Personal Finance Advice and Education! (3 Viewers)

[DocHolliday]

I have a buddy who uses a financial advisor. He knows I use and endorse Vanguard but he is less open to managing his own money. In trying to get a handle on his fees, he told me that the outfit charges him 1% annually to manage his money. Question: when these folks invest a client's funds in an ETF or mutual fund that carries an expense ratio (they have him in JAHYX, for instance, which reports an expense ratio of 0.88%), those fees stack, is that right? I assume that he doesn't get a reduced or eliminated expense ratio since they're already hitting him with 1%. He is thinking about dumping them if they're costing him upwards of 2% per year to have him invested in ETFs or other equities that he could just as well buy and hold for himself. Thanks for any info.

Yeah, that 1% plus the higher fees in those funds will crush him long term.
Like, if he has $100k today and just adds $1,000 monthly for 20 years at 8% that’s over a million. Add that 1% fee plus the higher expense ratio of 0.88%, that’s about $780k. It gets worse if he has more now or adds more monthly which I’d assume he does.
Is his “advisor” worth almost 1/4 million over 20 years?

I hear you. It has already been a couple decades. He is 52 and looking to retire soon (I'm trying to convince him that that is a bad idea but that's another story.) Since I have some knowledge and manage my own money, he and I have been talking for the past couple of years. He had me look over his portfolio and I noted two holdings that made up an inordinate percentage of his portfolio given his risk tolerance. My understanding is that they mostly leave his portfolio on auto-pilot, to the point where they may be accused of "reverse churning." Anyway, when I told him about these two individual stocks buried within two dozen ETFs, mutual funds and bonds (he is a 60/40 guy), he contacted his advisor. They said, "why yes, we agree that you should liquidate those holdings and spread the funds around through your more conservative holdings." Thankfully, those two names boomed over the past five years but the question is: what are they doing to earn their fees? There is a degree of loyalty here because this same outfit manages his parents holdings which are probably 10x his. I assume they pay more attention to mom and dad's portfolio than the relatively poorer son. He is leaning towards pulling the plug and moving to Vanguard. Seems obvious to me but that family history is deep and he is not very knowledgeable about these things.

He should pull the plug immediately and go to Vanguard or Fidelity. Buy a few cheap funds based on his risk tolerance and sleep easy at night.

 

[-OZ-]

I have a buddy who uses a financial advisor. He knows I use and endorse Vanguard but he is less open to managing his own money. In trying to get a handle on his fees, he told me that the outfit charges him 1% annually to manage his money. Question: when these folks invest a client's funds in an ETF or mutual fund that carries an expense ratio (they have him in JAHYX, for instance, which reports an expense ratio of 0.88%), those fees stack, is that right? I assume that he doesn't get a reduced or eliminated expense ratio since they're already hitting him with 1%. He is thinking about dumping them if they're costing him upwards of 2% per year to have him invested in ETFs or other equities that he could just as well buy and hold for himself. Thanks for any info.

Yeah, that 1% plus the higher fees in those funds will crush him long term.
Like, if he has $100k today and just adds $1,000 monthly for 20 years at 8% that’s over a million. Add that 1% fee plus the higher expense ratio of 0.88%, that’s about $780k. It gets worse if he has more now or adds more monthly which I’d assume he does.
Is his “advisor” worth almost 1/4 million over 20 years?

I hear you. It has already been a couple decades. He is 52 and looking to retire soon (I'm trying to convince him that that is a bad idea but that's another story.) Since I have some knowledge and manage my own money, he and I have been talking for the past couple of years. He had me look over his portfolio and I noted two holdings that made up an inordinate percentage of his portfolio given his risk tolerance. My understanding is that they mostly leave his portfolio on auto-pilot, to the point where they may be accused of "reverse churning." Anyway, when I told him about these two individual stocks buried within two dozen ETFs, mutual funds and bonds (he is a 60/40 guy), he contacted his advisor. They said, "why yes, we agree that you should liquidate those holdings and spread the funds around through your more conservative holdings." Thankfully, those two names boomed over the past five years but the question is: what are they doing to earn their fees? There is a degree of loyalty here because this same outfit manages his parents holdings which are probably 10x his. I assume they pay more attention to mom and dad's portfolio than the relatively poorer son. He is leaning towards pulling the plug and moving to Vanguard. Seems obvious to me but that family history is deep and he is not very knowledgeable about these things.

