Brad and Jonathan explain the long-term tax benefits of using a Health Savings Account to pay for medical expenses, discuss the benefits of new index fund investing options, review Monday’s episode with Timika Downes.
- Brad and Jonathan are getting back to traditional health insurance, and excited about the Health Savings Account (HSA).
- Most companies offer health insurance options, typically including:
- Low monthly premium + high deductible
- High(er) monthly premium + low(er) deductible.
- The IRS defines a high deductible plan as anything higher than $1,350 for an individual, or $2,700 for a family.
- Employees with high deductible plans have access to an HSA (eligible accounts).
- An FSA (Flex Savings Account) is a reloadable account, that is primarily use-it or lose-it
- Putting money in an HSA is tax free, and rolls over to future years, and drawing it out for medical purposes is tax free.
- 2018 HSA contribution limits:
- $3,450 for individuals
- $6,900 for families
- After 65, if you have unused money in your HSA, you can draw it out like a traditional IRA and just pay your normal tax. Here’s how an HSA can fit with your FI plans.
- Brad intends to save his receipts and wait to be reimbursed until later, as HSAs will earn interest the same as any investment account.
- ChooseFI community members recommend Lively or Fidelity. Check out our related article: Investing Inside Your HSA: Healthcare’s Best Kept Secret
- Review of Monday’s episode with Timika – similar concepts and action points as the recommendations from Alan in the Side Hustle Coaching Series.
- You don’t need permission: just take action.
- Dan writes in to report that he’s reached FI!
- ChooseFI has listeners across the globe – although not all the tax and investment information are relevant to international listeners, the lifestyle conversations are.
- Brad and Jonathan highly recommend Vanguard because they have low fees, which means investors keep more of their returns.
- In last few months, Fidelity began offering zero-fee funds and Vanguard has lowered its minimum investment from $10k to $3k for several funds.
- Investments abroad can have very high fees.
- Zero fees are not the only thing to consider when picking accounts: tax efficiency is very important as well.
Links:
