Here’s how it works…
Enroll in a high deductible health insurance plan (usually these deductibles are between $6,000- $10,000), yet the premium rates can be less than half the cost of a low deductible plan.
Open up a Health Savings Account. Most banks offer these accounts with little or no service fees. A debit card is linked to this account so that you can easily pay for your health care expenses.
Fund your HSA. Funds contributed to your Health Savings Account are currently not subject to federal income tax and as long as you use this money to pay for qualified medical expenses, you can withdraw the funds without federal tax liability or penalty. The maximum amount a family can contribute to a HSA is currently at $6,250.
How this saves you money…
Lower Premium: The insurance premium will be much lower for a high deductible plan than a traditional insurance plan.
Less Taxes: The money you put into the HSA are not subject to federal income tax. YAH!
Investment Opportunity: Money in your HSA can be invested in mutual funds, ETF, Bonds, etc. This gives you one more avenue to grow your money. Make your money work for you.
PLUS…This system puts you in charge of your money and your health expenses. You don’t have to wait around for an insurance company to decide if your expenses are legit, you simply use your HSA debit card and pay for your expenses. You get to decide how this money is spent.
Here is a real life example of how this works…
$12,850 per year (traditional insurance policy)
My family of 4 on a traditional $250 deductible run of the mill insurance policy with no HSA…
$1,050 per month premium x 12 months $12,600.00
$250 out of pocket deductible $ 250.00
$11,710 per year (HSA & High Deductible insurance policy)
My family of 4 with a $6000 deductible insurance policy (same benefits as above) and Health Savings Account…
$455 per month premium x 12 months $5,460.00
Maximum contribution to our Health Savings Account $6,250.00
Now using this example you save over $1000 assuming that you actually had over $6,000 in medical expenses in one year. But here is the joy of the additional savings. If you are a relatively healthy family and don’t go to the doctor every time your child sneezes, you could essentially not use the entire $6,000 deductible so that means everything you don’t use is yours! Yours to keep! Yours to grow! How wonderful is that! We have had a high deductible insurance policy and a Health Savings Account for 3 years now and we have over $10,000 socked away for any future medical expenses TAX FREE!
The Health Savings Account is one of those little known secrets of the rich my friend. So even if you are not one of the 1 per centers out there (heaven knows I’m not) let’s start being wise with our money and one day we can be among the rich!