He should pull the plug immediately and go to Vanguard or Fidelity. Buy a few cheap funds based on his risk tolerance and sleep easy at night.

If he’s looking to retire soon and has a low risk tolerance he’s probably better off with something like 60% VT, 40% BND or a cd ladder. I’d probably use the ladder at that point. That’s just a standard portfolio around retirement.

 

[jm192]

Reading the stories above reminds in part why I don't think I'll ever have an advisor.

Someone on a podcast one time said something to the effect of "If you know enough to know if your advisor is doing a good job, you know enough to manage your own money."

I'm not mentally equipped for "Here's my money, make it grow." I'd want to be able to see every move they made, and then I'd call them when I didn't like what they did. I also would cringe when they tried to sell me something specific. In general, I'm a big believer if I didn't already know I wanted/needed it--I'm not going to be talked into wanting/needing it by someone else. No, I do not want 2 Apple Pies.

A lot of the doctors I know swear by "their guy." Most of them can't tell me what they're being charged. Most of them say they don't want to think about it, worry about it, learn about it. It's just...so expensive not to.

I spent probably 25 hours so a few years back researching/learning so that I could manage this stuff. I still listen to podcasts, and read up on things. It's a lot of time, but money management has almost become a hobby.

I don't think a lot of advisors would drastically outperform me. We're in high quality Index Funds and ETF's with low expense ratios. I've done some tax loss harvesting. Not to be arrogant. I'm not some guru. I don't think I'm any better than investing than a lot of people in this thread. I just think it's a lot simpler than they want us to believe. They rely on that sense of "man this stuff is just so complicated" to keep building a customer base.

Now don't get me wrong. I'm sure there are some fantastic advisors that can and do outperform my very simple investment strategy. I'm just not convinced they're going to consistently beat my returns at a rate to justify the cost.

 

[jm192]

I feel like I de-railed the thread haha. Getting back on track.

Put some money into the Vanguard money market account. May eventually buy I-bonds instead but felt like I needed to just do something with the cash.

 

[NutterButter]

Reading the stories above reminds in part why I don't think I'll ever have an advisor.

Someone on a podcast one time said something to the effect of "If you know enough to know if your advisor is doing a good job, you know enough to manage your own money."

I'm not mentally equipped for "Here's my money, make it grow." I'd want to be able to see every move they made, and then I'd call them when I didn't like what they did. I also would cringe when they tried to sell me something specific. In general, I'm a big believer if I didn't already know I wanted/needed it--I'm not going to be talked into wanting/needing it by someone else. No, I do not want 2 Apple Pies.

A lot of the doctors I know swear by "their guy." Most of them can't tell me what they're being charged. Most of them say they don't want to think about it, worry about it, learn about it. It's just...so expensive not to.

I spent probably 25 hours so a few years back researching/learning so that I could manage this stuff. I still listen to podcasts, and read up on things. It's a lot of time, but money management has almost become a hobby.

I don't think a lot of advisors would drastically outperform me. We're in high quality Index Funds and ETF's with low expense ratios. I've done some tax loss harvesting. Not to be arrogant. I'm not some guru. I don't think I'm any better than investing than a lot of people in this thread. I just think it's a lot simpler than they want us to believe. They rely on that sense of "man this stuff is just so complicated" to keep building a customer base.

Now don't get me wrong. I'm sure there are some fantastic advisors that can and do outperform my very simple investment strategy. I'm just not convinced they're going to consistently beat my returns at a rate to justify the cost.

I think it certainly gets more complicated as you approach retirement and you need to diversify to reduce risk, minimize taxes and take advantage of obamacare subsidies if you retire early. Right now at 46 and at least 8 years until retirement, its just save as much as I can and spread it out across various stock indices in both roth and traditional accounts. But there's gonna be more and more decisions that need to be made starting soon. I'm not considering an advisor b/c I like this kind of stuff but I can certainly see the benefit. Its analogous to home improvement. You can watch a lot of youtube videos and save thousands on repairs or just pay someone to do it b/c that's just not your thing.

