^^^^ This. FWIW: A common point among the majority of post-retire people I've talked to agree they should have retired earlier vs later as most of their fears were unfounded after retirement.
Retirement questions
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Jim
In 2008, my sister and I inherited some money. She used it to pay off her house, because she wanted the peace of mind of not having the mortgage payment anymore and was spooked by the big market drop that had just happened at the time. I put mine in the market--I essentially "used my mortgage to invest the money".
The markets have had very high performance in the years since then. I'm now in a somewhat better position than she is, relatively speaking.
Of course, had the markets flatlined for 15 years, I would not necessarily be able to say that. But historically, if you're in the market long enough, the trend is consistently upward.
As we come to the end of the race and time is no longer "limitless", market volatility becomes a much bigger concern.
wilkersk
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judypilot
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I was going to jump in, but decided to stay mostly out of it because the advice here is worth what you are paying for it. There are just too many variables.
The one thing I would say is, find an insurance agent who specializes in Medicare and Medicare supplemental health coverage. I cannot emphasize this enough. We found a really good one and he has been a godsend. I have a PhD and still wouldn't even try to navigate all that myself. It's too complicated (as a small example, my husband and I have access to a Medicare plan that my brother does not, just by virtue of where I live). Our agent has saved us $1000s, gotten good coverage for my husband even though he has a potentially disqualifying condition, and our coverage is amazing--we pay hardly anything. I had a total knee replacement that I think cost me $100 or something like that (maybe not even that).
The one thing I would say is, find an insurance agent who specializes in Medicare and Medicare supplemental health coverage. I cannot emphasize this enough. We found a really good one and he has been a godsend. I have a PhD and still wouldn't even try to navigate all that myself. It's too complicated (as a small example, my husband and I have access to a Medicare plan that my brother does not, just by virtue of where I live). Our agent has saved us $1000s, gotten good coverage for my husband even though he has a potentially disqualifying condition, and our coverage is amazing--we pay hardly anything. I had a total knee replacement that I think cost me $100 or something like that (maybe not even that).
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judypilot
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I agree. Depending on where you are invested, the company holding your 401k may have disinterested financial planners. I have a 403b (the education equivalent of a 401k) and they assigned me a financial advisor when I reached a certain level. He is paid by the company, not on a commission. I'm pretty savvy when it comes to investing, so I mainly use him to bounce ideas off and to execute changes, but he'd do a lot more for me if I needed it. He's never tried to sell anything to me. Moreover, I have half my money with another company, and he's never even suggested I roll that money over to his company.
Sinistar
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Brad
@AKBill
We have similar active Navy service. Unless you have a disability or near zero income, as other posters said its gonna be tough to count on this one.
I would also vote no to touching the savings to pay off the house.
Waiting for the full SS benefit is probably wisest. Although I can't find it right now, I once heard a stat of how many men wait until 70 and how few years they actually collect.
Here's another quick check. Simply subtract how much you saved this pass year from your salary. If you didn't save it you spent it. Thats a cross check to how much you need. When we were planning retirement a while back our "estimated" living costs weren't quite matching our actual expenses...point being we tend to be optimistic about our expenses.
Seems like you would want to work until the house is paid off. Or perhaps if you are moving to a lower priced home relatively soon?
We have similar active Navy service. Unless you have a disability or near zero income, as other posters said its gonna be tough to count on this one.
I would also vote no to touching the savings to pay off the house.
Waiting for the full SS benefit is probably wisest. Although I can't find it right now, I once heard a stat of how many men wait until 70 and how few years they actually collect.
Here's another quick check. Simply subtract how much you saved this pass year from your salary. If you didn't save it you spent it. Thats a cross check to how much you need. When we were planning retirement a while back our "estimated" living costs weren't quite matching our actual expenses...point being we tend to be optimistic about our expenses.
Seems like you would want to work until the house is paid off. Or perhaps if you are moving to a lower priced home relatively soon?
