Financial shit and open enrollment stuff
 

First of all, if you saw that thread title and clicked to open the thread, what the hell is wrong with you? :D

But since you are here, let me tell you something that I was told last night by a financial adviser we hired to scrutinize all our stuff and tell us what to do.

Among other advice covering everything, he suggested that I reduce my 401k contributions each month so that we are only putting in enough to get my employer's matching contribution, and instead put that extra money into our HSA (Health Savings Account).

We have been using our HSA to pay doctor bills and such when they aren't covered by our high deductible insurance. That's what it is meant for. That's why Congress set them up. But an HSA is better than a 401K because the money is pre-tax, so it isn't taxed upfront. The earnings are tax free, and when you use the money to pay for qualified health expenses, there is no tax. With a 401K, you pay tax when you take the money out. With an IRA, you pay tax when you put the money in. With the HSA, you never pay tax.

This adviser was saying that since the money never expires, and since everyone has astronomical health expenses when they get older, it's not like you aren't going to use the funds. And you would be using taxed 401k funds for medical expenses anyway when you get old. (Oh and he said that we should pay any uncovered medical expenses with savings so that the HSA can grow untaxed.)

It turns out that our HSA, and probably yours too, has the option to invest in mutual funds once you have a minimum balance. The fees are going to vary from HSA bank to HSA bank, so you have to do a little bit of homework to see if it works for you.

But since it is open enrollment season in the USA right now, I thought I would pass along that little bit of advice.

There is Max contribution for HSA. $7100 next year for a family.

Indeed. This planner was saying we should max it out. We had previously been trying to put in just enough to cover planned annual health expenses, so we would be increasing dramatically.

I still need to research fund management fees before I completely jump in.

Inland bank had the lowest fee when I researched them a few years ago.

Cunning...

Interesting, Thanks

Okay, but hold up: if you die suddenly, doesn't all the money in your HSA effectively disappear? Or is it a family account that stays active as long as someone in the family is alive? What if both adults die simultaneously? Just thinking out loud.

Good question. Something else to look into.

There is a beneficiary.

Pete added the HSA to our retirement spreadsheet. If we were able to spend HSA money on insurance premiums it could make retirement doable...

Long term care insurance premiums are a qualified expense for a HSA.

Also, our adviser was saying that the qualified health expenses can be incurred at any time after the HSA was opened. So any time you pay for a qualified health expense with regular funds, save the receipt. Ten years from now, if you need some cash, you can reimburse yourself for that receipt you saved and basically just make a withdrawal from the HSA. This guy says he has files full of receipts and they are like future money to him.

What happens to HSA's when Bernie covers us all?
Actually my real question is how the thing got so complicated.

It's a pain in the ass, let me tell you.

Adulting in general is a pain in the ass.

Convert to IRA?