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The Best Retirement Account You've Never Heard Of

MULTIZ321

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The Best Retirement Account You've Never Heard Of - by Matt Becker/ The Simple Dollar/ thesimpledollar.com

"It's the only account that offers a triple tax break if you use it properly.

If you’ve done any research into saving for retirement, you’ve almost certainly heard of the most commonly recommended retirement accounts: The 401(k). The traditional IRA. The Roth IRA. Or if you’re self-employed, maybe you’ve looked into the SEP IRA or solo 401(k).

That’s the standard lineup. And they’re all great retirement accounts. They offer big tax breaks that make it easier to save your money efficiently and reach your long-term goals sooner.

But there’s one account that’s missing from that list. One account that almost no one ever talks about, but that can actually be the most powerful of them all if you know how to use it. One account that allows you to save your money completely tax-free.

The best retirement account you’ve never heard of is the health savings account..."

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Richard
 

SMHarman

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Unless there are chronic medical conditions s in your household. Then you burn through it meeting the high deductible.
 

lorenmd

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i agree, excellent savings account. as a family we meet our high deductible of $3500 so after that everything's covered. but we can put $6500 in and my employer puts $1500 plus the premiums. after 3 years i have almost 10k in it and i can self direct the investment. at this rate i will have about 30k in 10 years and i will be able to use it to pay my medicare part B . i have all the other retirement accounts accept a roth and we followed warren buffett's advice and started roth IRAs for each of our 4 college kids. they each earn about $3000 a year in their little summer jobs so we fund each of them $2500/year. we will do this as long as we can and long after we are gone when they are in their 60s they will smile and say, smart parents.
 

WinniWoman

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We also have one. I leave the money in cash because I am afraid to invest it, since the market can go down just when you might need the money to cover expenses from an unexpected illness. We continue to put the max allowed into the account every year.

I like the fact that after age 65, you can take the money out of the account for any purpose penalty free (though not tax free) and off course, always tax free for medical expenses.
 

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Unless there are chronic medical conditions s in your household. Then you burn through it meeting the high deductible.
Ditto what SMHarman said. These Health Savings accounts are only good if you and your family are very healthy.
 

WinniWoman

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Just remember if you are working and turn 65, you might want to hold off applying for Medicare A because you cannot contribute to the HSA once you are on Medicare.
 

Sugarcubesea

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Unless there are chronic medical conditions s in your household. Then you burn through it meeting the high deductible.

My son is a Type 1 Diabetic and my hubby has High Blood Pressure, High Cholesterol and Sleep Apnea. We add the max and still burn thru it.
 

SMHarman

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I have a child with anaphylactic allergies.
Epipen type medication runs at about $400-500 a box.

One for the classroom, one for the backpack, one for the younger sisters diaper bag and one for the home and I'm $2k out of pocket.

They will have to rename those zero copay cards. They certainly don't discount to zero, just take $100 off my copay and my copay is now 100% of the cost.
 

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We sort of have one. It came out about the time I retired and DW contributed to it until age 65 when you have to stop. There is some money in it, and the concept is good- as stated above, better if your medical needs are modest. The ideal situation is that a HSA gets well funded and invested during a person's working (and presumably healthier) years, then will have grown to provide benefits during the owner's less healthy old age.

Obviously, like all plans for funding one's old age, results will vary.

Jim
 

elaine

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I don't see how these work for anyone but the uber healthy. For families, there's always something--strep throat, sprained ankle (xrays, orthopedist), bronchitis (1 month supply of asthma meds). And as we age, cholesterol meds, diagnostic tests like EKGs, etc.
All those things add up to at least $1.5K a year for us with regular insurance. If I had to pay the whole bill, we would easily burn thru $5K a year, without any emergencies, surgeries, etc.
 
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donnaval

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I had an HSA-compliant plan prior to Obamacare kicking in - they eliminated my plan (which was expensive but excellent). That first year of Obamacare, I was able to pay about the same for a somewhat similar plan. Then for 2015 they cancelled THAT plan. The only HSA plans offered were rigged so that you essentially had to pay out your full maximum OOP ($6700 I believe) as deductibles before the "insurance" covered anything - buh-bye HSA savings if you required any medical care at all. Same thing for 2016, for which the rates were just recently released. My monthly rate has gone up 14% for a plan that does not qualify for HSA. I sure wish we could still do the HSA and make it work. Obamacare has not been good for us - we don't qualify for any subsidies, our insurance is a lot more expensive than it was a few years ago, it covers less, and we no longer have the HSA benefit.
 

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I have 2 of them, the one from old employer sits to grow (includes brokerage account which I am using), the one with this employer receives an employer contribution and my own contribution. I try to pay my expenses out of pocket to let this grow as my old age healthcare bucket of dough.

Another poster said HSA rigged, but that makes no sense, they are standard products, I'd like more info on this alleged rigging.

