Recently I was reading an article from Dividend Diplomats called Strategy Adjustment Taxes Series Part 2. While commenting on the article I had a conversation with Lanny about investing through an HSA. This got me to thinking about the different ways that Health and Wellness can be advantageous. Obviously we all know that living a healthy lifestyle has benefits. It allows us to live longer and at a higher quality of life but there are other ways that it can help benefit us financially.
Currently in America if your employer offers a high deductible insurance plan, $1,300 for an individual and $2,600 for a family, they also offer a Healthcare Savings Account (HSA). You can also start your own HSA account but the tax benefit will not be realized until you file your taxes the next year. An HSA allows you to put money into it before taxes but the catch is that it can only be used for healthcare. If you use the money for something other than healthcare then the money will be taxed just like regular income.. For 2016, the maximum contribution for an HSA is $3,350 per year.
At my current job I am enrolled in a HSA. At the beginning of every year the company adds $650 into my HSA so that means during the rest of the year I am only able to contribute $2,700 so that I don’t go beyond the maximum contribution limit. So that $2,700 dollars that I contribute goes into the account tax free. If we look at the tax savings that is $675 saved from Federal taxes (25%), $162 saved from State taxes (6%), $206.55 saved from FICA taxes (7.65%) and in total that would be $1,043.55 that was saved from taxes. (Any tax experts please feel free to correct me if I am wrong, truthfully it would be appreciated.)
That is a lot of money that I am able to save that is tax free. Since I am only 31 it’s not like I need a lot of healthcare so I will be able to just allow this money to compound. Currently I have them in some index funds, so I don’t keep up with the day to day fluctuations of the value because I know that my weekly contributions and a long term investing plan will allow the value to compound larger and larger.
While an HSA is a common strategy that people apply to their finances, I do still have one more trick up my sleeve. My company has a wellness program setup that is supposed to help the employees stay healthy and fit. In doing a little research into our wellness program I learned about a little trick that I could do to save myself some money on my health insurance.
With the current health insurance that I have selected at work I pay $23.19 a week and this plan only covers myself. If we look at this amount, that would be a total of $278.28 a quarter for my health insurance. Now the little trick that I mentioned above works kind of like this. If you participate in the wellness program and you acquire so many points in a quarter then you receive $150 that will be applied towards your health insurance. So when I participate in the program and I earn the $150, that brings my quarterly amount down to $128.28, which breaks down even farther to $10.69 that I am paying for the insurance per week. Wow that is more than a 50% savings I am getting there.
Now here is the best part of my trick. To achieve the required points to earn the $150 a quarter, I have set up an automated process that earns it for me. I know what you may be thinking….. but no I am not cheating here. What I have done is synced my FitBit with the wellness program. My daily activities earn me enough points throughout the quarter to allow me to earn the $150 without actually having to do anything extra. Since I am a pretty active person already it is really just rewarding me for being healthy…. and that is the whole point right?
I bet you may not have been aware that there were so many possible perks to being healthy and active. The financial benefits are great but the ultimate benefit is a happier and healthier life. I hope everyone has enjoyed this article and I look forward to reading any comments or questions. Happy Investing!!!