| Investment
and Health Scenarios |
| The following tables illustrate how an
HSA plan
can work over a number of years and in various scenarios. |
| Normal expected medical, dental & vision expenses, for
which you would draw funds from the HSA, might include: |
- Dental appointments every 6 months
- Routine medical check-ups every two years
- Early warning tests (PAP, mammograms, PSA's etc),
- Vaccinations
- Medications, glasses, orthopedic aids etc.
|
Prices in the tables will appear stable, as no one can predict the future, but consider
some optimistic possibilities:
- The cost of health insurance premiums will be stable and might actually
decrease because they are underwriting a pool of prudent health care shoppers whose bulk
of medical expenses will fall within the high annual deductible.
- The maximum contribution allowed for tax purposes increasing to 100% of the amount
of the annual deductible or an even higher amount. This possibility
is currently in the hands of a Congressional committee, and will be a
hot topic during the year 2000 campaigns.
- The cost of the expected medical, dental & vision expenses going down as health care
providers realize the 30-40% cost savings when the patients pay for visits in cash and
require no claim or other regulatory paperwork.
|
| Scenario
#1. Family of 5 in best of health never purchasing above normal |
| Scenario
#2. Family of 5 with unexpected medical needs in 7 out of 30 years |
| Scenario
#3. A single lady or gentleman in the best of health |
| Scenario
#4. Single lady or gentleman with health troubles in 7 of the 30
years |
Calculations are:
1.0275 x amount in HSA in prior year + 1.015 x net amount added in that year; or,
in the higher yield column: 1.07 x prior year HSA balance + 1.02 x net amount
added in that year.
|
| Scenario #1. Family of 5 in
best of health, withdrawing only $1,375 a year for normal medical expenses. |
| Year of HSA |
Annual premiums for high deductible health insurance |
Annual tax deductible contribution of 75% of $4,500 deductible |
Normal expected medical, dental, vision expenses |
Accumulated Health Savings at 2.75% annual simple interest |
Accumulated savings at a higher yield of 7% |
| 1 |
$3,000 |
$3,375 |
$1,375 |
$2,030 |
|
| 2 |
$3,000 |
$3,375 |
$1,375 |
$4,116 |
$4,116 |
| 3 |
$3,000 |
$3,375 |
$1,375 |
$6, 259 |
$6,444 |
| 4 |
$3,000 |
$3,375 |
$1,375 |
$8, 461 |
$8,935 |
| 5 |
$3,000 |
$3,375 |
$1,375 |
$10,724 |
$11,601 |
| 10 |
$3,000 |
$3,375 |
$1,375 |
$23,006 |
$28,002 |
| 20 |
$3,000 |
$3,375 |
$1,375 |
$53,181 |
$83,270 |
| 30 |
$3,000 |
$3,375 |
$1,375 |
$92,760 |
$191,990 |
| Compare $191,990 in your Health Savings account with $0 if
you fail to begin a Health Savings account. during this window of opportunity. After
the 30th year of your HSA, you might be retiring and wanting to draw out of the
HSA
(say $2,000/ year); then again you might be happy working and contributing the same $2,000
year. Either way you'll probably be able to buy a rowboat and a fishing rod,
probably you can buy the lake and the house too. |
| 50 |
withdrawing $2,000 each year |
$100,259 |
$645,316 |
| 50 |
adding $2,000 each year |
$212,768 |
$826,571 |
| The 60th year below is shown with great optimism.