Worst part is having to have high deductible plan to be eligible for one but I'm ok with that. Lack of copay suddenly wakes one up to what they really pay in visiting the doctor, what meds really cost, what that procedure really cost.... eye-opening... and while I never saw doctor for sniffles, there is absolutely no way I'd go for sniffles now.
 

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I have 2 of them, the one from old employer sits to grow (includes brokerage account which I am using), the one with this employer receives an employer contribution and my own contribution. I try to pay my expenses out of pocket to let this grow as my old age healthcare bucket of dough.

That's what we do as well...
 

Passepartout

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You DON'T have to have a high-deductible insurance plan to have and use a Healthcare Savings Account. You can use those savings to pay (tax-free) for all qualified healthcare expenses. Glasses, dental care, over-the-counter meds, immunizations, co-pays, and yes, insurance premiums.

Those old (pre-ACA) non-insurance, low cost, high deductible insurance plans qualified to be paid with HSA funds, but now that those have gone the way of the dodo bird, HSA's can pay all other healthcare expenses.

Jim
 

WinniWoman

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You DON'T have to have a high-deductible insurance plan to have and use a Healthcare Savings Account. You can use those savings to pay (tax-free) for all qualified healthcare expenses. Glasses, dental care, over-the-counter meds, immunizations, co-pays, and yes, insurance premiums.

Those old (pre-ACA) non-insurance, low cost, high deductible insurance plans qualified to be paid with HSA funds, but now that those have gone the way of the dodo bird, HSA's can pay all other healthcare expenses.

Jim

I am pretty sure you have to have a high deductible plan to contribute to an HSA
 

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Worst part is having to have high deductible plan to be eligible for one but I'm ok with that. Lack of copay suddenly wakes one up to what they really pay in visiting the doctor, what meds really cost, what that procedure really cost.... eye-opening... and while I never saw doctor for sniffles, there is absolutely no way I'd go for sniffles now.
Us either but visits to allergy specialists are not the free well visit and are expensive.
 

SMHarman

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I am pretty sure you have to have a high deductible plan to contribute to an HSA
Yes you do. The only exception I know is when your employer sets up an HRA for those not eligible for HSA to make sure you get the dollars they contribute. But the EE can't contribute.
 

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Yes, you must be Currently Enrolled in a high deductible plan To Contribute. Note that if next year I do not have a HD plan I can still pay expenses with my HSA, I just can't put money in.

Note also that the "high deductible" threshold is roughly $1500, much lower than I expected.

IRS.gov probably has an HSA publication with details, but I'm pretty sure there would be penalties for contributing when not eligible.
 

MULTIZ321

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Yes, you must be Currently Enrolled in a high deductible plan To Contribute. Note that if next year I do not have a HD plan I can still pay expenses with my HSA, I just can't put money in.

Note also that the "high deductible" threshold is roughly $1500, much lower than I expected.

IRS.gov probably has an HSA publication with details, but I'm pretty sure there would be penalties for contributing when not eligible.


Here is the IRS Publication: https://www.irs.gov/publications/p969/ar02.html


Richard
 

donnaval

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Another poster said HSA rigged, but that makes no sense, they are standard products, I'd like more info on this alleged rigging.

Worst part is having to have high deductible plan to be eligible for one but I'm ok with that. Lack of copay suddenly wakes one up to what they really pay in visiting the doctor, what meds really cost, what that procedure really cost.... eye-opening... and while I never saw doctor for sniffles, there is absolutely no way I'd go for sniffles now.

I used the term rigged, but I didn't mean the HSA itself was rigged, only that the plans offered by MY particular insurer are designed to make sure that you pay a high $ monthly premium, but still have to use up a huge chunk or all of your annual HSA contribution before the plan even pays one dime. I know it varies from state to state, so perhaps others have more HSA-eligible plans to choose from. But in our area, there are only three HSA-compliant plans offered to me. All of them have a high deductible ranging from $2,500 to $6,700. There are no co-pays - you pay the whole freight for any service required until you meet your deductible. Then, in the case of the one with the lowest deductible, after you meet that deductible there is a co-pay of $50 for PCP visit, $100 for specialist visit, and various other co-pays for other services, and the insurance pays 80% of the balance with you paying a 20% co-insurance up to your annual maximum OOP (around $6,800). The kicker on the lowest two plans, is a $3,000 PER DAY co-pay for a hospital stay until your maximum OOP is reached. In all cases, the premiums are quite high (I'm old), and when you add the take-it-out-of-your-HSA expenses to that, you are basically paying a premium price for a catastrophic plan. As I said, it may be different in other areas.

