading that myself after reading Industries of the Future.  In 100 years, most jobs are going bye bye.   I wish he would've talked more about what our economy would look like in that scenario besides just talking about BIG.

Yeah, that chapter was very enlightening.  Typically, I find myself in the "handouts are bad in the long term" camp...but I'm coming around on it for sure.

 

[NutterButter]

Yeah, that chapter was very enlightening.  Typically, I find myself in the "handouts are bad in the long term" camp...but I'm coming around on it for sure.

In the next 20 years, it's probably necessary, but long term, I couldnt envision most of the country being able to live on it.  I'm really curious about that time frame.  

 

[Tiger Fan]

In the next 20 years, it's probably necessary, but long term, I couldnt envision most of the country being able to live on it.  I'm really curious about that time frame.  

No idea, gonna be very interesting to see how it all shakes out.

 

[Slapdash]

I wish we could put more in HSAs each year

 

[Sand]

I wish we could put more in HSAs each year

Remember when you tell your company to #### off and retire you get one lifetime HSA instant infusion.  So quit in January so you can get that last year in!

 

[Tiger Fan]

wish my company had HSAs

 

[NutterButter]

an HSA would be really nice

 

[mquinnjr]

wish my company had HSAs

I have one, it's awesome. The HSA account is coupled with a personal choice Aetna high deductible plan. HSA custodian is BoA and they offer Vanguard index funds, couldn't love it any more than I already do. Deductible is $1,250 a year OOP (from the fund), and I can put $3,350 into the account every year so I max it, basically an extension of a traditional 401k for the net if I had to ever outlay the full $1,250 in a year.

I run a lot and had really nasty pain in my right foot recently, so I saw my PCP fearing a stress fracture and wanted to rule it out. He had me get an X-Ray and an MRI, luckily both negative. I think the out the door OOP even with high deductible was like $55 total since the hospital where I had both procedures done was my home hospital, and was in-network. Rules. 

 

[Philo]

Remember you can wait as long as you want to reimburse yourself from the HSA. I'm paying all my out of pocket expenses from cash & savings, and holding on to the receipts. If I ever need to pull money out of the HSA, I've got over $3K in receipts to take money out penalty free. 

Until then, I'm using it as another tax free growth account. Pre tax money goes in and untaxed money comes out whenever (up to the receipts total until I reach the age where all withdrawals are without penalty). 

 

[ghostguy123]

I really need to learn more about HSA's.  I will be starting my new job next week, and they offer either an HSA or their regular health plan.  It's a major hospital system so their employee health plan is really nice.  Just wondering which would be better for my family. 

Both plans offer flexible spending accounts (though the HSA only offers it for dental and vision).

 

[Instinctive]

It would seem to me that it would make a lot of sense to contribute to both traditional (especially 401k and 403b) and Roth.  It would also seem like a good idea to do so based on your current tax brackets, and invest accordingly.

For example, say the cutoff from the 15% to 25% tax bracket for married couples is $75,000.  If you are pretty sure your taxable income will be above that, say around 85k, I think it would be a good idea to take that $10,000 that is going to be taxed at the 25% rate and contribute it to your 401k/403b rather than contribute money into the Roth after it is taxed at 25%.

Otherwise, it would seem the Roth option makes more sense than traditional if you are using money that was just taxed at 15%, so maxing that out before making contributions (beyond company match of course) to the 401k/403b. 

Obviously nobody can predict what tax brackets will be when they retire in 20-30 years, but here is a question.  Say for example you are not going to be bringing in a lot of money during your retirement.  Would having money be better in the traditional or the roth at that point?  To me it would seem that the traditional would be better because you will probably be taxed the lowest amount on it.  I think this is why it would make a lot of sense to have both, just in case you aren't rolling in the dough in retirement.

You missed the point I made. Perhaps because I didn't make it well. 

The tax brackets are irrelevant for nearly all of these decisions. If you have the ability to put the full IRA amount in a Roth, it is an objectively better choice. 

Edit: because you save more dollars in tax advantages space 

 

[Sand]

Both plans offer flexible spending accounts (though the HSA only offers it for dental and vision).

This is by law, BTW, not the employer.

A couple articles about why HSAs are free-free in the tax realm are here and here.  There is some disagreement on whether to save the money to grow or to use it and just save whatever is left YoY.  I prefer the former, but there are smart people who subscribe to the latter.

 

[ghostguy123]

This is by law, BTW, not the employer.

