Health plan perk: No taxes, ever — a Roth IRA on steroids!

Most federal workers and retirees pay health insurance premiums to one of the many plans in the Federal Employees Health Benefits Program. But a growing number of people now have their health plans paying them.

Account balances of $30,000 to $40,000 are not unusual. At least one fed has $100,000 in their health savings account, which is offered by a growing number of FEHBP plans. The open season when people can pick their 2021 health plan ends Dec. 14. So there is still time to figure if this is the time to consider an HSA, a flexible spending account or a high deductible or consumer driven health plan.

Health savings accounts and health reimbursement accounts (HRAs) provide “significant tax advantages,” according to Walton Francis, editor of Consumer’s Checkbook Guide to Health Plans for Federal Employees. And they can permit policyholders who build up large financial accounts.

HSAs have the most advantages, he says, because “you can add to your HSA account by advance planning, just as if it were a flexible spending account. Second, while you can only establish an FSA account in advance you can add to your HSA account any time during the year — if you have unanticipated late year expenses of an extra $1,000. In most HDHPs you can have $1,000 transferred from your account to your pay, to your HSA, lowering your taxable income by $1,000, pay the bill through the HSA, and obtain what amounts to a one-third discount on your unplanned  expenses.”

Or, Francis says, you could transfer the extra $1,000 even if you don’t have any unexpected expenses, saving one third in taxes, and build up your account for future years.

He said that since you have the HSA account for life, “regardless of Open Season plan changes or retirement — and it can accumulate tax-free earnings — it can become a very substantial lifelong protection against health care expense.”

Nearly Useless Factoid

By Amelia Brust

From 1934 to 1986, paddlers and anglers in Minnesota’s remote Boundary Waters Canoe Area Wilderness could get drinks from Dorothy “the root beer lady” Molter. She made the beverage from the waters of Knife Lake. Her isolated and rugged lifestyle made her a celebrity, and she even won a fight with the U.S. Forest Service to stay on the land after the Wilderness Act of 1964 required her to close her fishing camp and sell root beer “for donations.”

Source: Atlas Obscura

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THRIFT SAVINGS PLAN TICKER

Dec 07, 2021 Close Change YTD*
L Income 23.3889 0.114 4.32%
L 2025 12.1624 0.1129 7.70%
L 2030 43.1805 0.5434 9.58%
L 2035 12.9956 0.1791 10.38%
L 2040 49.2803 0.7383 11.19%
L 2045 13.5228 0.2165 11.85%
L 2050 29.6775 0.5061 12.55%
L 2055 14.6766 0.3038 15.21%
L 2060 14.6765 0.3038 15.21%
L 2065 14.6764 0.3038 15.20%
G Fund 16.7204 0.0006 1.26%
F Fund 20.9201 -0.0404 -1.14%
C Fund 70.6894 1.4348 23.16%
S Fund 83.9657 2.0886 11.80%
I Fund 38.7597 0.7792 6.04%
Closing price updated at approx 6pm ET each business day. More at tsp.gov
* YTD data is updated on the last day of the month.