Talk me out of choosing a high deductible plan + HSA

The way mine works is if you have a major expense at the beginning of the year that would more than exceed your HSA balance, the account would more or less credit what was needed and then pro rata that portion from your paycheck for the rest of the year to pay it back.

It's great to have, especially once the balance is up there.

quote:

---

The $2600 in contributions to the HSA will more than make up for the difference in deductibles but I definitely see that we will be financially at risk if, for example, somebody breaks an arm at the beginning of the transition.

---

That's the risk. If you can get past the first few months, you will be good.

Does your current plan have co-pays? Remember in a co-pay plan, many things are via co-pay from dollar one. For example, my kid has as ear infection. Goes to doc. We pay $25 co-pay. Does NOT count toward deductible. If we had an HSA... we would have paid $190, but it DOES go toward deductible.

If you don't have co-pays, and everything is subject to deductible from the start, then I think it's an even better decision to move to the HSA.

It would help if you had $4,000 in savings that you can access from the start in case of emergency, it would also help if you could throw some additional money at the HSA contribution ($1,400 per year at least so you are covering the full deductible).

I am very glad you started this thread. I am in a similar situation with a child who will be two. Right now it's myself, my wife, and my son on a traditional plan. She will be on her works insurance next year and I'm thinking of switching myself and my son to the high-deductible HSA Plan. I will contribute the full difference into the HSA and I have been contributing some into an FSA this year that I can use until March of next year. I feel like I am making the right decision, just have to keep fingers crossed nothing major happens early on in the year.

quote:

---

And after 65 you can use the money for anything you want, you just pay taxes on it.

---

You can actually start taking the money out of an HSA at any time you want, as long as you have had medical bills since the inception of the plan. And this counts for everything - contacts, glasses, ibuprofen - whatever.

Here is what you need to do (and what I do):

I maximize my HSA every year (this should be the first account you maximize after you've maxed employer match) due to 3 way tax savings - tax free in, tax free growth, and tax free out.

Whenever I have medical expenses - I pay out of pocket. Although I can reimburse myself through my HSA to cover these, I pay after-tax dollars to cover that. I scan in the bill and throw it on google drive.

From here on out - I can withdraw any amount of money up until the total accumulated cost of all my medical expenses since the inception of the plan, at any time, tax free. I have all my bills to support all the withdrawals. If I am ever in dire need of cash and my nest egg can't cover it, this is where I would go to instead of having to touch my Roth and pay penalties on that.
Young people may not have too many medical expenses right now but as you grow older, these tend to become larger.

Finally - make sure you have at least 1x your deductible in your HSA at any time. God forbid, if something were to happen - you can rest easy as you are covered.

Once you have $1,500 in your HSA you can start investing those funds just like any other brokerage account. HSA Bank offers TD Ameritrade services which offers Vanguard Index funds. This is why I would recommend them.

In Summary - If you are a person that does not visit the doctor a lot - there is no other retirement vehicle as good as an HSA. If, however, you do visit the doctor often, you are better off using a low deductible plan.

ETA: $3,550 a year may not seem a lot but 35 payments of $3,550 at 6% growth ends up being $455K. For reference, the average retirement savings in the US is $201K.

quote:

---

That's good info there. So even with 2 young kids (healthy) the HDHP is typically worth it?

---

quote:

---

I have gone to the doctor prob 3-5 times in my adult life I don't see that changing unless something happens.

---

Based on these two things, in a vaccum, I would be say yes.

But there are other things you might want to consider (Its easier than it sounds). Just think ahead 1 year and see if you see any big medical expenses coming up - a big one is - plan for another baby?

Just ask yourself these questions and also honestly know whether or not you will maximize the benefit. Until you hit 1x your deductible (And really every year thereafter) - you absolutely should.

Check in on your plans. My company will be charging me $40 a month for my wife (who works and is offered insurance) to be on my plan.

eta I’m sold on the HDHP + HSA

quote:

---

Whenever I have medical expenses - I pay out of pocket. Although I can reimburse myself through my HSA to cover these, I pay after-tax dollars to cover that. I scan in the bill and throw it on google drive.

---

Sharp. Very sharp and efficient way to get at the money when needed... without penalty or taxes.

This is something I've been considering over the past year.

My wife has a high-deductible plan covered through her work. She's on my FSA plan though... so if I remove her next year I can start contributing towards a HSA?

You really can't beat the triple tax benefits.