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Hsa Insurance Rules Question & Answers

2014 November 5
by Sarah Fields

Linda asks…

Can somebody give me some estimates as to how much of my monthly income to spend?

I am about to start graduate school, pretty soon i will be in the “real world”. I was just wonder, what percentage of your income should you spend on certain monthly costs?

Things like student loan repayments, mortgage, insurance.

What gets lumped together? Is a mortgage in it’s own separate “spend ~20% of your monthly income” and school loan repayment, car loan repayment and insurance lumped into another “~35% of your monthly income”?

Sarah Fields answers:

Well there’s a lot of leeway here and a lot of adjustments you can make based on where you live and what kind of tradeoffs you’re willing to make. Here are some good budgeting rules of thumb.

Your rent/mortgage should be about 25% of your monthly income after taxes. That’s a great rule of thumb. If you live in LA or NY then you’re going to spend more of your monthly income on rent. Don’t spend more than like a third of it though, that’s retarded.

Your student loans should be locked in unless you refinance. If you refinance you’ll pay longer, the total amount will be higher, but your monthly payment will be less. Considering the fact that your loans will be forgiven no matter what the balance is after 20 years, under this new legislation, i’d just take whatever the locked in rates are. (i’m also assuming you have just stafford and perkins loans to pay, not any private ones.)

You should be saving about 10% of what you earn, too. This is above and beyond a 401K contribution. You need to have a safety net fund of about 6 months after tax income, in case something horrible happens.

Car insurance. Get the cheapest plan you can get. I’d say 100/300 is a good solid safe coverage. If you have a newer vehicle, I’d get comprehensive collision on it too. I’d get some deductable you could pay in one pay check and still cover your mortgage, utilities, loans and food for the week (so basically if you crash your car, you can pay for it in one paycheck, but you won’t be having any fun that week)

You’re going to spend money on food. You’re going to spend a lot, and that’s okay because you need food. Spend it wisely though. Go to the grocery store, get stuff that’s on sale. If you’re spending more than 33% of your after tax income on food, you’re being stupid (or your fat).

Health insurance. I hope you get it where you work if you’ve got a masters. If you’re self employed this is a whole new ball of wax. Spend as little as you can on your policy. High deductable, with a corresponding HSA is the most cost effective way to go.

Also, use your credit card for what it’s for. It’s not for buying things you can’t afford, it’s for paying for stuff between pay periods. If you get paid 2000 bucks a pay period lets say, and you run an 1800 dollar credit car balance for those two weeks, and then pay it off with your check, that’s fine.
Don’t run a balance though, that’s retarded. Credit card debt is for people who don’t make money. You’re in grad school, you’re going to make money. Spend it like a smart person!

All the best. I hope the real world turns out well for you.

Carol asks…

Could I retire when I’m 61 years old with my plan?

I’m 55 years old right now and make about $145,000 with benefits including health/dental/etc.

My net worth at the end of this year if there are no major stock market crashes would be about 1.67 million dollars

My yearly spending is about $50,000. That is I can live comfortably paying food, utilities, taxes, and insurances including long term care/car/umbrella/house that my employer don’t pay for.

I can contribute about $50,000 to my 401A and $22,000 to my 403B, and $6,000 to my non-deductible IRA a year till I’m ready to retire, and I will be doing that.

My house is payed off and worth about $280,000 and I have no dependents.

I would imagine I’ll have at least 2million dollars by the time I’m ready to retire at 61.

I should be able to handle a high deductible HSA insurance while I wait for medicare to kick in.

I would expect my total expenses during my retirement would be around $60,000 to 70,000 a year.

I’m going to wait till 70 years old to collect social security.

Can’t predict but with my family history and my current health and life style, I’ll love to be 90.

Would I be able to safely retire? Using 4% or even 5% rule?

Sarah Fields answers:

Do you really need to ask this question? You are okay and would meet your 2million dollar net worth easy by time you are 61. You are less than 30% away from your goal. That can be reached without investing within the stock market with other investments at 3% for the next 10yrs. I would obtain Social Security at 65, you never know when life would be over so at least get something out of the deal

Take Care

Ruth asks…

Abolishing social security and medicare…?

Ok. Then would you support the obligatory requirement to provide for your old parents if they are poor and not able to pay for their food, housing, medications or healthcare?

Why many of our “responsible” adults are expecting taxpayers to pay for their parents care?

And don’t tell me about paying into SS and Medicare for all your life. As we know, our payments are too small to cover the expenses.

So if you take your dad to the hospital, be prepared to pay the bill. What about that?

Those who have no kids certainly could save more, so they should just dig into their millions… or think about having kids.

Sarah Fields answers:

Some foreign countries have laws requiring that everyone contribute a significant fraction of their wages [net income if self-employed] to their own retirement and health care. Both Singapore and Chile do this and both have very high economic growth rates [compared to America].

I believe, but am not certain, that the combined deposit rate in Singapore is about 30% of one’s income.

In the case of Singapore, one’s HSA [that’s what it amounts to] is required to annually buy an approved health insurance plan. If there isn’t enough in the account, the government pays the difference. As the year progresses, co-pays, etc. Are paid out of the HSA. Unused amounts roll over to future years; if you die with a positive balance it goes to your heirs.

Retirement works as you’d expect in Singapore. Contribution is required. Investing the funds in approved ways is done by the owner. Retirement rules are about as you’d expect. Government only supplements those people whose account is very small when they retire. Your heirs get the balance [tax free], if any, when you die.

In both countries, people think and act aggressively in managing their accounts. Neither type of account is subject to taxes. The capital both types represent is re-invested in the economy with the result that capital per worker has gone up and up, productivity has gone up and up, and wages have gone up.

Sure sounds like a fairer deal that Social Security and Medicare, doesn’t it?

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