 

[Leeroy Jenkins]

So my company is just now starting an HSA. To get it though, you have to enroll in the high deductible plan. The deductible is $3200 per individual and $6400 for family.

Is it normally tied to high deductibles like this?

Is there any reason why I shouldn’t do the HSA and maximize the contributions?

I know folks in here have praised hsa in the past.

Tia.

 

[-OZ-]

I'm sure there are some fantastic advisors that can and do outperform my very simple investment strategy. I'm just not convinced they're going to consistently beat my returns at a rate to justify the cost.

I’ll never pay an advisor to beat the market. But I’ll probably pay a FA to double check my work, help tax plan, and in case I’m no longer able to do it (by death or loss of mental acuity)

 

[-OZ-]

So my company is just now starting an HSA. To get it though, you have to enroll in the high deductible plan. The deductible is $3200 per individual and $6400 for family.

Is it normally tied to high deductibles like this?

Is there any reason why I shouldn’t do the HSA and maximize the contributions?

I know folks in here have praised hsa in the past.

Tia.

The only way to get an HSA is to have a high deductible plan.
I’m not eligible, but if I were I’d probably have one. It’s only probably for us as a family of 7 because I’d need to check how much we’d spend with the deductibles.

 

[NutterButter]

So my company is just now starting an HSA. To get it though, you have to enroll in the high deductible plan. The deductible is $3200 per individual and $6400 for family.

Is it normally tied to high deductibles like this?

Is there any reason why I shouldn’t do the HSA and maximize the contributions?

I know folks in here have praised hsa in the past.

Tia.

Curious, what's the premium and coinsurance difference?

 

[matttyl]

So my company is just now starting an HSA. To get it though, you have to enroll in the high deductible plan. The deductible is $3200 per individual and $6400 for family.

Is it normally tied to high deductibles like this?

Is there any reason why I shouldn’t do the HSA and maximize the contributions?

I know folks in here have praised hsa in the past.

Tia.

Yes, you must have an HDHP (high deductible health plan) to be able to participate in an HSA. I’m a big advocate of HSAs, they are pretty cool if you use them properly. You get a deduction for the contribution, if those are invested and make money, it’s tax free.

 

[Leeroy Jenkins]

So my company is just now starting an HSA. To get it though, you have to enroll in the high deductible plan. The deductible is $3200 per individual and $6400 for family.

Is it normally tied to high deductibles like this?

Is there any reason why I shouldn’t do the HSA and maximize the contributions?

I know folks in here have praised hsa in the past.

Tia.

Curious, what's the premium and coinsurance difference?

Coinsurance is 30% in-network on everything but preventative care. This is essentially the same as the plan I was on before, except sick visits and specialists were a $40 copay and now prescription drugs are also subject to 30%, as opposed to $10. Deductible is $1200 more for individual ($2400 family). We are a self-insured company plan.

 

[matttyl]

So my company is just now starting an HSA. To get it though, you have to enroll in the high deductible plan. The deductible is $3200 per individual and $6400 for family.

Is it normally tied to high deductibles like this?

Is there any reason why I shouldn’t do the HSA and maximize the contributions?

I know folks in here have praised hsa in the past.

Tia.

Curious, what's the premium and coinsurance difference?

Coinsurance is 30% in-network on everything but preventative care. This is essentially the same as the plan I was on before, except sick visits and specialists were a $40 copay and now prescription drugs are also subject to 30%, as opposed to $10. Deductible is $1200 more for individual ($2400 family). We are a self-insured company plan.

Right, an HDHP can not have any upfront (before deductible) benefits, other than preventive care. The idea is that you’ll save premium dollars by going to this type of plan, and you can put those savings into an HSA and get a tax deduction. If you then have claims, you can pay for those with pre tax dollars.

 

[Nugget]

So my company is just now starting an HSA. To get it though, you have to enroll in the high deductible plan. The deductible is $3200 per individual and $6400 for family.

Is it normally tied to high deductibles like this?

Is there any reason why I shouldn’t do the HSA and maximize the contributions?

I know folks in here have praised hsa in the past.

Tia.

I max my HSA each year - $7750 for 2023, $8300 for 2024. Contributions go in without paying federal, state, or payroll taxes. In my plan, it requires $1000 cushion, then the rest can be invested in standard mutual fund type options. Think my deductible is around $7K. I've built up a decent buffer over the past couple years - hopefully it will be used towards retirement healthcare in 20 years. If not, it basically acts as a traditional IRA.

