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102R | The Triple Tax Savings of Health Savings Account

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:

Vanguard Ratchets Up Index-Fund Price Battle

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