Updated using everyone’s incredible feedback. Keep the feedback coming! Here is version 1.2

This is great! I really like how you can go step by step and always be working towards the next thing in the most optimal way

No it needs to be done by April 15

I feel like the “automate everything” part is so underrated and is the number one thing I try to explain to people. As a developer, the concept is much more natural but many people don’t think about it

M1 has a whole rule engine for moving money around in different conditions and I love it.

Interesting. I’ll check it out. I imagine more and more banks will add these features in the near future

🙂

Should this flow chart be bookmarked to the channel header or can we find it on your website?

What do you think is better?

Bookmark is definitely easier to find

👍👍

We should probably look to update some aspects in light of SECURE 2.0. Specifically around the decision to build an emergency fund before using an employer plan and paying off reasonable debt afterwards.

Any other suggestions regarding it? I'll make all those updates, thank you!

Can’t think of anything else sounds good

I made lots of updates. Anything else before I send it out as a big update to everyone? https://frum.finance/chart/

2 things: First, the link in step 8, frum.finance/emergency is broken. And second, step 19 is to fully fund your HSA and use it as an investment instead of for medical expenses. I agree that using it as an investment should only be done later, but fully funding it should be done earlier, because those contributions are tax free and qualified medical distributions are tax free so ideally you should be using HSA money to pay medical expenses at step 6

I'm getting page not found when clicking the link in the chart

I didn't know you could click the chart 😂

Yeah the chart is /secure2.0/emergency

Oh bleh okay I'll change the shortlink then so I don't need to update the chart.

The link text in the chart is just /emergency though

Omg urgh

Screenshot_20230116-165430.png

Bleh

Nothing else that comes to mind

@swift-vegetable-15776 can you elaborate how it's triple tax advantaged?

The problem with using it as a proper investment account is that the time horizon is undefined. You don't know if you'll need the money next week or next decade or never. So the typical investment approach won't work if actually rely on it for medical expenses.

@steep-dog-55906 " An HSA has a unique triple tax benefit. Your contributions reduce your taxable income, any investment growth within the account is tax-free, and qualified withdrawals (that is, ones used for medical expenses) are tax-free." Investopedia.

What is the penalty for non-qualified withdrawals? And is there a clawback provision?

Non-qualified withdrawals have a 20% penalty and will be taxed, but at age 65 the HSA becomes similar to a traditional IRA/401k in that you can take non-qualified withdrawals at no penalty and just pay income taxes on it. What do you mean by clawback provision?

The govt clawing back money they were originally moichel. For example if you took unqualified distributions earlier, are they taxed retroactively?

I'm not sure

So the benefit here is if you want to raise the limits for tax advantaged retirement savings, with similar restrictions as an IRA. If that's not the goal, then an HSA might be a bad place to save.

@swift-vegetable-15776 The link should be fixed!

There are a few scenarios where HSA's are useful (sending to the channel also because this might be a useful breakdown). 1. It can be used as a vehicle to pay your current medical bills. This would mean you shouldn't be investing it (though you may be able to earn some sort of interest on it, I'm not sure). The advantage here is that your contributions lower your taxable income, so you're getting an income tax deduction for paying your medical bills. That's the standard way of using it and the intended purpose. Any non-qualified distribution would be subject to a 20% penalty as well as income taxes. 2. Another way is like you said, it can be used to raise the limits for a tax advantaged retirement account. This is because after age 65, non-qualified distributions are treated like traditional IRA/401k distributions and just taxed at income tax rates with no penalty. Qualified distributions can still be taken tax free though. 3. Finally, if you're making enough money to cover your medical bills without taking distributions, then an HSA is really even better than a retirement account. This is because it can potentially be used in a way that has more tax advantages and no age restriction. Let's say you rack up $15,000 in medical bills over some amount of years(including you, your spouse, your children - anyone you can claim as a dependent for tax purposes). If you keep a record of all those medical bills, then you can take out $15,000 from your HSA at some point in the future(e.g. for a simcha) all at once, and it'll be completely tax free. If your HSA is invested then that could have been only a few thousand dollars in contributions(which lowered your taxable income, i.e. you didn't pay income tax on it), that grew tax-free, and is now being distributed tax-free as a reimbursement for all those past medical bills.

So a warning for everyone regarding HSAs because I had a bad result in 2022. My thought process was to use HSA in years we were not giving birth and FSA in years we were giving birth, because of the whole high deductible thing. Well in 2022 we didn’t give birth and our medical expenses were still high enough (with two kids getting sick randomly and medication) that we absolutely 100% would have been better off in the long run not using an HSA. But at least I have that account of triple tax advantaged money now lolsob

My general approach is to use FSA and the best healthcare plan until the kids become don’t need medical care. We had exceed all of the limits on our plan every year in the last 17.

Just want to point out that an FSA is use it or lose it and HSA is not

(there is a $500 roll over)

@swift-vegetable-15776 excellent summary, thank you!

@rich-insurance-32675 yeah so i’ll try out an HSA again in 30 years IY”H 😆

I have a different problem in that my company can't offer an HSA because they offer the employees (me) free telemedecine visits. And there's a weird clause in the tax code that makes this scenario ineligible for offering HSA. Still trying to find some way around it, but I think it'll require a change in the current law

I guess my employer gets us out of that by charging 10$ for our telemedicine visits

That wouldn't help, if the $10 is cheaper than your HDHP cost would have been

not sure how we get away with it then. Or maybe this is why Amazon killed off amazon care haha]

Apparently the cares act in 2020 temporarily lifted that restriction for 'telehealth and remote care services'. That exemption expired in December '21. In March 2022 it was extended until December 2022. I have no idea where this sits now

gotcha and in novemeber 2022 amazon removed our telemedicine benefit so it lines up

Aha, it was extended again with CAA 2023 through December of 2024. So apparently it's a political game, but likely to stick around in the long run

don’t be too sure https://www.fiercehealthcare.com/health-tech/amazons-move-eighty-six-amazon-care-strategic-play-not-failure-some-experts-say

All great stuff

@mysterious-tomato-10057 I’m very sure. The B2C model moves the playing field significantly to Amazon’s advantage (which benefits everyone, actually), but at this point we are not even playing the same game anymore.

What's the advantage of FSA over HSA? I never even consider FSA because I can't deal with use it or lose it.

None

You get to have a low deductible

To echo the previous two answers, there's no advantage in the FSA itself over an HSA. The advantage lies in what type of insurance plan you can have - you can only have an HSA if you're on a high deductible plan.

The high deductible is main concern with HSAs and I also find that those type of insurance plans have less coverage

That was the biggest issue I had. My numbers made a lot of sense for having a high deductible and an HSA in 2021, but I didn't realize there would be so much less coverage and I would be paying so much more out of pocket

Right. This is why the idea of using a HDHP/HSA when you do not have any excess cash flow to cover your medical expenses just to ensure above the line deductions on your expenses is not necessarily prudent. If you have enough expenses to spend down an entire year’s worth of family contribution amounts then you should probably be looking into better coverage.