A couple articles about why HSAs are free-free in the tax realm are here and here.  There is some disagreement on whether to save the money to grow or to use it and just save whatever is left YoY.  I prefer the former, but there are smart people who subscribe to the latter.

I am trying to figure out if it is better for me to pick the HSA or the traditional health plan.  If I did the HSA I would put in the max contribution.  My employer would contribute $1,000 per year.

I am just having a hard time researching to find out which makes sense for me and my family, the HSA or the traditional.  I know the HSA has some benefits, but will it save me more money that choosing the traditional?  If I were to choose the HSA I know I would likely contribute the max and then use what is in the HSA to pay for any health care costs as they come up, but is that going to be better for us than just going the traditional route?

 

[Slapdash]

I've been spending the HSA as it comes along.  Haven't had too many medical expenses and max it, so I have over $7k in there.  Hoping to keep growing it as long as I have the plan.  It will be good to have tax-free growth later on with the increase in medical costs.

 

[JoeSteeler]

I am trying to figure out if it is better for me to pick the HSA or the traditional health plan.  If I did the HSA I would put in the max contribution.  My employer would contribute $1,000 per year.

I am just having a hard time researching to find out which makes sense for me and my family, the HSA or the traditional.  I know the HSA has some benefits, but will it save me more money that choosing the traditional?  If I were to choose the HSA I know I would likely contribute the max and then use what is in the HSA to pay for any health care costs as they come up, but is that going to be better for us than just going the traditional route?

What medical expenses does your family have in a typical year including RX? 

 

[Sand]

I am trying to figure out if it is better for me to pick the HSA or the traditional health plan.  If I did the HSA I would put in the max contribution.  My employer would contribute $1,000 per year.

I am just having a hard time researching to find out which makes sense for me and my family, the HSA or the traditional.  I know the HSA has some benefits, but will it save me more money that choosing the traditional?  If I were to choose the HSA I know I would likely contribute the max and then use what is in the HSA to pay for any health care costs as they come up, but is that going to be better for us than just going the traditional route?

You can calculate the breakeven point.  In mine, at least, there is a breakeven out of pocket at which the higher cost traditional plan makes sense as the out-of-pocket for the high-deductible plan is higher.  In general (and it really depends on your particular plans) if you're healthy and have low expenses the high deductible plan makes sense and if you have high medical expenses or drug costs the traditional makes sense.  I've seen posts from people out there who try and arbitrage this by alternating years and doing expensive stuff during the traditional year.  That seems pretty iffy to me, but I've seen it.

 

[FUBAR]

I am trying to figure out if it is better for me to pick the HSA or the traditional health plan.  If I did the HSA I would put in the max contribution.  My employer would contribute $1,000 per year.

I am just having a hard time researching to find out which makes sense for me and my family, the HSA or the traditional.  I know the HSA has some benefits, but will it save me more money that choosing the traditional?  If I were to choose the HSA I know I would likely contribute the max and then use what is in the HSA to pay for any health care costs as they come up, but is that going to be better for us than just going the traditional route?

I'd imagine the devil is in the details and I'm not even eligible for a HSA, but why would an HSA be better than "traditional" health insurance?  I know I wouldn't trade my health insurance for an HSA. 

ETA: do you have to pay into or purchase the insurance?  

 

[ghostguy123]

Both my HSA option and the traditional option are exactly the same in terms of who I can see in my network.  Only difference is how i pay for it.

I know we would certainly reach the max deductible of $3,000 each year if we has the HSA.

Though the max out of pocket for the HSA is $5,000 and for the traditional it is $4,400.

 

[Sand]

I'd imagine the devil is in the details and I'm not even eligible for a HSA, but why would an HSA be better than "traditional" health insurance?  I know I wouldn't trade my health insurance for an HSA. 

ETA: do you have to pay into or purchase the insurance?  

High deductible insurance - still insurance but you have much lower monthly premiums, but your out of pocket can possibly be higher if you have a major medical event.  Along with an HDP you can get a health savings plan (HSA) that is a tax sheltered account - tax free going in and tax free going out as long as it's used for medical expenses.  If you are young and healthy a HDP makes a lot of financial sense.  In my case the HDP and traditional are the same provider so same network - same care, just a different cost structure to pay for care.

From a retirement point of view HSAs don't have to be used right away.  You can reimburse yourself anytime, so it can be a powerful retirement tool if you let it grow and use it later on.