Do the Math
Category

By In Do the Math, Health Savings Accounts (HSAs), Savings and Budgets

An HSA Really Can Be a ‘Dream-Vacation’ Reserve Account…If You’re Smart About It

We’ve written extensively about how much you might end up spending on your own health care in retirement and, as a result, why it’s important to build up your HSA funds so that you can have that reserve of tax-free dollars for such expenses.

But, as a former co-worker of mine used to say, here’s a “super-secret hack” about HSAs that may change the way you spend both in retirement and beforehand: there is no time limit on when you can reimburse yourself from your HSA for medical expenses.

What does this SSH (ahem, super-secret hack!) mean for your retirement savings? It’s simple. Keep reading…

(more…)

Read more

By In Around the Web, Do the Math, Health Insurance

Employer Benefits Are Confusing. Duh.

As we have written about several times, getting benefits through your employer is essential to your FIRE plans but can also be very, very confusing. This article from a publication focused on brokers and consultants talks about exactly how confusing and frustrating it can be for you, the employee, to pick the right benefits for yourself and your family.

TL;DR: Only one in three of us feels like we’ve made the right decisions with our benefits selections — mainly because we haven’t been given the information we think will help us. As a result, we’re overly risk-averse.

Our advice is to do as much legwork as you can on your own. Put your analytical FI mind to work, build some spreadsheets, crunch some numbers, as your benefits administrator at your company loads and loads of questions. Then make your choices with more confidence. And if you find that your choices aren’t that great after all, let you benefits administrator know so that, hopefully, they’ll take your advice and do a better job for everyone the following year.

https://www.benefitspro.com/2019/06/12/confusion-and-risk-aversion-driving-poor-benefit-choices/?kw=Confusion%20and%20risk-aversion%20driving%20poor%20benefit%20choices&utm_source=email&utm_medium=enl&utm_campaign=bprodaily&utm_content=20190613&utm_term=bpro

Read more

By In Budgeting, Do the Math, Featured, Financial Independence, General Benefits Knowledge, Health Insurance

Congratulations, You’re FIRED! Health (and Health Coverage) Tips for Early Retirees

If you’re in the FIRE vanguard, retiring in your late 20s to mid-30s, you’re (hopefully) living the dream healthy enough to enjoy your retirement to its fullest. If you’ve planned your housing, transportation and other common living expenses well, they will be quite manageable within your budget until it’s time to shuffle off this mortal coil.

But keeping that coil tightly wrapped gets harder with each passing year. Don’t risk your financial health by compromising on your physical health — get insurance. And not just the cheapest insurance. Make sure it’s good enough that it doesn’t leave you with huge bills if something bad happens. Such decisions and expenses should all be part of your FI plan, even if it means a few extra years of saving to be fully prepared for a long, healthy life of early retirement freedom.

Here are some tips for that early retirement health care party…

(more…)

Read more

By In Do the Math, High-Deductible Health Plan (HDHP), Money-Saving Tips

HDHP: Managing Your Costs Before Meeting Your Deductible

With car insurance, deductibles are relatively straightforward — anything not related to damage of some kind, i.e. any maintenance or services, is not covered. You get your oil changed, you pay for it. You get your car washed, you pay for it. You get in a wreck and your car is totaled, your insurance pays for all costs over your deductible. Simple as that.

With high-deductible health plans (HDHPs), it’s almost the opposite. There are a number of preventive care services that you can have covered at no cost to you, provided they are “in-network,” meaning the doctor or healthcare provider you choose much be “covered” by your insurance. That’s lesson 1: even though you’re paying out of your own pocket for most things, if you want your insurance to pay for something before your deductible it met, you have to follow their network rules.

These preventive services are things like an annual check-up or physical, as well as screenings and diagnostic tests frequently associated with an annual physical, and other tests like cancer screenings. These services are mostly mandated to be free under the Affordable Care Act, but some employers have “grandfathered plans,” which means the plans were exempted from ACA regulations on the premise that they would remain cheaper than ACA coverage (something that hasn’t proven to be true, but I digress…).

The best thing for you to do is to find your plan details or request them from your company’s HR/benefits manager or directly through your health insurance provider. My family is currently on an individual ACA plan and I found my information pretty easily through the site where I bought my insurance, HealthSherpa (full disclosure: I do consulting work for HealthSherpa but don’t get paid to post the link I just posted — I just think they’re a great company if you qualify for ACA coverage), as well as through my health insurance provider site, SCBlues (full disclosure: I don’t consult for SCBlues 😜).