Anyone who begins saving at age 25 and contributes $2,000 a year to his savings right on
through retirement can actually accumulate $1.6 million dollars by age 85. The marvel of
compound interest, diligent savings and good health. |
| 60 |
$3,000 |
$3,375 |
$1,375 |
$302,083 |
$1,654,176 |
| Scenario #2. Family of 5
with unexpected medical needs in 7 out of 30 years |
| Year of HSA |
Annual premiums for high deductible health insurance |
Annual tax deductible contribution of 75% of $4,500 deductible |
Expected expenses + high expenses in 7 of the 30 year period. |
Accumulated Health Savings at 2.75% annual simple interest |
Accumulated savings at a higher yield of 7% |
| 1 |
$3,000 |
$3,375 |
$1,375 |
$2,030 |
|
| 2 |
$3,000 |
$3,375 |
$5,500 |
These setbacks early in an HSA might require
drawing from other sources, until better health resumes. |
| 3 |
$3,000 |
$3,375 |
$5,500 |
| 4 |
$3,000 |
$3,375 |
$5,500 |
(4,448) |
$226 |
| 5 |
$3,000 |
$3,375 |
$1,375 |
(2,540) |
$2,281 |
| 10 |
$3,000 |
$3,375 |
$5,500 |
$3,627 |
$10,724 |
| 20 |
$3,000 |
$3,375 |
$1,375 |
$13,760 |
$32,710 |
| 30 |
$3,000 |
$3,375 |
$1,375 |
$37,023 |
$88,492 |
| $5,500 is calculated in years 2, 3, 4, 10, 15, 16, & 17
seven years of health troubles that required funds from your health insurance company in
addition to your $5,500 out-of-pocket (from your HSA or another source). Your
insurance company collected $3,000 in premiums from you each year. They also
collected that from the guy in the family in Scenario #1. Whether or not that
company made a profit depends on lots of factors and figures that actuaries can tell us
all about. But the good news is you lived through 7 years of medical troubles and
still have between $37,000 and $90,000 in a Health Savings account at about the age you
might like to retire. Then the account might go like this: |
| 50 |
No more contributions to the fund, withdrawing
$2,000 each year for medical expenses. |
$11,301 |
$260,444 |
| 60 |
$37,829 |
$540,518 |
| However, if you prefer to keep working & contributing to
your fund in the same manner, now that there is no Alzheimer's or Arthritis to trouble
you, then you can see a bit more in your account. Money to pass on to your
loved ones and charities of choice. |
| 50 |
$3,000 |
$3,375 |
$1,375 |
$123,810 |
$441,699 |
| 60 |
$3,000 |
$3,375 |
$1,375 |
$185,401 |
$897,075 |
| Scenario #3. An individual
lady or gentleman in the best of health |
| Year of HSA |
Annual premiums for high deductible health insurance |
Annual tax deductible contribution of 65% of $2,250 deductible |
Normal expected medical, dental, vision expenses |
Accumulated Health Savings at 2.75% annual simple interest |
Accumulated savings at a higher yield of 7% |
| 1 |
$960 |
$1,462 |
$462 |
$1,020 |
|
| 2 |
$960 |
$1,462 |
$462 |
$2,063 |
|
| 3 |
$960 |
$1,462 |
$462 |
$3,135 |
|
| 4 |
$960 |
$1,462 |
$462 |
$4,236 |
$4,374 |
| 5 |
$960 |
$1,462 |
$462 |
$5,367 |
$5,700 |
| 10 |
$960 |
$1,462 |
$462 |
$11,509 |
$13,861 |
| 20 |
$960 |
$1,462 |
$462 |
$26,599 |
$41,359 |
| 30 |
$960 |
$1,462 |
$462 |
$46,391 |
$95,453 |
| Compare $95,000 with $0 if you fail to begin a
Health Savings account during this window of opportunity. To continue with the
similar possibilities described above: |
| 50 |
No more contributions, withdrawing $1000 each
year, beginning in the 30th year. |
$50,148 |
$320,559 |
| 60 |
$54,444 |
$616,772 |
| The same agent or broker who set up your HSA plan will likely
have other excellent retirement and life insurance plans for you; there are many options
available. We could play with spreadsheets all day but we have other things to do.
Here is what the savings account would look like if you continued with the $1000
input each year. |
| 50 |
Continuing the $1000
contributions each year. |
$106,403 |
$411,187 |
| 60 |
$151,066 |
$822,960 |
| Scenario #4. Individual
lady or gentleman beset with major health troubles for 7 years. |
| Year of HSA |
Annual premiums for high deductible health insurance |
Annual tax deductible contribution of 65% of $2,250 deductible |
Normal expected medical, dental, vision expenses |
Accumulated Health Savings at 2.75% annual simple interest |
Accumulated savings at a higher yield of 7% |
| 1 |
$960 |
$1,462 |
$462 |
$1,020 |
|
| 2 |
$960 |
$1,462 |
$462 |
$2,063 |
|
| 3 |
$960 |
$1,462 |
$462 |
$3,135 |
|
| 4 |
$960 |
$1,462 |
$462 |
$4,236 |
$4,374 |
| 5 |
$960 |
$1,462 |
$462 |
$5,367 |
$5,700 |
| 10 |
$960 |
0 |
$3,000 |
$3,019 |
$4,571 |
| 20 |
$960 |
$1,462 |
$462 |
(34) |
(292) |
| 30 |
$960 |
$1,462 |
$462 |
$6,603 |
$7,064 |
| Calculations are based on the maximum out-of-pocket of
$3,000 during years 6, 10, 11, 12, 13, 19, and 23. This illustrates that someone who
goes through a major difficulty might have to dip into debt for awhile. Yet if
gainful employment is possible after the ordeal, one might pull back out of debt
and still accumulate a sizeable savings. The same person impoverished at
age 45 can restore to an enviable level of prosperity even with this simple saving plan of
$1,000/year. |
| 50 |
Net annual contributions of
$1,000. |
$37,951 |
$69,150 |
| 60 |
$61,281 |
$150,122 |
