Dear Natalie,
Now that I'm divorced, health insurance costs for my kids and I are drowning my dreams! But, I just read something about Health Savings Accounts on your Facebook page page which gives me hope. Wow! So if I understand correctly, Natalie, Health Savings Accounts would actually offer an incentive for me (and my kids) to stay healthy, because when I don't need medical care, that money that I set aside for deductibles and co-pays becomes part of my retirement account? If that's the gist of it, that sounds absolutely fantastic! Where can I learn more about this?
Signed,
Health Lover
Dear Health Lover,
Reducing expenses after divorce is a must for most parents. While some personal finance experts espouse cutting out cafe lattes, the truth is that doesn't work. Making cuts in the big ticket expenses, rather than trying to eliminate all of your fun, means that you will be able to have your cake and latte, too. (Let's face it, austerity measures suck, whereas having fewer bills and being able to treat your kids to hot chocolate and yourself to a caramel macchiato can be just what the doctor ordered on a cold winter night.)
So, here's the good news on how to cut the costs of one big ticket item that already makes you sick every time you write the check. Reduce your insurance premiums with health savings accounts and a high deductible insurance plan. Health Savings Accounts reward you when you stay healthy. When you don't go to the doctor, that money stays in your tax-deductible retirement account (and even grows if you invest it wisely). If you do have to go to the doctor, you have money to cover the deductible and co-pays. What a win-win! It's a great New Year; New You Money Saver!
You can learn more about all of the requirements and annual contributions of Health Savings Accounts at IRS.gov. Essentially, you can purchase catastrophic health insurance, reducing your monthly insurance premiums dramatically, and put money that can be used to cover the deductible and coinsurance if you need it (up to an annual cap) into a Health Savings Account. There the money can be invested as you wish (in FDIC insured money markets, stocks, bonds, etc.) and the gains you make are not taxed as long as they stay in the HSA. Also, if you do not go to the doctor (as I haven't in decades), then you keep your dough and all your investment gains and that becomes part of your estate (your beautiful bottom line as I like to call it).
http://www.irs.gov/publications/p969/ar02.html#en_US_publink1000204020
Health Savings Accounts provide incentives for everyone to stay healthy by rewarding you financially for doing so. Personally, I know so many people who prefer alternative treatments, diet and exercise these days (many of which are not even covered by insurance) that I think if Americans knew about this solution, they would definitely embrace it!
http://www.irs.gov/publications/p969/ar02.html#en_US_publink1000204020
Healthcare and retirement entitlements alone make up 45% of the United States budget. So, while we get our own bottom line in shape, by staying healthy and investing all of the money that we don't spend on medical care in stocks and bonds, we are also improving the bottom line of our nation.
Remember to shop around before you set up your health savings account. Some brokerages offer you literally thousands of stocks, bonds and funds to invest in, with low trading fees, while others may have limited choices of investments and are more expensive, to boot! FYI: You do not have to purchase your HSA from the insurance company that sells you your high deductible medical care plan.
About Natalie Pace:
Natalie Pace is the author of You Vs. Wall Street and host of the Pace and Prosperity radio show on BlogTalkRadio.com/NataliePace. She is a repeat guest on Fox News, CNBC, ABC-TV and a contributor to HuffingtonPost.com, Forbes.com, Sohu.com and BestEverYou.com. As a philanthropist, she has helped to raise more than two million for Los Angeles public schools and financial literacy. Follow her on http://www.facebook.com/pages/NWPace, and on YouTube.com/NataliePaceDOTCOM. For more information please visit, http://www.nataliepace.com.