The Investment Scientist

Archive for September 2018

hdhp-300x180.pngIn my last newsletter I wrote about how a Health Saving Account (HSA) is the best retirement saving vehicle with triple tax benefits. However, not everybody can have a HSA – you must have a High Deductible Health Plan (HDHP.) Those of you who have traditional PPO/HMO health insurance are not eligible.

This begs the question, who should use the HDHP with a HSA? Here are the simple answers followed by a discussion.

  1. High income folks especially those in top three tax brackets of 32%, 35% and 37% should use a HDHP.
  2. Healthy folks should use a HDHP.
  3. Low income folks who are frequently sick should stay with PPO/HMO.

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Health-Savings-Account-Speedometer.gifJust this week I get an email from a client of mine asking me if she should contribute to her HSA (health saving account) and if so, how much. So I thought this would be a good time to talk about HSAs.

What is a HSA?

A HSA is a tax-advantaged savings account for health care purposes for folks who enroll in a qualified high-deductible health plan (HDHP.)

HSAs were brought about by President George W. Bush in the same legislation that added prescription drug benefits to Medicare. It was established without much fanfare because at the time all the sound and fury was about the prescription drug benefit. Little did we know that one and a half decades later, it would be becoming more and more popular in the corporate health insurance marketplace.

How does it work?

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Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.


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