My premiums in traditional plans were higher than the $7K deductible - it became the only viable option in my workplace.

 

[dino259]

So my company is just now starting an HSA. To get it though, you have to enroll in the high deductible plan. The deductible is $3200 per individual and $6400 for family.

Is it normally tied to high deductibles like this?

Is there any reason why I shouldn’t do the HSA and maximize the contributions?

I know folks in here have praised hsa in the past.

Tia.

Yes, you must have an HDHP (high deductible health plan) to be able to participate in an HSA. I’m a big advocate of HSAs, they are pretty cool if you use them properly. You get a deduction for the contribution, if those are invested and make money, it’s tax free.

The company that runs our HSA seems to have a pretty high cost for the investment portion of the funds. Am I correct in seeing that you can transfer custodian of your HSA once a year? If so, what are some of the better low cost options for HSA custodians?

 

[Craig_MiamiFL]

Yes on HSA and investing contributions if have option. Max out each year. Our Company/Custodian handling doesn't charge any premium on funds with wide range of choices and gains are tax free when used on medical expenses.

$1500 deductible. Company makes contributions of half that/year. (The deductible of our regular plans are like 2-3x more). For us it's really a no brainer to go with HDHP IMO

 

[shuke]

So my company is just now starting an HSA. To get it though, you have to enroll in the high deductible plan. The deductible is $3200 per individual and $6400 for family.

Is it normally tied to high deductibles like this?

Is there any reason why I shouldn’t do the HSA and maximize the contributions?

I know folks in here have praised hsa in the past.

Tia.

Do it if makes sense for your situation, depends on how much you usually spend to cover existing/ongoing conditions. I believe an HSA is the only triple tax-free investment. Pre-tax contributions, tax-free growth, and tax-free withdrawals.

 

[gianmarco]

So my company is just now starting an HSA. To get it though, you have to enroll in the high deductible plan. The deductible is $3200 per individual and $6400 for family.

Is it normally tied to high deductibles like this?

Is there any reason why I shouldn’t do the HSA and maximize the contributions?

I know folks in here have praised hsa in the past.

Tia.

Do it if makes sense for your situation, depends on how much you usually spend to cover existing/ongoing conditions. I believe an HSA is the only triple tax-free investment. Pre-tax contributions, tax-free growth, and tax-free withdrawals.

We have the above and we use it as an investment vehicle. We don't use it to cover any medical expenses (yet).

 

[matttyl]

So my company is just now starting an HSA. To get it though, you have to enroll in the high deductible plan. The deductible is $3200 per individual and $6400 for family.

Is it normally tied to high deductibles like this?

Is there any reason why I shouldn’t do the HSA and maximize the contributions?

I know folks in here have praised hsa in the past.

Tia.

Do it if makes sense for your situation, depends on how much you usually spend to cover existing/ongoing conditions. I believe an HSA is the only triple tax-free investment. Pre-tax contributions, tax-free growth, and tax-free withdrawals.

True, but 529s come close (contributions can be state tax deductible). Love the triple tax free nature of them - and you can use them for lots of medical and dental expenses.

 

[Nugget]

So my company is just now starting an HSA. To get it though, you have to enroll in the high deductible plan. The deductible is $3200 per individual and $6400 for family.

Is it normally tied to high deductibles like this?

Is there any reason why I shouldn’t do the HSA and maximize the contributions?

I know folks in here have praised hsa in the past.

Tia.

Do it if makes sense for your situation, depends on how much you usually spend to cover existing/ongoing conditions. I believe an HSA is the only triple tax-free investment. Pre-tax contributions, tax-free growth, and tax-free withdrawals.

True, but 529s come close (contributions can be state tax deductible). Love the triple tax free nature of them - and you can use them for lots of medical and dental expenses.

I also have an limited FSA that can be used only for dental/vision - I fund $500-1500 depending on expected expenses for the year. Around $500-650 can be carried over YOY - not sure where the current limit is.

