Owen778

I don't think you quite understand it yet.

For most healthcare plans, and, I think, all HDHP plans (required to have the HSA you mention), you have to pay the full cost up to the deductible, yes. However, above the deductible, you have to pay a percentage of cost (for mine 20%), until you reach the out of pocket maximum, which is considerably higher.

Also, the minimum HDHP deductible for 2017 is $1300, not sure why you're quoting $1250.

Pulaski

But if you're a light or moderate user of medical services and are unlikely to reach the minimum deductible of $1,300 (we certainly haven't in the past 8 years), then you may be able to slash your premiums by taking a higher deductible. We have deductibles of about $3k each but our aggregate insurance premiums are only $183/mth for my wife, daughter, and me.

Jack8602

See, I've been here 18 months and still can't figure it out. i just pay what I'm told when i use it.

Sparked my interest, i logged onto my account, i have a $1250 deductible and $4k out of pocket maximum at a rate of 20%. I also have an HRA as opposed to HSA

What you say makes sense Owen.

I'm not sure - my plan deductible is definitely $1250

Fk me, healthcare plans don't make it easy to understand for newcomers.

Pulaski

That's OK because you don't have HD insurance - only HD insurance has the mandatory minimum.

The problem with your HRA is that any money you put in must be used during the year, or perhaps in the first quarter of the following year, and if you change jobs you lose it. Whereas with an HSA the money is yours to use or keep, even if you switch jobs, quit working, retire, or leave the country.

If your insurance already has a $1,250 deductible then I see very little downside for you in switching to HD insurance and an HSA.

Jack8602

Good to know, i'll check that out on the november re-enrollment

LouisB

Thanks everyone for the help.
Much appreciated.
For time being we're enrolled in a plan that covers healthcare, vision and dental work.
The plan can be reviewed and changed around October.
So I think we'll just hang in one what we have today, after all most important thing was to be covered then look to switch it.
I like the idea of savings based insurance.
Today's we both are low users of healthcare, in fact neither of us have needed any medical services for the last 20 years pretty much.
But that can change, so we'll definitely keep cover, especially for accidents and mishaps also.
So will look into HSA approach on renewal and by then hopefully will have a clear idea on how to approach it. Once you've built up enough savings I imagine you can rest assured you have it covered.

One question, say you left the states, or changed to a different type of plan later on, what happens with the savings? Can you get at it, is it stuck there?

As for 401k, ok sounds like this is worth doing. There will be spare money per month so this might as well go into 401k tax efficient savings than being saved net after tax into a low interest bearing regular bank account.

I wanted to be sure initially we didn't run into a cash flow issue during the move if there was an unforeseen problem. Now we're here and settling in, it looks like we're going to be ok and I'm leaving a chunk of $ in my savings account anyway just in case of the unexpected. Based on that it seems next steps will be to move to HSA savings and a 401k (and maybe a Roth later).

Thank you 🙂

Pulaski

The money in an HSA is yours, but there will be income tax and a penalty if you withdraw the money other than for qualified medical expenses before you reach retirement age (I don't recall what that is defined as for an HSA).

LouisB

Thank you, that's great!

Pulaski

You're welcome.

Think of an HSA like a 401k, except it is tax free on the way out too, and after whatever the cut-off retirement age is, you can spend the money on anything tax free. So if you reach 70 and are diagnosed with terminal cancer and given a year to live, you could take your HSA balance and buy a Ferrari with it, or cruise the world in a state room suite.

nun

It needs a bit of forethought about the amount of tax the will be due, but the 401k to ROTH rollover isn't too complicated, especially if you use something like Turbotax.

Doing it as a UK resident is easy too. There are no UK tax consequences as the rollover money is not classed as income and the Tax Treaty makes it UK tax free, but you'd be liable to US tax and would have to file a 1040NR if you are an NRA.

deadshoppingmalls

I'm going to go against the grain here with 401k, but remember...opinions are like arseholes - everyone has one.

If you see yourself living in the US until retirement then absolutely go ahead and get one. If this is only a 3-5 year thing, then I would I would definitely pass. While the tax savings are there at the end of say 5 years, you'd be left with <60K that you can't touch without the 10% penalty + tax on the amount.

But it is a crapshoot, and you have to go with your gut - I'll give you my example. I saw myself as permanent here (even though on L1 visa) so started with my 401K which vested @ 20% a year and matched at 6% (this mean that my company matched my contributions unto 6% of my salary, with all the money being mine in 5 years of joining). That was an OK offer. Then in order to make themselves more competitive, they announced that all 401K's would vest after 1 year. In June last year, my 401K went from ~50K in usable money to ~100K for my retirement which I have managed to build on with my new company 401K (less generous, but great Stock options)

As I say...it's a crapshoot - but if I was only in the US as a temporary measure I'd measure whether it was worth using verses more traditional stocks/investing.

Pulaski

But that's no different from a pension account in the UK - if you took a job in the UK that you were only expecting to do for a few years would you advise "Nah, don't bother to contribute to a pension account, the money will be locked up until you retire"? There is nothing wrong with having another chunk of pension investments salted away in a 401k even if you return permanently to the UK after a few years.

deadshoppingmalls

True point - I suppose if the OP maxed it out @ 18K a year for 5 years...after 20 years of sitting doing nothing it could technically be worth 340K (assuming 7% return and all things being equal in 20 years) which is not to be sniffed at.

kodokan

Hubby's employer matches at 52c on the dollar. So when we put in the full $18k, we immediately make a little over $9k on it. Add in the tax savings on the 18k at a fairly high marginal rate, and you'd have to be nuts to not be doing this, regardless of it being timelocked. His 401k also has excellent investment choices, including Vanguard index funds with almost no charges on them.

MidAtlantic

Sums it up!