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So long HSA contribution
Old 11-12-2020, 03:14 PM   #1
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So long HSA contribution

I have been shopping on our state health insurance exchange for our 2021 renewal. We've purchased our own health insurance in the private market our entire lives, nearly 40 years now.

We've had a high deductible HSA qualified plan since the year they came out about 20 years ago. We've been knock on wood healthy and have accumulated about $95,000 in the account, 2 years worth of out of pocket expenses in cash and the rest invested in their S&P 500 index option. It's worked well and I like it much.

Trouble is with this year's renewal the option for an HSA qualified plan is $165 more per month than a similar plan that is not HSA qualified. That's $1.980 a year in premium. The $7,000 contribution allows us an equal deduction, in our 17% marginal tax rate (Federal & State) that's a savings of $1,190. I've decided to give up the HSA contributions and invest it in our Vanguard account along with our core investments.

With $95,000 in the HSA account I'm fairly comfortable of making it to Medicare (59 & 56 current ages) If one of us does develop a health condition where we know we'll reach our out of pocket expenses I can go to the exchange at our next renewal a pick another HSA plan and fund it again, or maybe get a plan with a lower deductible. With all the changes in health care you can't plan too much further than a year or two at a time.

For now I'm going to take the premium savings and invest it along with the same amount from the former HSA contribution. I'll pay a little more taxes, but I think I'll net ahead long term.
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Old 11-12-2020, 03:32 PM   #2
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I think that is a good decision. Don't forget to keep track of your qualified health care expenses (deductibles, co-pays, dental and vision) and you can withdraw those now or later. I made a withdrawal for 10 years of expenses ealier this year so my executor doesn't need to worry about it. From here on, I'll probably withdraw every 1-3 years for the same reasons.
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