 

[SFBayDuck]

I've had to reimburse myself from my HSA a couple of times in the past, but the goal is to just keep putting that money away every year as another retirement vehicle. I keep a google drive folder where I upload all unreimbursed medical receipts (and a folder for the few I've had reimbursed), and a spreadsheet of the total amounts so I know at any given time how much I could withdraw if needed.

The company that runs our HSA seems to have a pretty high cost for the investment portion of the funds. Am I correct in seeing that you can transfer custodian of your HSA once a year? If so, what are some of the better low cost options for HSA custodians?

I haven't rolled funds over from my current employer HSA, but from my previous employer I rolled them over to Fidelity and can invest in pretty much anything there just like any of my other accounts with them - currently have a mix of individual stocks and ETFs. I'll have to look into rolling over my current one to that, hadn't thought about it.

 

[NutterButter]

I hate all your HSA types. I hope you're all forced to commute to work. I'm just kidding. I love you all. I am jealous though.

 

[Leeroy Jenkins]

Went with it and maxed contribution.

 

[Andrew74]

I hate all your HSA types. I hope you're all forced to commute to work. I'm just kidding. I love you all. I am jealous though.

I have an HSA and work from home whenever I like.

 

[-OZ-]

I hate all your HSA types. I hope you're all forced to commute to work. I'm just kidding. I love you all. I am jealous though.

I can’t complain though. Our health insurance costs $30/month with a catastrophic cap of $4,000. With a family of 7 (oldest hasn’t aged out yet), that’s tough to beat.

I do like the FSA.

 

[The Z Machine]

It's the high deductible thing that scares me away from the HSA.

 

[pecorino]

It's the high deductible thing that scares me away from the HSA.

It’s ludicrous that the government doesn’t allow everyone to open an HSA. The requirement to have a high deductible plan is dumb.

 

[Mitchie]

It's the high deductible thing that scares me away from the HSA.

It’s ludicrous that the government doesn’t allow everyone to open an HSA. The requirement to have a high deductible plan is dumb.

interesting comment, to me seems like it's part of the cost benefit analysis of choosing a plan. with high deductible, people are giving up that benefit to obtain the other one. part of high deductible plan is to discourage overuse of health care system so think some part of that makes sense. not opposed to more govt benefits to health care though.

 

[-OZ-]

It's the high deductible thing that scares me away from the HSA.

It’s ludicrous that the government doesn’t allow everyone to open an HSA. The requirement to have a high deductible plan is dumb.

I’d be content to let your max contribution be equal to your catastrophic cap.

 

[Nugget]

It's the high deductible thing that scares me away from the HSA.

Is there a large difference in your premium between your plan options?

 

[-OZ-]

Might be a mistake but I went ahead and put another $15k into I bonds. These funds are targeted 5-8 years out for a lake house. I’m rolling with about a 75/25 target split between equities and bonds for the purchase. Also we might take a TSP loan out when the time comes depending on rates. Wouldn’t be the primary house so the max loan would be $50k. Hoping to have enough to pay for half, including any renovations.

 

[jm192]

It's the high deductible thing that scares me away from the HSA.

Don't forget to factor in the differences in the premium costs and the tax savings.

For us, the Premium difference alone is another 1500$ per year.
Assuming you do the max 8,300$ for next year--
At 22% Federal tax, you'd save another 1800$
At 24, it's 1992$
At 32% it's 2,656.

It's a bit of a gamble either way just because we can't predict the future. My out of pocket maximums are pretty close on the top plan and the HDP. We don't seek much health care other than our IVF stuff--and most of that isn't covered anyways.

 

[urbanhack]

Tax Harvesting.

I have some bad investments that need written off. I’m planning on dumping some index funds that have consistently earned 20 to 25% the last couple of years. I have these spread out across a regular cash account, a Roth and a regular IRA will all of the gains and losses be aggregated when it comes time to do my taxes or will need to hire a CPA to figure all this **** out? All the accounts are in a single place, Fidelity.

 

[Nugget]

Tax Harvesting.

I have some bad investments that need written off. I’m planning on dumping some index funds that have consistently earned 20 to 25% the last couple of years. I have these spread out across a regular cash account, a Roth and a regular IRA will all of the gains and losses be aggregated when it comes time to do my taxes or will need to hire a CPA to figure all this **** out? All the accounts are in a single place, Fidelity.

You can’t harvest anything in the retirement accounts.

