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Old 09-25-2007, 10:06 PM
 
Location: in drifts of snow wherever you go
2,522 posts, read 463,958 times
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Hi Everyone,

I have a high deductible ($4,000) insurance, and I need to open a health savings account. I'm shopping around different banks to find the best. Does anyone have any recommendations?

Thanks,

Greenie
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Old 09-25-2007, 10:33 PM
 
Location: WA
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I have a Bancorp Bank HSA and it is doing the job OK. I don't see any big advantage from one to the other if you don't keep a big balance (seems like I spend it as quickly as we deposit it). Bancorp does require automatic monthly deposits or a $2500 balance to avoid a $2.50 monthly fee. The schedules of fees are high but if you avoid special services and NSF items it is basically free. There are trading features but I don't use them. Interest is paid monthly on the balance.
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Old 09-25-2007, 11:30 PM
 
Location: in drifts of snow wherever you go
2,522 posts, read 463,958 times
Reputation: 692
Quote:
Originally Posted by cdelena View Post
I have a Bancorp Bank HSA and it is doing the job OK. I don't see any big advantage from one to the other if you don't keep a big balance (seems like I spend it as quickly as we deposit it). Bancorp does require automatic monthly deposits or a $2500 balance to avoid a $2.50 monthly fee. The schedules of fees are high but if you avoid special services and NSF items it is basically free. There are trading features but I don't use them. Interest is paid monthly on the balance.
Yeah, I've been shopping around all evening and I don't see much in terms of HSAs... not very competitive! I finally called my friend who is a financial adviser and he said the best he found was a bank called Delta Trust. They don't have any of the opening/closing/monthly fees and they offer 4.18 percent interest if you have over $3,000 in the account.

I'm going to put a few thousand in before the end of the year. I had a bad moment the other day at Bloomingdales where I almost spent $600 on shoes. I gave the salesperson my credit car. He rang me up and asked me to sign and all of a sudden I said, "CANCEL THE SALE !!! I'M OUT OF CONTROL !!!!" I'm going to turn around and put that money in my HSA instead...

Greenie
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Old 09-26-2007, 08:53 AM
 
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wow. I do not think I have spent $600 on shoes total in my entire life.

Teasing -- Army and work boots probably totaled up more over the years.

Seriously -- interesting topic. Are HSAs good only as 1040 deductions, or can they be Schedule C business expsenses?
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Old 09-26-2007, 10:21 AM
 
Location: SC
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Here’s not only what you need to look for in an HSA custodian but also the smartest way to utilize your HSA account in different situations.

Because ideally you want to make maximum contributions every year into your HSA account and leave the money alone which I’ll explain later, the transaction fees that a custodian charges won’t matter to you because ideally you won’t be constantly accessing the money. So look for a custodian with low initial set up costs and low monthly or annual fees and high interest rates given on deposits. Also make sure you can invest in good no load mutual funds that you have access to right away (or that don’t have high minimum investment requirements).

Here’s why the transaction fees don’t matter. If you are taking optimum advantage of your HSA account you will want to, every year, make the MAXIMUM contribution you can and LEAVE THE MONEY THERE until you reach retirement age because the money in the account will grow and compound tax free! Why would you want to take money out of an account that does that for you? You want as much money as you are allowed to put in an account like that at all times. Another reason why you want to make the maximum contribution you can is to save the most you can in taxes. If you have a $4000 deductible and this is a family plan, you can contribute $4000 every year and if you are in a 30% tax bracket, YOU’LL SAVE $1200 EVERY YEAR in taxes. Why would you not want to save $1200 every year especially if you can afford to put $4000 away?

Now let’s say you have medical expenses, ideally you’ll still be able to leave the money in the HSA account and just use other money to pay part or all of whatever you needed to put towards your deductible or to pay for whatever other medical type expenses that you had. However if you aren’t so lucky and you do have to access your money, then try to do it just once at the end of the year or only when you really have to to a few times a year to cut down on the transaction fees you’ll have to pay.

If you think you can’t afford to make your maximum contribution each year at the very least, contribute at least what you spent that year in medical expenses. If you spent $800, contribute $800 even if you have to temporarily borrow the money from another retirement account--- (which by the way you have 60 days before any penalty will apply if you do this)----put the money into the HSA account and take it right back out again in a few days. At least this way, you’ll have gotten the maximum savings from your HSA plan you could because by depositing the money into the account, even if you take it right back out, you’ll be able to DEDUCT the contribution from your adjusted gross income and not have to pay taxes on $800 which will save you $240 at a 30% tax bracket. So even if you got the HSA plan because of the lower insurance costs and you think you can’t afford to make the maximum contributions, you’ll at least want to do this. So instead of your medical expenses costing you $800 that year, they would have only cost you $560.

I hope this helps and congratulations on choosing an HSA plan over a co-pay plan which are and always have been over-rated and over-priced and really not nearly as good protection as an HSA qualified plan. In fact I have a FLASH presentation at my website that shows how an HSA plan compares to a low deductible plan and there is no comparison. The HSA plan wins hands down for sick people healthy people young people old people rich people and poor people.
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Old 09-26-2007, 11:13 AM
 
Location: in drifts of snow wherever you go
2,522 posts, read 463,958 times
Reputation: 692
Quote:
Originally Posted by Philip T View Post
wow. I do not think I have spent $600 on shoes total in my entire life.

