This September I had an honor to visit England and France to see, Karl Fleischer - our client and dear friend, swim across the English Channel. Even though he challenged himself athletically many times, this was quite a feat for Karl, who celebrated his 60th birthday this year. The strong tides and currents in the Channel are such that a typical swim crossing makes an S-curve so the actual distance covered is closer to 25 to 30 miles. Not only it’s one of the busiest channels in the world with the commercial boats crossing day and night but the captain of the escort boat, has to find a perfect wind conditions for the swim that can take 12+ hours.
On his first attempt Karl swam for 2.5 hours, “broke” the boat by swimming too fast and had to wait for the stars and weather to align again and assemble new support crew while the boat engine being fixed. On his second attempt, Karl enjoyed his swim and went three quarters of the way until he was pulled out by the captain because he started to swim in circles, his stroke rate dropped dramatically and he stopped comprehending what his team was saying. I am proud that he came back safe and satisfied that he gave his best to this dream!
At the same time, Sarah Thomas, Karl’s unofficial coach and training partner from Colorado was swimming the Channel to establish the record for quadruple crossing! Sarah, who beat breast cancer in 2018, has become the first person to swim across the English Channel four times non stop on September 17, 2019! I am so proud of Karl and Sarah for challenging their endurance against Mother Nature and harsh elements!
At this point you may be wondering what swimming across the English Channel has to do with open enrollment. Maybe nothing or maybe everything. Just like the weather creates an opportunity for safer swim, during open enrollment your company opens a window to review your benefits and make good choices. I encourage you to consider benefits that fit your financial goals and needs. One such option that I want to highlight today is the HSA and its hidden benefits.
What is HSA? A Health Savings Account is a tax-advantaged account created for individuals who are covered under high-deductible health plans (HDHPs) to save for medical expenses.
The reasons why I love HSAs:
- Unlike the FSA, money set aside in the HSA is NOT “use it or lose it”.
- Balance that is not used in the current year can be invested in mutual funds with tax-deferred growth potential.
- Contributions to HSA are fully tax deductible and employer can also contribute to the account. (Current limits are $3,550 for individual and $7,100 for the family).
- Distributions for eligible expenses are tax free. When funds are used for non-qualified expenses, the withdrawal is taxed as ordinary income and, if the account holder is younger than age 65, a 20 percent penalty tax is owed.
It may sound counter intuitive, but accumulated funds in HSAs can be a valuable asset in financial planning to build, potentially grow and use during retirement for medical expenses. According to Fidelity research report, a 65 year old couple retiring in 2019 can expect to spend roughly $285,000 in healthcare and other medical expenses throughout their retirement.
Wouldn’t it be nice to have a sizable, triple tax free account that you can use for things like acupuncture, glasses, contacts, hearing aids, LTC and Medicare premiums, copays and other health related expenses? Oh yes of course, you may say, but despite all these benefits HSAs are severely underutilized, mostly due to lack of education or belief that funds are “use it or lose it”. This year, during your open enrollment window, I encourage you to take a deeper look at your benefits and contact us with any questions.
Content in this material is for general information only and not intended to provide specific investment, tax, or legal advice or recommendations for any individual. No strategy assures success or protects against loss. Investing involves risk including loss of principal.