Oldmanb777
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I don't want to highjack the thread, but because of my second job all these years, and hanging onto and investing all that effort, we would be better off on the exchange. We had some things happen. It really messed with our retirement income. Some my fault, and some not. I think it will level out now. It looks really good on paper, but actually isn't as good as it looks. One of the main reasons is IRMAA. I have no idea what they are doing, can't get an explanation from SS or Medicare. I've spent the whole week last week on the phone with both. No one can answer what the ridiculous bill I just got is for. But its uggly.
PaulS
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Tough subject, this forum is not really a good place to get advice. You are in a good place financially, the real issue is not so much how much you make now, but how much you spend. Properly invested your $1.4 million in cash should easily support 4% withdrawal per year and hopefully still modestly grow. The SS question is a tough one, you need to understand the income limits on full payouts and do an analysis as to whether it is worth it to wait for a bigger check, sometimes it isn't. You really need a trustworthy financial guy, maybe fee based, to work this through with you. I would avoid advice to buy insurance or annuities. You should be in a pretty conservative place with your cash, but definitely not just in savings accounts. You have a good problem here and decision to make, many at your point in life are not nearly as well off. Good work, I hope you figure it out and it works out.
Let me see. I have been though fee based, percentage of AUM and standard 'commissioned salesman' type. I found no difference in the quality of advice given. The only difference were the strategies to maximize fee revenue for their employer.
How does she see this ?
As long as the .gov hands out free money to subsidize rising home prices, there is a penalty for owning your home outright. Some are willing to pay that price in exchange for the knowledge that all they have to cover is the taxes and utilities to have a roof over their head.
Clip4
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Anything you buy on the exchange would be inferior to Medicare. There no way your Medicare with the maximum income penalty costs more than the premium off the exchange. At age 64 the lowest monthly premium on the exchange is $669 for a $8700 deductible.
The bill you got can be as much as $582 a month because INRAA affects both fB and D rates.
People forget Medicare is an old age welfare program. If you are in that income bracket, write the check and quit whining.
Clip4
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I agree. Unless you are totally lost as an investor or need someone to talk you out of selling in bear markets, there is no reason for an advisor.
Oldmanb777
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I just got a bill for January $3120 and one in the same amount for my wife. I understand what you are saying. Still not right, or fair.
airdale
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airdale
+1 There are some knowledgeable people here but the forum purpose does not select for financial planning expertise.
There are resources for finding advisors who are not trying to sell anything. https://www.garrettplanningnetwork.com/ is well spoken of, as are
www.xyplanningnetwork.com and https://www.napfa.org/. You want an advisor who is paid by the job or perhaps one who offers a subscription type service with monthly or annual fees unrelated to the value of your assets.
Lots of good advice here: https://www.early-retirement.org/forums/ but like any place on the internet, there is a lot of nonsense as well.
Easy reading:
"If You Can" by William Bernstein https://www.etf.com/docs/IfYouCan.pdf (free 16 page download)
"The Coffee House Investor" by Bill Schultheis https://www.coffeehouseinvestor.com/ (This is Bill's first book; read it before reading his second one.)
This one is popular: "The Simple Path to Wealth" by JL Collins: https://www.amazon.com/Simple-Path-Wealth-financial-independence/dp/1533667926 though it's not to my personal taste.
AKBill
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Thanks for all the responses. A lot of good information and food for thought. I guess I have a lot of homework to do before making any changes.
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Drake the Outlaw
I'm not saying this is the wrong strategy, but I equate working longer (and putting more money away) as a form of insurance. Sure, 95% of people (made up percentage) won't get into a situation where they need 24 hour care for many years, but for those 5% who to, it is really expensive. Having a few (actually a lot) more $$ in the bank is critical to being reliant on your resources, as opposed to the State's resources. You don't want to end up in an assisted care facility on the State's nickel.
My father needed 24 hour help for a decade after he became wheelchair bound. Over half of the 24 hour care expenses for the first 6 years were offset by long term care insurance, but his apartment in assisted living and other expenses averaged > $100K/yr in addition to what the insurance covered. Once the insurance ran out, the out of pocket expenses were north of $200K/yr.