 

[-OZ-]

Tax Harvesting.

I have some bad investments that need written off. I’m planning on dumping some index funds that have consistently earned 20 to 25% the last couple of years. I have these spread out across a regular cash account, a Roth and a regular IRA will all of the gains and losses be aggregated when it comes time to do my taxes or will need to hire a CPA to figure all this **** out? All the accounts are in a single place, Fidelity.

You can’t harvest anything in the retirement accounts.

Exactly. You don’t aggregate for tax purposes. Or any reason other than seeing your own personal gain / loss. Just make sure you don’t buy the asset in your retirement accounts you sold for a loss in your regular brokerage.

 

[Redwes25]

Tax Harvesting.

I have some bad investments that need written off. I’m planning on dumping some index funds that have consistently earned 20 to 25% the last couple of years. I have these spread out across a regular cash account, a Roth and a regular IRA will all of the gains and losses be aggregated when it comes time to do my taxes or will need to hire a CPA to figure all this **** out? All the accounts are in a single place, Fidelity.

You can’t harvest anything in the retirement accounts.

Exactly. You don’t aggregate for tax purposes. Or any reason other than seeing your own personal gain / loss. Just make sure you don’t buy the asset in your retirement accounts you sold for a loss in your regular brokerage.

It would be a wash trade if you bought a substantially identical security in a cash or retirement account.

 

[The Z Machine]

It's the high deductible thing that scares me away from the HSA.

Is there a large difference in your premium between your plan options?

Yes. Don't have it in front of me, but it's easily thousands of dollars per year for a family of 4.

 

[The Z Machine]

It's the high deductible thing that scares me away from the HSA.

Don't forget to factor in the differences in the premium costs and the tax savings.

For us, the Premium difference alone is another 1500$ per year.
Assuming you do the max 8,300$ for next year--
At 22% Federal tax, you'd save another 1800$
At 24, it's 1992$
At 32% it's 2,656.

It's a bit of a gamble either way just because we can't predict the future. My out of pocket maximums are pretty close on the top plan and the HDP. We don't seek much health care other than our IVF stuff--and most of that isn't covered anyways.

With 2 kids under 10, you never know what catastrophe might come and bite you.

 

[matttyl]

It's the high deductible thing that scares me away from the HSA.

Don't forget to factor in the differences in the premium costs and the tax savings.

For us, the Premium difference alone is another 1500$ per year.
Assuming you do the max 8,300$ for next year--
At 22% Federal tax, you'd save another 1800$
At 24, it's 1992$
At 32% it's 2,656.

It's a bit of a gamble either way just because we can't predict the future. My out of pocket maximums are pretty close on the top plan and the HDP. We don't seek much health care other than our IVF stuff--and most of that isn't covered anyways.

With 2 kids under 10, you never know what catastrophe might come and bite you.

So pay for those with pre tax dollars. I’ve got an 8 year old who’s been to the ER at least 10 times (and hospitalized a handful of times). In those super expensive years we hit the max OOP ( which is similar between the plans, so we saved on premium). In the years with little to no claims we also saved money on premiums - which goes into our HSA and allows us to pay for those claims when they inevitably come up.

 

[gianmarco]

It's the high deductible thing that scares me away from the HSA.

Don't forget to factor in the differences in the premium costs and the tax savings.

For us, the Premium difference alone is another 1500$ per year.
Assuming you do the max 8,300$ for next year--
At 22% Federal tax, you'd save another 1800$
At 24, it's 1992$
At 32% it's 2,656.

It's a bit of a gamble either way just because we can't predict the future. My out of pocket maximums are pretty close on the top plan and the HDP. We don't seek much health care other than our IVF stuff--and most of that isn't covered anyways.

With 2 kids under 10, you never know what catastrophe might come and bite you.

The max OOP is $6K for us with the HDHP. Your health insurance is there exactly to cover for a catastrophe and the HDHP doesn't eliminate that.

The difference is that, when you have an ER visit or most anything else, you pay a lot more for it AT FIRST until you hit that deductible. Ours is $3K. After that, prices come down as if we had the other plan until we hit a total of $6K and then we pay nothing for the rest of the year.

The difference in premiums is MASSIVE for us (thousands) plus the ability to save in the HSA.

