It’s October. That means the NFL is in full swing, the Bay Area weather is beautiful and it’s time to recheck the boxes during your company’s open enrollment.
But wait! Before you mindlessly keep what you had last year, consider changing to a high-deductible health plan (HDHP).
Why?
Because you’ll pay fewer taxes.
If you’re enrolled in a high deductible plan, you can open a Health Savings Account (HSA). And if you put money in an HSA, you will never ever pay taxes on it.
Cue breathless, fast-talking infomercial guy- “But wait. There’s more!”.
And you can even invest that money and let it grow *mind explodes*.
An HSA is the only type of account that is triple-tax free:
1. You put in pre-tax dollars, which reduces your taxes this year.
2. The money grows tax-free (no taxes on capital gains or dividends)
3. You don’t pay taxes when you take the money out (as long as you use it for qualified medical expenses)
So here’s the play:
1. Sign up for a high-deductible plan
2. Max out and invest your HSA contributions (2019 maximum is $7,000 for families)
3. Pay for current medical expenses out-of-pocket
4. Use all HSA money to pay for your medical expenses in retirement (of which there will be many)
The catch is #3. You have to pay current medical expenses out-of-pocket (the out-of-pocket maximum for a high-deductible plan is $13,500. So it won’t be more than that). That can be an adjustment.
This is not for everyone. But for the right people, it’s a goldmine. Talk to your financial planner to see if this could be a good strategy for you.
(As always, if you don’t have one, give us a call. We love helping with this stuff.)