Teasing -- Army and work boots probably totaled up more over the years.

Seriously -- interesting topic. Are HSAs good only as 1040 deductions, or can they be Schedule C business expsenses?
You deduct it on the 1040.

Anyone with a high-deductible health insurance policy can open an HSA. Banks do not offer very good rates on an HSA (for some reason, they are not too competitive on this type of an account!), so how much you put in (up to $2,850 a year) is up to you. I don't agree with emilbh -- most banks pay low interest rates on HSAs, so I want one without monthly, set up, and closing fees. If a bank charges you $18 to open the account, $25 a year to maintain it, and 1 percent interest, what good is that? Oh, then if you want to switch the account to a more competitive bank down the road, they charge $25 transfer fee? And yes, I do want to take the money out in case I get sick and need it. That's what it's for!!!

The benefit of an HSA is that it allows you to put pre-tax money in an account to cover your insurance deductible. Instead of paying a $250 premium each month, you pay $100 and put the other $150 in a bank where it earns some interest. (Some banks even let you invest the funds.) Best yet, you can write this money off your income. Say you made $30,000 for the year and you put $2,000 in an HSA -- well, now you only need to pay taxes on $28,000.


Other benefits:

- Interest earned on your account is tax-free
- Tax-free withdrawals may be made for qualified medical expenses
- Unused funds and interest are carried over, without limit, from year to year
- You own the HSA even when you change plans or retire

As a sole-proprietor, I'm very keen on the HSA. I have a $4000 deductible health insurance plan and I only pay $121 a month in premiums. I can write off the monthly premium and any money I put in my HSA.

greenie

Last edited by GreenMachine; 09-26-2007 at 11:26 AM..
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Old 09-26-2007, 11:15 AM
 
Location: WA
4,065 posts, read 13,366,092 times
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Quote:
Originally Posted by emilybh View Post
If you are taking optimum advantage of your HSA account you will want to, every year, make the MAXIMUM contribution you can and LEAVE THE MONEY THERE until you reach retirement age because the money in the account will grow and compound tax free! Why would you want to take money out of an account that does that for you?
Because we have regular medical expenses but not quite enough to qualify for a deduction. Therefore we use the HSA to pay for medical tax free. Isn't that what the system is designed for?
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Old 09-26-2007, 11:23 AM
 
Location: in drifts of snow wherever you go
2,522 posts, read 463,958 times
Reputation: 692
Quote:
Originally Posted by cdelena View Post
Because we have regular medical expenses but not quite enough to qualify for a deduction. Therefore we use the HSA to pay for medical tax free. Isn't that what the system is designed for?
cdelena,

That is correct. You would take the money out if you are sick and need it or if you want to transfer the money to another bank with an HSA that offers more competitive rates.

- greenie
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Old 09-26-2007, 01:08 PM
 
Location: SC
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Quote:
Originally Posted by cdelena View Post
Because we have regular medical expenses but not quite enough to qualify for a deduction. Therefore we use the HSA to pay for medical tax free. Isn't that what the system is designed for?
No. You see once you make the contribution into the HSA account you get the maximum tax savings right away AS IF you had the same in medical expenses. If you have less than that in medical expenses you will indirectly be able to deduct MORE than what your medical expenses came to every year by making your MAXIMUM contribution.

If you make the maximum contribution and are withdrawing money from the account for medical and being charged transaction fees each time you do you are having to pay the transaction fees. What I'm trying to explain to people is the least expensive way to pay the medical expenses AND the way to MAXIMIZE your deductions every year. You do this by avoiding the transaction fees AND by leaving the money in the account so you have more money in the account working, compounding and growing tax free until retirement.

Again, once you've made the maximum deposit, you've maxed out deductions for medical expenses already whether you've actually incurred them or not. With HSA accounts the Tax deduction happens whether or not you incur medical expenses AS LONG AS you make the maximum contribution you can.

The accounts were not designed EXCLUSIVELY to pay medical bills or they would't have allowed you to ALSO use the money for regular living expenses at retirement.

Getting you to make withdrawals is just a money maker for the bank or HSA custodian because they charge you each time you do it. You can use other money to pay the medical expenses. You aren't restricted to only usinging your HSA account for that.
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Old 09-26-2007, 01:21 PM
 
Location: SC
8,569 posts, read 8,896,002 times
Reputation: 2888
Quote:
Originally Posted by GreenMachine View Post
cdelena,

That is correct. You would take the money out if you are sick and need it or if you want to transfer the money to another bank with an HSA that offers more competitive rates.

- greenie
Greenie,

You certainly CAN do this but it's not to your advantage to do it if you have any other money you can use instead.

What I'm trying to do is get people to look at the BIG picture. I would think the object would be to spend as little as you can on healthcare costs and save the MOST you can on taxes and save the MOST you can for retirement. Following my suggestions is the ONLY way to do that. Anything else will mean higher costs for the user of the account.

It is a free country. People can do whatever they want and will do whatver they want. I'm just offering my professional opinion as a licensed insurance broker with more than 20 year experience and someone who helps my clients on a daily basis with HSA plans, and before that MSA plans and many other kinds of tax advantaged treatments when it comes to health insurance.
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