Matthew
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Count me in that group.
I was one of those guys that said, “when I hit $xxx, then I can retire.” I got there, but just wasn’t mentally ready to retire. Then I figured, “Well, if I stay another 3 months I’ll have $xxx+y”, then it became 6 months and $xxx+2y. When I was finally ready and walked away, I realized that initial value of $xxx was probably on the high side. Once you subtract the payroll deductions for 401(k), HSA contributions, and a few others that go away, you realize you can do pretty well with less. I could have retired earlier, but I wasn’t mentally ready.
ACA insurance starts for me next year, I’m still on COBRA for a few more weeks. There are ways to play the game with taxable income so you can qualify for a subsidy.
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Jim
Knowing what she knows now, does she wish she'd acted differently back then? I don't know, because I'm afraid to talk to her about it. What we *have* talked about is that she is a lot more uncertain about her financial situation in retirement than I am.
Can you point me to some of this free money? I'd like to get some.
At any rate, I understand that people are not computers, the future is uncertain, and different people attain "peace of mind" in different ways, so a decision right for one person may not be right for someone else. I know that I'm happy with the decision I made. Perhaps my sister is also happy with hers, but even if so, the peace of mind she may have gained in the short term when she paid off her house has now eroded into worries about financial security in retirement (she does not live in a place where home values have increased a jillion percent in the last two years like they have elsewhere). Had she made a different decision back then, her house would still have the same value today, but she would have more investment assets to fund her retirement so she might be sleeping easier tonight.
You can defer medicare without incurring a pemalty if you are eligible for an employer based plan. Would that exemption apply to an exchange bought plan ?
We have patients who are on commercial insurance into Medicare age, but those are corner cases where they benefit from a generous union contract. They drive the school bus 3 days a week and get full medical for $100/month etc. If you have to actually buy full coverage, I don't see how you would ever get out ahead vs. medicare B/D and a supplement.
The rate on my mortgage is lower than inflation. The reason the rate is so low is because when I refinanced the last time, the government wrote a couple of IOUs that people were willing to buy at a ridiculously low rate. If I had to borrow the money from a bank, I would have had to pay a much higher interest rate. It's weird and it seems like a scam, but until they figure out how dumb this is, I'll keep the free money working for me. Next house, after kids etc. have moved on is going to be smaller and hopefully cheaper. If the .gov still runs the free money deal, I'll borrow for that place. If have to pay real interest, I'll cash in some stocks in my taxable accounts and build with cash.
You don't need a 'financial advisor'. What you need is someone who understands fed pensions, VA healthcare, ACA eligibility, your companies pension plan and tax consequences of all those things. You probably won't find someone who knows all those things as they apply to your specific situation, it's probably a number of people you need to talk to.
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3G
Uh, we’re making nowhere near that kind of cheese in our working income + my .mil and certainly not once we stop working.
Rcmutz
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Great advice and thoughts. Very similar to what I have thought through. One thing a lot of folks should also consider depending on your IRA amounts are RMDs, and there tax implications. I plan to live off my pension and IRA withdrawals, and delay taking SS. This will allow for a guaranteed 7% a year growth in SS. At the same time, I am converting Traditional IRA to Roth, being careful not to bust the income limits for Medicare Part B costs. Everyone’s situation is different and there are no one size fits all, only some general thoughts to consider and apply to each unique situation.
JOhnH
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I sort of disagree with that. I have been seeing Medicare deductions from my paychecks for 51 years prior to seeing any benefits. My younger brother died 10 days after his 65th birthday (pancreatic cancer) and therefore gained NOTHING from his 50 years of advance payments.
Perhaps it is a "welfare" system for some, but not for everyone. I doubt it is welfare for the OP either.
