Philadelphia Reflections

Getting Started

So it's simple to get started, although any obvious modifications like periodic payroll deductions, are between you and your vendor.

To repeat: you choose a high deductible health insurance plan which conforms to regulations. Since they vary in price and service, you are advised to shop around, probably starting with the Internet, or the personnel department of your employer, or your friends. At the moment, a number of features are fixed by the Affordable Care Act, so price and service are really the main issues.

Then, having identified a (high-deductible) insurer and an HSA vendor (perhaps a bank or investment adviser), you are free to switch later, but in the long run you are looking for more-or-less permanent relationships.

You now presumably have your health insurance policy, with a Christmas saving fund arrangement attached. Don't sign anything until you are satisfied with the answer to this question, "How much income can I expect and how much freedom do I have to invest in total market stock index funds, when and if I choose to?"

If you get evasive answers, you might silently plan to sign up, but plan to keep on looking for a better deal to switch to later. At first, it might not matter, but over time you need to find the best arrangement. A debit card attachment is nice. Big vendors are reassuring, but they tend to be inflexible. Bear in mind, there isn't much in it for your advisor unless you keep renewing for a long time, so if you persist, you will probably get an answer. If persistence doesn't work, the outlook for a favorable answer, however, is dim.

So you might suddenly improve the atmosphere if you offer plans to deposit the maximum allowable immediately because a lot of obstacles will likely be waived. Keep that up for as long as you can, at least until minimum balance requirements are fulfilled. If you can't manage it, then use the Christmas fund approaches of payroll deductions and income penalties for as long as you have to, but remember your counterparty really must somehow be paid, even though he always remains a counterparty. What about the retirement income features? You probably don't have to worry about retirement for many years, although it is always wise to check occasionally to see how income compares with the competition. As things now stand, you needn't do anything until you become eligible for Medicare, except keep score between your arrangement and others, reacting appropriately to differences. As the time approaches, you will probably find you have lots of choices of retirement plans, so don't be in a rush to freeze that option.

Whether it is explicit or not, let's say you have done everything necessary for both a health insurance plan and, following that, a retirement plan. The retirement plan will have no money in it until you shift it there from the health insurance plan, replaced with Medicare. There are penalties for early withdrawals, but they can be made if you must. So to summarize, there's a little nuisance when you start, and another bit when Medicare looms. But essentially the Health Savings Account is on auto-pilot if you keep funding it, and events continue to demonstrate you are getting the maximum available return.

That completes the first section of this book. It all may be a little hard to understand, but it's easy to do. The last part of the book is devoted to what else you and Congress might think about, to build additional features on top of this foundation. Most of these extensions would greatly enhance the finances of you and the rest of the country, but all of them must be debated in minute detail before implementation. And all of them require major legislation to be smooth and workable. The Health and Retirement Savings Account as it stands might use a few easy amendments, but it already has most of its kinks worked out. It's already reached the point where the claim can be made it's a whole lot better than any other term insurance plan.

One by one, let's examine the potential multi-year improvements to be debated, so at least you understand where all this might take you.

Originally published: Tuesday, March 29, 2016; most-recently modified: Monday, May 20, 2019