Dear Dick

I’ve been happily working at my current job.  I’m an electrician.  I love my co-workers.  I look forward to coming to work every day.

The employee benefits are good, particularly, the health care coverage for me and my family.

Everything is fine.   That is, until 5 pm last Friday.

My supervisor called me into the conference room.  I lost my job along with 20 other employees.  The company needed to cut costs to remain profitable.

Since then, I started working as a self-employed electrician.

I’m surprised.  I’m finding a good amount of work.  My previous bosses and co-workers have been calling and passing on jobs they can’t handle.

But…I need health care coverage in case I get hurt on the job.  I need to protect my family too.

I heard about the HSA from another electrician.  What’s an HSA? Is this something worthwhile I should get?

“Currently Working, But Shocked” 

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Dear Currently Working, But Shocked” 

It isn’t easy to make predictions, especially about the future. But there is one prediction we’re confident in making: you will have substantial out-of-pocket expenses for health care after you retire. Personal finance experts estimate that an average retired couple age 65 will need at least $300,000 to cover health care expenses in retirement.

You may need more.

The time to save for these expenses is before you reach age 65. And the best way to do it may be a Health Savings Account (HSA). After several years, you could have a fat HSA balance that will help pave your way to a comfortable retirement.

Not everyone can have an HSA. But you can if you’re self-employed or your employer doesn’t provide health benefits. Some employers offer, as an employee fringe benefit, either HSAs alone or HSAs combined with high-deductible health plans.

An HSA is much like an IRA for health care. It must be paired with a high-deductible health plan with a minimum annual deductible of $1,400 for self-only coverage ($2,800 for family coverage). The maximum annual deductible must be no more than $7,050 for self-only coverage ($14,100 for family coverage).

An HSA can provide you with three tax benefits:

1. You or your employer can deduct the contributions, up to the annual limits.
2. The money in the account grows tax-free (and you can invest it in many ways). 
3. Distributions are tax-free if used for medical expenses. 

No other tax-advantaged account gives you all three of these benefits. 

You also have complete flexibility in how to use the account. You may take distributions from your HSA at any time. But unlike with a traditional IRA or 401(k), you do not have to take annual required minimum distributions from the account after you turn age 72. 

Indeed, you need never take any distributions at all from your HSA. If you name your spouse the designated beneficiary of your HSA, the tax code treats it as your spouse’s HSA when you die (no taxes are due). 

If you maximize your contributions and take few distributions over many years, the HSA will grow to a tidy sum. 

If you have any questions, please contact Richard Soo Hoo CPA at (508) 954-6270 or richardsoohoocpa@benjamin-zhao

SAMPAN, published by the nonprofit Asian American Civic Association, is the only bilingual Chinese-English newspaper in New England, acting as a bridge between Asian American community organizations and individuals in the Greater Boston area. It is published biweekly and distributed free-of-charge throughout metro Boston; it is also delivered to as far away as Hawaii.