I've never been one to go to the doctor for every sniffle either - I'm actually very healthy for my age - but I somehow strained an Achilles Tendon which has led to orthopedic specialist visits, physical therapy, etc. which would have pretty much decimated a year's worth of HSA contributions. Co-pays alone have cost me about $1,000. The problem is still not resolved, and it is causing some lower-back issues to develop, so there's plenty more expenses to come.

The plans offered to me this year vary only slightly in monthly costs, with the lowest-cost HSA-compliant plan (the one with the highest deductible) running about $15 per month less than the non-compliant plans, and the others literally only a dollar or two different in monthly cost. Since I know for sure this tendon issue will not be resolved easily, the HSA unfortunately no longer makes sense for me.
 

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My company has an excellent HSA (where they contribute and pickup part of deductible), but my issue with them is that they include cost of prescriptions in the deductible - unfortunately (or fortunately...) I have $450/month prescription that I only pay $25/mo for under my current plan. If they didn't include full cost for medicines towards a deductible, I would have a HSA (and suspect others would as well)
 

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donnaval, thank you for the clarification!

The high deduct plans "are supposed to" have cheaper premiums because you have to pay full freight until meeting deductible and then copays until hitting oop max. The plans do not sound rigged, they sound "normal".

I sympathize on your current Ach. issue as it wasn't until I needed PT after a car crash that I had enormous bills I couldn't pay out of pocket and was happy to have HSA stocked with a couple years of contributions. I was lucky to not be hurt so bad as to blow thru it all and then some; this time.

I agree, it's most helpful if you stay healthy, but I think some paycheck-to-paycheck people are helped because the health $ are set aside throughout the year. Even if the HSA can't pay full bill, offsetting some of the costs is helpful.

I am fortunate to be covered by employer plan, but this employer uses sliding scale so I pay more in premiums than someone that makes much less than me, which makes it triple what my monthly cost for same general plan at last employer. Note that I am A-ok with sliding scale, and appreciate that they do that because salaries here cover the gamut and it would be sickening to see a young entry level single person pay same as very accomplished end of career high 6 or even 7 digits salaried person. Note also that even tho my premiums are triple from last job, it's dirt cheap for me compared to those having to fund their own plans. I am lucky and I know it.

And now I have to figure out when I can retire and be covered to bridge gap to Medicare. I'm 50 and currently assume Medicare will still be around, even if it doesn't quite look the same. Having paid into it for a very long time, it better be there! Some of the candidates want to change things with folks my age but it's not enough time to plan around, I'd like to see (whatever are coming) changes for the under 30 set as that is time to plan. I'm sure wealthy folks in their mid 40s won't have a problem with changes, but I'm much more concerned about the middle income and under folks and 40s are too late to hit them.
 

Sugarcubesea

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I had an HSA-compliant plan prior to Obamacare kicking in - they eliminated my plan (which was expensive but excellent). That first year of Obamacare, I was able to pay about the same for a somewhat similar plan. Then for 2015 they cancelled THAT plan. The only HSA plans offered were rigged so that you essentially had to pay out your full maximum OOP ($6700 I believe) as deductibles before the "insurance" covered anything - buh-bye HSA savings if you required any medical care at all. Same thing for 2016, for which the rates were just recently released. My monthly rate has gone up 14% for a plan that does not qualify for HSA. I sure wish we could still do the HSA and make it work. Obamacare has not been good for us - we don't qualify for any subsidies, our insurance is a lot more expensive than it was a few years ago, it covers less, and we no longer have the HSA benefit.

Ditto to everything you just stated and I'm in the same situation... I contribute the max every year and burn thru that amount and more.
 

donnaval

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The high deduct plans "are supposed to" have cheaper premiums because you have to pay full freight until meeting deductible and then copays until hitting oop max.

Yeah, there were a lot of things about Obamacare that were "supposed to" be true :mad:- alas, many of us have found the reality to be far different! The difference in monthly payments - in OUR AREA - just don't work out. It may work out in other places.

Sorry that you, too, are having the same problems sugarcubesea.

I've got a few years to go to reach retirement age - it would've been nice to be able to take advantage of the HSA to contribute toward those goals. I definitely would encourage younger, healthy folks to give the HSA very serious consideration, especially if you are in an area where the insurance companies are doing what they were "supposed to" do regarding the difference in premiums. Also, an employer contribution or qualifying for a federal subsidy would definitely factor in to the choice.
 

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Also high deductible are not necessarily as high as they look. Certainly based on my plan.

My new 2016 family plan has a 3500 deductible.

My 2015 plan had a 500 deductible per person and 20/35 copays and 20% coinsurance.
For five of us that's 2500 plus say 10 visits 5X20 and 5x35 275 plus some coinsurance on those. Say 300 and you are getting up to the same deductible.

This assumes we are all equal users of the plan. If child 1 is a bigger user and the rest of us don't use the plan then I'm hit for 3500 not 500 plus plus.

The comparative math is not simple.
 
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