This is why retirement plans/strategies are so personalized to the individual or couple. In your plan the issue of LTC is important. But with others its not so important based on their experiences or research. The one thing I have learned is just as each person's life is unique so is their retirement decision. There is no one plan, no one reference, no one rule-of-thumb. Plus every plan has an element of risk just like living or investing. So what it really boils down to is what is your level of risk aversion. Regardless, one way to ultimately smoke check your plan is to talk to people who have already been there--done that and retired. I talked to dozens of retirees and they became very instrumental in the (earlier) path I took which is about to come full circle next month. The very first retirement date goal I wrote down was 01/31/2022. I plan to have a party on that date even though it will be 7 years and 6 months too late.
Clip4
Touchdown! Greaser!
I understand your logic, but all you did was pay a very minimal payroll tax that would never cover the normal person’s medical needs over their life time after age 65.
Count your blessings in life and quit moaning.
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airdale
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airdale
The title "financial advisor" is often misleading. Critters using that title are often just investment advisors. The typical brokerage house financial advisor is almost always just an investment advisor and of dubious quality anyway. A good financial advisor is involved with all aspects of the client's financial life from saving for milestones like college, to insurance advice, ACA strategies, SS draw strategies, to nagging clients about estate planning, etc. and finally to investment advice. The superman who knows all this will be difficult to find and in some cases will need education on (for example) the client's company pension plan. But finding that kind of advisor and avoiding the investment advisor claiming to be a financial advisor is the goal.
Re investment advisor, these people are usually a waste of time and money. In addition to the reading I recommended in post #94 above, add "The Bogleheads Guide to Investing" by Taylor Larimore et al https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365 and maybe "Winning the Loser's Game" by Charles Ellis https://www.amazon.com/Winning-Losers-Game-Strategies-Successful-dp-1264258461/dp/1264258461 (latest edition, May 2021) to your reading list and you won't need an investment advisor. You'll know more than most of them.
IRMAA for joint filers doesn't kick in until an AGI of 182k. At 250 jointly it's $150/month (+$32 for part D) I just fail to see how this would figure into the decision when to stop working.
Oh, you are part of the welfare system. But you are serving as a payor and you have our wholehearted 'Thank You!' for your decades of service.
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Llewtrah
Inflation is running about 6.8% right now, I believe. My investments, under Merrill Lynch and reasonably conservative, are 17%+ this year. (The Dow is up 20% for the year)
This inflation is due to recovery from the hit Covid took on the economy (supply chain, mostly, plus a shift in demand from people being at home, etc,). It won’t last forever, for sure. I’m not losing sleep over this stuff. It’s pretty much inevitable for a recovering economy.
And “runaway” is a bit of an exaggeration for this inflation, IMHO. I don’t think the sky is falling, personally. Depending on one’s objectives and debts, $5M seems plausible. Just me…
Oldmanb777
Line Up and Wait
Trying to get back on topic here. We could go on forever about welfare, for anybody. But back on topic.......................
WE have been surprised at how little we spend after retirement. Certainly, Covid played a part in that. But aside from that. We no longer have the kids ruining the couch or for that matter the tires on the car. We are not spending as much on working. The opportunity cost of working wasn't figured in. Using less gas, less miles driven etc. So you may not need what you thought you needed for income. The first few years the cost usually goes up as you do things you had put off. Then it tapers off. In our case our expenses went down. I wish i would have looked forward a bit better (doesn't everyone). I didn't expect to have an inheritance (Wife's mother) that was taxable. I know "there is no inheritance tax" look closer, you might get a surprise. I didn't plan on the tax ramifications of shutting down a sideline business. So just like the surprise you may get from AMT's and probably from RMD's, you need to educate yourself on that impact of your life, and plan for it. I didn't and now I'm paying for that oversight. Some are simple, but if you have to deal with govt, it's never simple. I have found most people in SS and Medicare i have worked with, really try and be helpful. They know the system is a disaster, but they try to do the best they can for you. But often they don't know how to help. little things like, your first Medicare physical needs to be coded as a "Welcome to Medicare" physical. Who knew? but it took several months to straighten out. So do a real examination of what you have and what you don't want to have. How will you get rid of stuff, and is there any issue with that. What do you need, and what do you want for your retirement years. What is the best guess as to inflation and how to hedge against things like that. And a big one, do you want to work anymore? if not, then waht could you do to make up the bit of extra that you may need. Lots of options there, some may be viable when your 55 yrs old, but not really viable when your 70 yrs old. Good luck with your research. Everyone makes plenty of mistakes, what works for one isn't for everybody.