Anyway, take a look at what pre-deductible services you get for free and take advantage of the ones you think you need or that a doctor recommends for you.

Now, lesson 2: Even before the deductible is met, you want to pay attention to your expenses, because they will impact your overall costs. How? Well, sadly, pre-deductible costs are not created equally, nor are qualifying expenses.

Say you tweak your knee skiing. You need an x-ray, so you call around to some places (always ask the price!) and get the costs. You will likely find, as I have multiple times, that there is a huge difference between the “covered” pre-deductible cost for the service and the “cash” cost. It’s not uncommon for covered costs to be double that of cash costs. That seems like a no-brainer to go with the cash cost, right? Well, here’s the kicker: If you opt to pay the cash cost (not “cash” per se but rather the listed “cash cost,” because you can pay the “covered cost” with cash), that amount DOES NOT COUNT TOWARD covering your deductible. Sadface.

I don’t know why it’s done this way and I wish a law will be passed that will outlaw this “network cost” practice, but in the meantime you need to be mindful of the consequences of cash vs. covered.

While there is never a guarantee, if the service you need is relatively minor with little or no need for follow-ups (read: no additional costs), you may be better off paying cash to save the money right there and then. It seems like a smart move if the covered cost is, say, $500 and the cash cost is $250, which is a realistic scenario. If you think that there’s no way that you’ll cover your deductible without some kind of catastrophic accident happening, then pay cash — sort of like paying cash for a minor ding to your car rather than going through the hassle of filing a claim.

Now, you may end up having more costs and then you will want to shift to paying the deductible cost, but that would seem to make sense only if you truly expect to exceed your deductible by a large margin. (As a reminder, once you cover your deductible, you pay $0 for any additional services through most HDHP arrangements.)

Obviously this scenario doesn’t apply for people with chronic conditions or planned medical needs like childbirth. But for those minor scratches and dings, always ask the price and decide on your own whether cash is best or you want to make sure you’re paying down your deductible. YMMV.

And yes, take advantage or your free preventive care! Not just because you can, but because keeping track of your health could save you a ton of money AND give you a happier, healthier life in retirement, early or otherwise.

Read more

By In Around the Web, Do the Math, General Benefits Knowledge, Health Insurance Utilization, Health Savings Accounts (HSAs), High-Deductible Health Plan (HDHP), Participating Provider Organization (PPO) Insurance

How to Make the Most of How Much It Sucks to Make the Most of Health Insurance

Tanja Hester at Our Next Life wrote a fantastic, comprehensive piece on the limitations and downsides of health savings accounts (HSAs) and high-deductible health plans (HDHPs). Before you dig deeper into this post, you should head over there and read it, because it’s chock full of awesomely useful information.

OK, see you back here when you’re finished…

Welcome back!

The Bottom Line

Now that you’ve read her post, you know that HSAs aren’t the magical “triple-tax-advantage” savior some might claim. Yes, there are definite benefits to HSAs if your circumstances are right (more on that in just a moment). But as we’ve said many times, HSAs are a contextually good idea attached to a pretty bad one — HDHPs — and you have to really lean in to avoid letting that bad idea drive your future more than the contextually good one.

Here’s the bottom line: Our “best in the world” health care system puts a great deal of pressure on us as individuals to make the right decisions about our health without giving us much to go on. It’s a system wrought with tradeoffs, and no one type of plan or solution it right for everyone. While HDHPs aren’t doing what they were meant to do, which is to make us better healthcare consumers, older plan designs like PPOs and HMOs aren’t doing that at all, and in fact could end up costing you more than an HDHP, with no added tax benefits and without drastically improving your health and longevity.

The TL;DR message is this: if you’re young and invincible or old and rich already, you can get an HDHP without much further consideration. For the other 99%, read on about some of the challenges we face as “consumers” of healthcare, with an HDHP and without one.

(more…)

Read more

By In Do the Math, Health Financial Accounts, Health Savings Accounts (HSAs), Retirement Income, Retirement Investment Accounts, Savings

Doing the Math on Why You Should Max Out Your HSA Contribution

Here are The Benefits of FI, we talk about HSAs as a savings vehicle for retirement in the same vein as a 401(k) or IRA. That’s because it has the same basic features of enabling pre-tax savings to be invested and thereby grow at a significantly higher rate than post-tax dollars in a standard checking or savings account.

