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educate me 401-k

  1. #2751
    Fast is contagious JettaJayGLS's Avatar
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    Re: educate me 401-k


    We rolled out an HSA this year.

    Option 1: Keep my low deductible plan. $110 a month from my paycheck. $1,500 out of pocket max.
    Option 2: High deductible plan with HSA. $50 a month from my paycheck. $4,000 out of pocket max. I can contribute an additional $3,650. Employer puts in $600.

    So I need $2,500 to close the gap in max out of pocket.
    $600 from employer
    $720 from monthly savings
    =$1,180 extra if I have $4k in hospital bills.

    I think I go for it and max it out?

    I barely every go to the doctor, but if I do it is likely catastrophic from crashing my bicycle (I ride ~250 days a year).

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    Last edited by JettaJayGLS; 11-12-21 at 12:33 PM.
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  2. #2752
    Super Moderator OreoGaborio's Avatar
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    Re: educate me 401-k

    My company rolled out an HSA plan last year... I must be enrolled because it suddenly showed up on my account last year saying I have $600 in my HSA Cash account and $0 in my HSA investment account but I have noooo fffffffffffffffffffffffffffffffffffffffffffekkin clue how it works or how to take advantage of it.

    ... And somehow it's linked to my BOA accounts.

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    Last edited by OreoGaborio; 11-12-21 at 01:11 PM.
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  3. #2753
    Fast is contagious JettaJayGLS's Avatar
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    Re: educate me 401-k

    Suggestion from the Nerdy in-law is to max it out, pay any deductible out of pocket, and just use it as a super-IRA.

    Money goes in pre-tax, grows tax free, and can be used tax-free on medical expenses when over 65.
    I guess it also can be used retrospectively, so if you find yourself short on cash, save your medical receipts and pay yourself back.

    Kind of seems like a no brainer to me now, unless I plan on having $4k of out of pocket medical expenses more often than not.

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  4. #2754
    Angry Gumball RandyO's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by JettaJayGLS View Post
    I think I go for it and max it out?

    I barely every go to the doctor.
    Yes, max it out, I used to barely go to the doctor... until I reached the age of 62, now it's a regular thing, glad I socked away as much as I could

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    RandyO
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  5. #2755
    Angry Gumball RandyO's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by OreoGaborio View Post
    My company rolled out an HSA plan last year... I must be enrolled because it suddenly showed up on my account last year saying I have $600 in my HSA Cash account and $0 in my HSA investment account but I have noooo fffffffffffffffffffffffffffffffffffffffffffekkin clue how it works or how to take advantage of it.

    ... And somehow it's linked to my BOA accounts.
    you should have gotten a checkbook and a debit card, use them on ANY medical expense you want, you don't have to wait till your older, buy a bottle of asprin, sunscreen (prevents skin cancer), or even a better bed for your back

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    RandyO
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  6. #2756
    Lifer ZX-12R's Avatar
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    Re: educate me 401-k

    I assume you are only insuring yourself here? If so, the max you can contribute to an HSA is $3600. Since your employer does $600, you can add $3K to it pre-tax and use that money to pay for doctor visits and other medical expenses. This is independent of of your monthly premiums.

    You also need to consider what your deductible limit is, and what (if any) co-pay there is. With a HDHP, you typically pay 100% of your expenses up to the deductible limit. From there, you enter the co-pay territory where you will owe some percentage of the expenses until you reach your annual limit. After that point, the HDHP will pay 100%.

    Since your max out of pocket is higher than the self-only HSA contribution limits, it's possible you won't be able to save anything if you have a busy medical year.

    In your particular situation, I would first look hard at what health plan is actually better for you and keep the tax considerations as a secondary decider.

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    Last edited by ZX-12R; 11-12-21 at 01:56 PM.
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  7. #2757
    Fast is contagious JettaJayGLS's Avatar
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    Re: educate me 401-k

    Yeah, just insuring myself. If history says anything, I rarely go to the doctor and rarely pay anything out of pocket. Broke my elbow once about 5 years ago, I think that was the last time I had to pay cash. I don't see chiropractors, therapists, etc. No prescriptions and no recurring visits.

    The point on max contributions is good to know. I thought employee vs employer contributions would be separate like 401k. If they're combined then looks like I'm tapped out at $3k and could be out of pocket for an additional $400

    HDHP is 20% coinsurance on just about everything
    LDHP is $10 copay
    Both have free preventive care, which is about all I really do.

    I think this really makes sense for me to play to my personal statistics and go for it. And hope that the interest earned outweighs any healthcare costs (which would max out at $2,500 a year).

