Tuesday, November 1, 2016
Everyone who knows me, knows that I am obsessive about saving. As amazing as it may seem, now that it's time for me to choose my benefits (health insurance, etc.), I get excited. My employer offers a defined contribution -- they give you money and you elect the benefits you want. Sure, I have to pay some of the expense myself, but with some analysis, my choices provide me with a great deal. Perhaps I drink the benefits Kool-Aide as I set up health care exchanges for a living right now. I see how employers struggle to do right for their people and how they look evil no matter what because they can't give benefits away for free. Not to start a political debate, but health care reform was a good thing -- and it has potential to get better.
I'm in a tough spot but thankfully, health insurance and the law surrounding plans and funding will provide me with a break. One day before the last day of my old job, I was diagnosed with osteonecrosis of the knee. For some reason, the bone in my knee died and the joint is going to collapse. I need a knee replacement. It may be that I can buy some time with an arthroscopic procedure, but there really is no "cure." Dead bone can't regenerate, so I am in a bad spot. I wear an expensive brace (luckily covered 50% by insurance), park in the handicap spot and have given up stylish shoes.
Enter my high deductible medical plan options. I know, people think they are evil, but when I combine it with an HSA, boy do I save money. I can more than cover my deductible without maxing out my HSA. And for 5K of savings in an HSA, it's like I had 7K or so in cash. Taking into account that I'll hit my deductible at 2K and the family deductible at 4K, then the rest is covered in full, that HSA is going to help me save a ton in health care expenses. With the employer contribution, I can afford that plan, and get other non-medical benefits at a a good price too. Plus, while I am out of work, my short term disability will replace all of my pay. To me, this is exciting. I'm shouting "sign me up" from the rooftops.
I plan to max out what I can in my 401(k), and I can also max out my HSA in addition. That means extra savings for the future, since an HSA is carried over. For those who think health care reform was a sham, consider that the HSA is one of the best savings vehicles to come along in ages. If you can get one, fill it up. Front-load it by putting in as much as you can as soon as you can and you will be prepared for bills. If you don't use it, it will be there if you need it to pay any other medical expense in the future. Even Medicare Part B premiums! Make it part of your retirement planning strategy.
Next year a tax break for start-up companies kicks in for me and I won't have to pay state income tax. That will help me fund my HSA and 401(k). Once I have been with my employer for a year, they let me put in 2% to a pension and they put in 9%. Just another awesome way for me to save for the future.
I have a generous situation, and I take advantage of it. Every year when it comes time to enroll in new benefits, rather than complain, I like to look at it as an opportunity. Good benefit strategies really are a way to plan for your short and long term future. So, don't dread the process, optimize it.