WE have been surprised at how little we spend after retirement. Certainly, Covid played a part in that. But aside from that. We no longer have the kids ruining the couch or for that matter the tires on the car. We are not spending as much on working. The opportunity cost of working wasn't figured in. Using less gas, less miles driven etc. So you may not need what you thought you needed for income. The first few years the cost usually goes up as you do things you had put off. Then it tapers off. In our case our expenses went down. I wish i would have looked forward a bit better (doesn't everyone). I didn't expect to have an inheritance (Wife's mother) that was taxable. I know "there is no inheritance tax" look closer, you might get a surprise. I didn't plan on the tax ramifications of shutting down a sideline business. So just like the surprise you may get from AMT's and probably from RMD's, you need to educate yourself on that impact of your life, and plan for it. I didn't and now I'm paying for that oversight. Some are simple, but if you have to deal with govt, it's never simple. I have found most people in SS and Medicare i have worked with, really try and be helpful. They know the system is a disaster, but they try to do the best they can for you. But often they don't know how to help. little things like, your first Medicare physical needs to be coded as a "Welcome to Medicare" physical. Who knew? but it took several months to straighten out. So do a real examination of what you have and what you don't want to have. How will you get rid of stuff, and is there any issue with that. What do you need, and what do you want for your retirement years. What is the best guess as to inflation and how to hedge against things like that. And a big one, do you want to work anymore? if not, then waht could you do to make up the bit of extra that you may need. Lots of options there, some may be viable when your 55 yrs old, but not really viable when your 70 yrs old. Good luck with your research. Everyone makes plenty of mistakes, what works for one isn't for everybody.
Rgbeard
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rgbeard
being married to a retired Wealth Advisor of the highest credentials and integrity I can tell you this is absolutely correct. Lots of salespeople out there masquerading as advisors.
One of the interesting things I learned leading up to retiring was the difference in what amount you thought you lived on vs what you actually lived on. A majority equate that amount to their check stub. But when you get down to checking the nickels spent it can be an eye-opener. In my case once I took out all the "non-living expenses" to include retirement investments my overhead dropped considerably. At first I thought my math was wrong. But it wasn't. The same expenses I had prior to retirement are there afterwards. What changed was certain amounts as you noted with the work related ones reduced while others increased like medical premiums. And even with the change in lifestyle after retirement my monthly overhead doesn't vary more than 10%. What I'm not understanding is your $3120.00 x2 bills after moving to medicare. Even at $500K+ income premiums on Parts B/D are not past $700/month each. And while the top shelf supplemental plans can push $1000 each per month still doesn't get you to $3000+. Is there something else thats driving this cost?
MooneyDriver78
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Tom
My biggest discretionary expense is aviation related (big surprise) make sure you can afford your hobbies, otherwise retirement will suck if all you’re doing is waiting to die.
And that's what should go on your "retire to something" list. But also keep in mind once you retire, what was once "important" may change when that ol' job is no longer in the way. Had 2 clients sell their aircraft after retirement to buy unique surface transportation modes as they now had the time to now explore the areas they used to fly over. But you have to start somewhere.