    This seemingly is another benefit to someone that doesn't really need it. Thankfully, I can swing $4k a year in medical costs if they do occur (errr, $3,400 since my company funds $600). If they don't occur, I can grow $3,600 for 35 years without any taxes in or out, that's a pretty crazy benefit.

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    Last edited by JettaJayGLS; 11-12-21 at 02:10 PM.
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  8. #2758
    Burns retinas nhbubba's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by JettaJayGLS View Post
    Money goes in pre-tax, grows tax free, and can be used tax-free on medical expenses when over 65.
    Tax free on medical expenses anytime. Penalty (but not tax) free after 65 for anything including hookers and blow.

    Spark up the spreadsheets and start doing comparos. Unfortunately the formulas aren't entirely straightforward; copays vs co-insurance.

    My employer soured the buy-up/low-deductible options years ago. I was one of the first in my crew to switch and haven't regretted it. Since then they have renamed my HDHP a "buy-up" option and entirely eliminated the low-deductible option. Corporate 'murica! Yo! In my case the HDHP is the only real option and the HSA is 110% a no-brainer. Max it out and at the very, very least enjoy the tax dodge.. if not the tax free savings.

    Even with (expensive as fuck) kids we max out the HSA and don't touch it. I consider it another tax-free savings bucket and instead pay medical bills using money I would have put into regular taxed savings. IMO maxing an HSA should be an early part of your savings strategy. I put it ahead of paying off low-interest debt, for example. Worst of the cases is it turns into a traditional IRA in the end. YMMV, as with everything.

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  9. #2759
    Angry Gumball RandyO's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by ZX-12R View Post
    I assume you are only insuring yourself here? If so, the max you can contribute to an HSA is $3600. Since your employer does $600, you can add $3K to it pre-tax and use that money to pay for doctor visits and other medical expenses. This is independent of of your monthly premiums..
    Yes, this is independent of your monthly premiums, it is your money and always your money

    when you get to be 55 iirc, the contribution amount is higher by $1k, it was $4400 when I stopped contributing @ 65

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    RandyO
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  10. #2760
    Angry Gumball RandyO's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by nhbubba View Post
    Tax free on medical expenses anytime. Penalty (but not tax) free after 65 for anything including hookers and blow.
    .
    when did they start penalty before 65 ? I never had penalty, and I used it for deductibles and dental work, might have even bought asprin with it

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    RandyO
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  11. #2761
    Fast is contagious JettaJayGLS's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by RandyO View Post
    when did they start penalty before 65 ? I never had penalty, and I used it for deductibles and dental work, might have even bought asprin with it
    Penalty is only if you use it on something other than medical expenses.

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    A man of many names...Jay, Gennaro, Gerry, etc.

  12. #2762

    Re: educate me 401-k

    Quote Originally Posted by nhbubba View Post
    Tax free on medical expenses anytime. Penalty (but not tax) free after 65 for anything including hookers and blow.

    Spark up the spreadsheets and start doing comparos. Unfortunately the formulas aren't entirely straightforward; copays vs co-insurance.

    My employer soured the buy-up/low-deductible options years ago. I was one of the first in my crew to switch and haven't regretted it. Since then they have renamed my HDHP a "buy-up" option and entirely eliminated the low-deductible option. Corporate 'murica! Yo! In my case the HDHP is the only real option and the HSA is 110% a no-brainer. Max it out and at the very, very least enjoy the tax dodge.. if not the tax free savings.

    Even with (expensive as fuck) kids we max out the HSA and don't touch it. I consider it another tax-free savings bucket and instead pay medical bills using money I would have put into regular taxed savings. IMO maxing an HSA should be an early part of your savings strategy. I put it ahead of paying off low-interest debt, for example. Worst of the cases is it turns into a traditional IRA in the end. YMMV, as with everything.
    One can argue hookers and blow qualify as medical expenses.

    So do hot tubs by the way.

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  13. #2763
    I've been here before. Mustang's Avatar
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    Re: educate me 401-k

    Quote Originally Posted by JettaJayGLS View Post
    Suggestion from the Nerdy in-law is to max it out, pay any deductible out of pocket, and just use it as a super-IRA.

    Money goes in pre-tax, grows tax free, and can be used tax-free on medical expenses when over 65.
    I guess it also can be used retrospectively, so if you find yourself short on cash, save your medical receipts and pay yourself back.

    Kind of seems like a no brainer to me now, unless I plan on having $4k of out of pocket medical expenses more often than not.
    Yes yes yes. Always go HDHP with HSA unless you use insurance all the time.

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