What some of you, especially those who have just started you FI journey and have neither started a family of your own nor seen your own parents get to standard retirement age, may be thinking is that since you’re saving the money for retirement, it’s retirement income that you’ll get to spend on fun stuff. Hopefully that will be true (although you’ll get taxed on it), but odds are that you’ll use it for medical expenses, which are never as fun but almost always a factor.

Research by Fidelity Investments, reported by Money, shows that the average couple currently reaching retirement age will incur $280,000 in medical-related expenses in retirement. As homer Simpson would say:

(more…)

Read more

By In Do the Math, Flexible Spending Accounts (FSAs)

As the Grace Period Deadline Approaches, Remember: FSA Funds are ‘Use-It-or-Lose-It’

As of this posting, there are seven days left in the most common “grace period” for using your 2018 FSA funds — that’s March 15, 2019. For those who don’t have a health savings account (HSA) but do have a flexible spending account (FSA) tied to their health insurance, you hopefully know that if you don’t spend your tax-deferred contribution by the end of the year or, if you’re lucky, the end of the “grace period” for the year, those funds are gone. They’re not gone gone, like totally disappeared. They’ve just been reclaimed by your employer and are no longer available to you.

So…in the short run, use those funds! And in the long run, make sure you’re calculating properly what you may or may not use in a given year. More details after the break.

(more…)

Read more

By In Around the Web, Do the Math

An Example of Why It’s so Important to Ask What Your Medical Services Cost

Morgan Gleason is a 20-year-old patient advocate living with a rare condition that requires monthly treatments. It’s manageable but also costs a lot, and she relies on health insurance to reduce her and her parents’ costs significantly.

She recently decided to compare both what hospitals were charging her and her insurance companies, and what her insurance companies were paying and telling her to pay. Her post on it, “No Wonder Healthcare Is so Expensive!” is frustrating, revealing and educational — you should go read it right now! She has a clear grasp on both the economics and the insanity of it all.

(more…)

Read more

By In Budgeting, Do the Math, General Benefits Knowledge, Money-Saving Tips, Savings, Savings and Budgets, Student Loan Debt, Taxes

How to Identify Your Scarcities and Use Them to Your FI Advantage

Recently, at a PTA meeting for my daughter’s school, the school’s two parent-volunteer yoga instructors gave a short presentation (with student participation) on the easy yoga and meditation techniques they practiced with our kids. It was fun, funny and heartwarming to see the kids really get into their practice. It was also illuminating for us as parents to try it ourselves. When it got to the mindful meditation part, one of the instructors mentioned how focusing on your breath opened a path to the amygdala, which “will get you off of the treadmill of worry and into relaxing mindfulness.” I used to find these types of descriptions a little silly, but the more I’ve tried to be more mindful in my own daily life, the more I can buy into this idea of needing a real shift in mindset to get from worry to deeper conscience.

It reminded me of a book I read last year called Scarcity: The New Science of Having Less and How It Defines Our Lives. It’s a wonderful book that can impact the way you approach both personal and professional challenges. It’s more of a research-oriented book than self-help, so don’t go into it expecting to get a blueprint for finding mindfulness. It’s more about the research the authors did on how scarcity impacts how we think and make decisions — and it really does.

As you seek financial independence, chances are you are making plans that are deeply impactful to the two most common forms of scarcity: money and time. You’ll want and need to ensure that you’re making the most of both to reach your FIRE goals. But you’ll also want to make sure that you understand when you’re making decisions based on a scarcity of one or the other, or both, and what you can do to work against making bad decisions.

(more…)

Read more

By In Do the Math, Money-Saving Tips, Prescription Drugs

Do Prescription Discount Cards Work? It Depends

I recently rolled off of my previous employer’s health insurance plan and bought an individual ACA plan for the first time. As a result, our prescription drug coverage changed as well and when I went to renew a prescription, I was asked to wait until Monday to get a reply. I couldn’t wait until Monday (it was Friday afternoon) for these two scripts, so I asked my options. Without coverage, they would cost $1,000 and $259, respectively, for a full order of each. Zoinks!

That’s when I remembered that I had gotten a prescription discount card at a healthcare conference I attended. I pulled the card from my wallet and asked the pharmacist if this would bring the cost down any. She looked at the card, smiled and said “This might actually make it cost more.” Ugh!

“The only discount card that usually works with us is GoodRx,” she said. I asked why and she didn’t seem to know the answer. So, I searched and found a bit…

(more…)

Read more