Tag Archives: HSA

Best Time To Start a HSA

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Participating in a HSA (Health Savings Account) is at best, described as a very delicate dance!

You may be wondering what the heck I mean by that?!?

Well, we’ve been participating in a HSA for the past 3 years now, but we were sweating bullets the first year and a half, when we didn’t have enough saved up for the cap where the regular insurance would kick in (our threshold limit was $5,000) if a major accident happened!

Here are some of the negative aspects of starting a HSAs:

  • When you don’t have enough in a HSA, a major health accident can really hit you hard if you don’t have enough in your HSA to cover the threshold cap!  So there is a risky period at the beginning.
  • If you suffer a small injury (like I have), you will not want to go because you feel that you need a cushion in case one of your kids or wife has a serious injury.
  • After a serious injury, and if we go above the $5,000 limit of our HSA, we will have to pay 15% of the total cost above the $5,000 from that serious accident!
  • You will tend to suffer through colds and the flu if you catch them instead of going to the doctor’s office…
  • There are nagging little fees that while don’t add up to much, are still frustrating!

So in my experience, the best time to start a HSA is when you are younger, but not too young, and perhaps a year or two before you want to start having kids.

If you are too young or active in sports, you might be at risk of being injured in which case a HSA wouldn’t be best for you.

If you have older kids, and are active or participate in sports it’s risky to start a HSA, unless you have enough money that it doesn’t matter!

Two years before you start to have kids is (in my opinion) the perfect time because it will give you time to build up the necessary protective net!

If your family (or your wife’s) has a history of cancer, heart disease, or any other health related problems that can be potentially inherited, a HSA may not be for you!  I know if I had such issues, I would stick to the regular health insurance.

Now, in HSA’s defense, it is really nice to save about $100 a month in health care expenses once the $5,000 threshold limit (in my company’s plan)  for the entire family!

If you have a HSA or you are thinking about starting one, please weigh the list I identified above.

Do you have any additional points that I many have missed?

-MR

Update: I also have an article at the “CashFlow Sherpa’s” today called:  Maximizing your Finanances and Experiences

Reasons For Having A HSA

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The main reason that I wanted to have a HSA was the fact that I hated to pay all of that money to the health insurance company every year! 

 

Hundreds of dollar each month was taken out of my paycheck and never seen or ever used.  It was very disheartening for me.   

Then in 2005, the company I work at announced that for year 2006, they were going to included a HSA plan in their medical options!  That when I started reading about it.  The first year it was offered, I didn’t bite, but it was very tempted and I really regretted that I didn’t join!  Then in 2007, I finally mustered up enough courage to take the plunge.  Nobody else around me was switching like I was, so I was second guessing myself alot, but the numbers made sense to me, so I switch to the HSA plan.   

My company had a yearly max of out of pocket expenses of almost $5,500 for family coverage, and $2,500 for individual max expenses.  Luckily, I had a Roth and other monies set aside that if the need truly arose, I could tap those funds to cover such emergencies.    

Reasons and logic as to why I went with a HSA:

  • I hate that I never, (NEVER), saw the money under the non-HSA plan.  It’s like renting…
  • We hardly used any money for health needs anyway.  Everybody is pretty healthy and young.
  • I thought the money would come in handy if for some reason I got laid off.  Taxes on it would suck though!!!
  • The tax benefits are phenomenal!  The contributions are tax deductible!  Up to the following top limits:  (for 2010) $3,050 for individual coverage, $6,150 for family coverage (and if you are 55 or older, you get an additional $1,000 amount tacked on to the above limits).
  • My company kicked in a free monthly contribution in addition to the one I was making!!!  Yeah Baby!

There were negatives too with the HSA plan such as:

  • You have to pay the money for all the visits to the doctor’s office, etc (although certain things were still covered with the company plan, like a physical and the kid’s checkups).  We got a credit card option with our HSA provider for HSA charges…
  • If we had a serious medical emergency the first year, then this would have costs us more than it would have benefited us.

As you can imagine, the positive aspect outweighed the negative aspects for my family.    

Here is the real kicker!  We have enough of a money basis in our HSA that we can now invest the money in a dividend stock of some sort and the dividend would pay for our yearly medical expenses (which currently come in less that $250.00)!  Not all plans let you do this though, but many will let you invest in mutual funds though.   

So far my small not-too-risky gamble has paid off with the HSA I am in.  Most of my work peers, don’t share my enthusiasm for the HSA plan, but for me, it’s a win-win!   

Readers, what do you have an HSA, and do you realize what a great money saving device it potentially is?