Basically, the only family that it wouldn't work out for is the family that would otherwise spend maybe $500 or less because of the discounts they got from the lower deductible plan and, without, would spend $3-4K. Then it's almost a wash and still not a loss. Pretty much any other scenario, the HDHP wins.

 

[ConstruxBoy]

I think this was the thread where someone was talking about HSAs and said that you CANNOT pay for insurance premiums with the HSA money, Is that true? My HSA "hack" was to use the money saved in it to help pay the more expensive healthcare options if I retire before I'm eligible for Medicare.

 

[BrutalPenguin]

I think this was the thread where someone was talking about HSAs and said that you CANNOT pay for insurance premiums with the HSA money, Is that true? My HSA "hack" was to use the money saved in it to help pay the more expensive healthcare options if I retire before I'm eligible for Medicare.

In general, you cannot pay insurance premiums with HSA funds. Cobra is an exception to that rule.

 

[-OZ-]

It's the high deductible thing that scares me away from the HSA.

Don't forget to factor in the differences in the premium costs and the tax savings.

For us, the Premium difference alone is another 1500$ per year.
Assuming you do the max 8,300$ for next year--
At 22% Federal tax, you'd save another 1800$
At 24, it's 1992$
At 32% it's 2,656.

It's a bit of a gamble either way just because we can't predict the future. My out of pocket maximums are pretty close on the top plan and the HDP. We don't seek much health care other than our IVF stuff--and most of that isn't covered anyways.

With 2 kids under 10, you never know what catastrophe might come and bite you.

The max OOP is $6K for us with the HDHP. Your health insurance is there exactly to cover for a catastrophe and the HDHP doesn't eliminate that.

The difference is that, when you have an ER visit or most anything else, you pay a lot more for it AT FIRST until you hit that deductible. Ours is $3K. After that, prices come down as if we had the other plan until we hit a total of $6K and then we pay nothing for the rest of the year.

The difference in premiums is MASSIVE for us (thousands) plus the ability to save in the HSA.

Basically, the only family that it wouldn't work out for is the family that would otherwise spend maybe $500 or less because of the discounts they got from the lower deductible plan and, without, would spend $3-4K. Then it's almost a wash and still not a loss. Pretty much any other scenario, the HDHP wins.

I’m not jealous

 

[gianmarco]

It's the high deductible thing that scares me away from the HSA.

Don't forget to factor in the differences in the premium costs and the tax savings.

For us, the Premium difference alone is another 1500$ per year.
Assuming you do the max 8,300$ for next year--
At 22% Federal tax, you'd save another 1800$
At 24, it's 1992$
At 32% it's 2,656.

It's a bit of a gamble either way just because we can't predict the future. My out of pocket maximums are pretty close on the top plan and the HDP. We don't seek much health care other than our IVF stuff--and most of that isn't covered anyways.

With 2 kids under 10, you never know what catastrophe might come and bite you.

The max OOP is $6K for us with the HDHP. Your health insurance is there exactly to cover for a catastrophe and the HDHP doesn't eliminate that.

The difference is that, when you have an ER visit or most anything else, you pay a lot more for it AT FIRST until you hit that deductible. Ours is $3K. After that, prices come down as if we had the other plan until we hit a total of $6K and then we pay nothing for the rest of the year.

The difference in premiums is MASSIVE for us (thousands) plus the ability to save in the HSA.

Basically, the only family that it wouldn't work out for is the family that would otherwise spend maybe $500 or less because of the discounts they got from the lower deductible plan and, without, would spend $3-4K. Then it's almost a wash and still not a loss. Pretty much any other scenario, the HDHP wins.

I’m not jealous

I also get an employer contribution

 

[-OZ-]

It's the high deductible thing that scares me away from the HSA.

Don't forget to factor in the differences in the premium costs and the tax savings.

For us, the Premium difference alone is another 1500$ per year.
Assuming you do the max 8,300$ for next year--
At 22% Federal tax, you'd save another 1800$
At 24, it's 1992$
At 32% it's 2,656.

It's a bit of a gamble either way just because we can't predict the future. My out of pocket maximums are pretty close on the top plan and the HDP. We don't seek much health care other than our IVF stuff--and most of that isn't covered anyways.

With 2 kids under 10, you never know what catastrophe might come and bite you.