Oldmanb777
Line Up and Wait
[QUOTE="Bell206, post: 3183437, member: 31758" What I'm not understanding is your $3120.00 x2 bills after moving to medicare. Even at $500K+ income premiums on Parts B/D are not past $700/month each. And while the top shelf supplemental plans can push $1000 each per month still doesn't get you to $3000+. Is there something else thats driving this cost?[/QUOTE
Me either. I have spent all week, and all day every day on the phone. Voice response on hold you name it, trying to get to the bottom of this. I have talked with others who have had similar experiences, and from that I have developed a theory. But that's all. SS says its a Medicare problem, Medicare says its a SS problem. Neither says they can do anything about it. They can't even tell me if its a monthly charge for all of next year or yearly or quarterly charge. But the bill indicates a monthly charge. No explanation offered. If it is monthly, it is way above their maximum amount. If it's monthly, I'm bankrupt. We have received 5 letters from them since October stating what our monthly tax will be for Medicare next year. All indicate a different amount. Then this bill. I can't cover $6k plus of a surprise bill, especially in December. I will need to rape a qualified fund, raising my taxes for the year. Catch 22 there. I have been surprised to find others who have had similar things. So far the best I have gotten out of SS and Medicare is........they both have turned it over to some sort of resolution team. Every year since I went on Medicare there has been some sort of expensive issue. I think if you fit in their mold, it works, if you don't your hosed. Punishment for trying to be responsible for yourself in retirement.
Me either. I have spent all week, and all day every day on the phone. Voice response on hold you name it, trying to get to the bottom of this. I have talked with others who have had similar experiences, and from that I have developed a theory. But that's all. SS says its a Medicare problem, Medicare says its a SS problem. Neither says they can do anything about it. They can't even tell me if its a monthly charge for all of next year or yearly or quarterly charge. But the bill indicates a monthly charge. No explanation offered. If it is monthly, it is way above their maximum amount. If it's monthly, I'm bankrupt. We have received 5 letters from them since October stating what our monthly tax will be for Medicare next year. All indicate a different amount. Then this bill. I can't cover $6k plus of a surprise bill, especially in December. I will need to rape a qualified fund, raising my taxes for the year. Catch 22 there. I have been surprised to find others who have had similar things. So far the best I have gotten out of SS and Medicare is........they both have turned it over to some sort of resolution team. Every year since I went on Medicare there has been some sort of expensive issue. I think if you fit in their mold, it works, if you don't your hosed. Punishment for trying to be responsible for yourself in retirement.
FastEddieB
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Fast Eddie B
Good plan. Another option is to take SS as soon as it’s available, and if not needed, religiously put those checks directly into a conservative mutual fund or funds. If you start at 62, at let’s say $1,000/month, that’s 8 years of checks @ $12,000/year or $96,000. Yes, you’ll have a lifetime of smaller checks than if you waited, but that $96,000 invested and dollar-cost averaged and hopefully appreciating is not nothing either. There’s no right or wrong answer, and everyone has to do their own personal calculus, but Karen and I both opted to start SS as soon as possible and it’s worked out well.
Oldmanb777
Line Up and Wait
We contributed to an HSA IRA for a few years before I retired. Anyone looking toward the future might want to look into this. You put the money in pre-tax, it grows tax free, and if you spend it on medical things, it's spent tax free. I think the only place that is triple tax free.
Don't you have to have a QHDHCP "qualifying high deductible healthcare plan" to open an HSA or has that changed? I used to have one before the "Affordable" Care Act killed my insurance plan that Obama told me I could keep. Well, technically it didn't kill it, just quadrupled the cost.
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Mahneuvers
https://www.investopedia.com/articl...4/rules-having-health-savings-account-hsa.asp
Who Can Open a Health Savings Account?
According to federal guidelines, you can open and contribute to a HSA if you:
- Are covered under a qualifying high-deductible health plan which meets the minimum deductible and the maximum out of pocket threshold for the year
- Are not covered by any other medical plan, such as that for a spouse
- Are not enrolled in Medicare
- Are not enrolled in TRICARE or TRICARE for Life
- Are not claimed as a dependent on someone else's tax return
- Are not covered by medical benefits from the Veterans Administration
- Do not have any disqualifying alternative medical savings accounts, like a Flexible Spending Account or Health Reimbursement Account