The max OOP is $6K for us with the HDHP. Your health insurance is there exactly to cover for a catastrophe and the HDHP doesn't eliminate that.

The difference is that, when you have an ER visit or most anything else, you pay a lot more for it AT FIRST until you hit that deductible. Ours is $3K. After that, prices come down as if we had the other plan until we hit a total of $6K and then we pay nothing for the rest of the year.

The difference in premiums is MASSIVE for us (thousands) plus the ability to save in the HSA.

Basically, the only family that it wouldn't work out for is the family that would otherwise spend maybe $500 or less because of the discounts they got from the lower deductible plan and, without, would spend $3-4K. Then it's almost a wash and still not a loss. Pretty much any other scenario, the HDHP wins.

I’m not jealous

I also get an employer contribution

Stupid tricare.

 

[ConstruxBoy]

I think this was the thread where someone was talking about HSAs and said that you CANNOT pay for insurance premiums with the HSA money, Is that true? My HSA "hack" was to use the money saved in it to help pay the more expensive healthcare options if I retire before I'm eligible for Medicare.

In general, you cannot pay insurance premiums with HSA funds. Cobra is an exception to that rule.

Ah, OK. Thanks!

 

[Andrew74]

I think this was the thread where someone was talking about HSAs and said that you CANNOT pay for insurance premiums with the HSA money, Is that true? My HSA "hack" was to use the money saved in it to help pay the more expensive healthcare options if I retire before I'm eligible for Medicare.

If you save receipts for healthcare expenses between now and then, can’t you just turn those in during retirement to “pay for” those expensive healthcare options?

 

[Runkle]

I think this was the thread where someone was talking about HSAs and said that you CANNOT pay for insurance premiums with the HSA money, Is that true? My HSA "hack" was to use the money saved in it to help pay the more expensive healthcare options if I retire before I'm eligible for Medicare.

If you save receipts for healthcare expenses between now and then, can’t you just turn those in during retirement to “pay for” those expensive healthcare options?

Sure, anything HSA eligible. Like glasses, condoms, cold medicine, etc. Just not insurance premiums.

 

[SFBayDuck]

I think this was the thread where someone was talking about HSAs and said that you CANNOT pay for insurance premiums with the HSA money, Is that true? My HSA "hack" was to use the money saved in it to help pay the more expensive healthcare options if I retire before I'm eligible for Medicare.

If you save receipts for healthcare expenses between now and then, can’t you just turn those in during retirement to “pay for” those expensive healthcare options?

Exactly. File those receipts away and you can reimburse yourself whenever to cover whatever.

 

[ConstruxBoy]

I think this was the thread where someone was talking about HSAs and said that you CANNOT pay for insurance premiums with the HSA money, Is that true? My HSA "hack" was to use the money saved in it to help pay the more expensive healthcare options if I retire before I'm eligible for Medicare.

If you save receipts for healthcare expenses between now and then, can’t you just turn those in during retirement to “pay for” those expensive healthcare options?

Sure, anything HSA eligible. Like glasses, condoms, cold medicine, etc. Just not insurance premiums.

OK, right. So you need to actually pay the expensive ACA premiums with "cash" in early retirement, but you can get money from the HSA to cover it by turning in older medical expenses?
Sounds like a nice way to offset the early retirement medical worries a bit.

 

[NutterButter]

I think this was the thread where someone was talking about HSAs and said that you CANNOT pay for insurance premiums with the HSA money, Is that true? My HSA "hack" was to use the money saved in it to help pay the more expensive healthcare options if I retire before I'm eligible for Medicare.

If you save receipts for healthcare expenses between now and then, can’t you just turn those in during retirement to “pay for” those expensive healthcare options?

Sure, anything HSA eligible. Like glasses, condoms, cold medicine, etc. Just not insurance premiums.

OK, right. So you need to actually pay the expensive ACA premiums with "cash" in early retirement, but you can get money from the HSA to cover it by turning in older medical expenses?
Sounds like a nice way to offset the early retirement medical worries a bit.

If the intention is try to lessen the ACA premium blow, another option is to put that HSA money in a roth instead, use some of the roth for your income during those ACA years and qualify for ACA subsidies. Or do both and leave the HSA money for your medicare premiums.