OT: Investing - Stocks/Mutual Funds/Bonds/Crypto

[HaroldinGMinor]

We have a small group health plan and the deductible/premiums are outrageous and rise about 12% per year. My family would need to utilize about 27k worth of health care per year before having insurance becomes a winning bet for us. Hopefully we never need it and I’m lucky enough to be able to support it for the time being, but I have no idea how most people do so. Even if you get a subsidy. The “A” in ACA is affordable. Unfortunately, it was a piece of legislation that did nothing to actually make health care affordable.

I blame doctors for why healthcare is so expensive.

#1 The US is comically obese and doctors don't do anything. It's like firemen watching a house burning down and not doing anything about it. Doctors talk blue in the face about preventive care but no one does a damn thing about it.

#2 Doctors are scared of hospitals telling them what to do. Large healthcare providers should replace traditional healthcare insurance. If that were to happen, hospitals would be all over doctors trying to reduce costs. Insurance companies pretend to do this, but they just adjust the risk accordingly and raise rates - they don't care if how expensive the cost of care is. Doctors want no part in being micro managed and are happy with the status quo.

It is all Midranger's fault you guys.

Doctors tell people to exercise more than anything else they probably tell people. They can't put leashes on them and take them for walks.

[chile]

My plan/scenario ties together real estate and backdoor roth. My main goal is to pay zero taxes or close to it when I retire (technically 30+ years away but looking to retire early).

With real estate, the goal for me was to keep my expenses high so it offset income. Granted I still made sure the building (small multi family) is a good money maker. Keeping my expenses high is in regards to mortgage payment, improvements, etc... if during one year my expenses were higher, I could transfer more from my traditional account to my roth without having to pay additional taxes (which I already paid on my 9-5).

The bonus with real estate is the depreciation expense. That is where I am hoping I can transfer a lot of wealth from traditional to roth. I am no way an accountant or financial adviser but below is a rough calculation of how things could look...

Real Estate Building Value - 2,000,000
We will assume yearly rental income is 200,000
We will assume yearly building expenses (insurance, property tax, maintenance, etc..) is 100,000

We want to have a mortgage as the mortgage interest is tax deductible. So for one year roughly 65,000 will be part of mortgage interest (bunch of assumptions like down payment, rate, term length) so your income to the IRS shrinks to 35,000. Adding in depreciation (2,000,000 / 27.5) is another 73,000 expense so your building to the IRS is a 38,000 loss.

When I do retire early I want to still have the mortgage payment and depreciation (lasts 27.5 years) so I can do transfers. I would rather do most of my transfers when I am not working full time because I could transfer more at a lower tax rate. Looking at the current tax brackets (married and filing jointly), I could transfer about 118,000 (38,000 from real estate loss and 80,000 from income limits) and only pay to the 12% tax bracket.

During my working years, I use the real estate "loss" to offset the taxes I am paying now. But when I quit/retire, I will use more of the money to do backdoor roths at lower tax rates. As soon as I pay off my rental mortgage and depreciation expires, then I live off the rental income of 100,000 (from example above). I could also continue to buy more property.

Again all of the above has tons of variables but it is the general idea that might help people.

[midranger]

We have a small group health plan and the deductible/premiums are outrageous and rise about 12% per year. My family would need to utilize about 27k worth of health care per year before having insurance becomes a winning bet for us. Hopefully we never need it and I’m lucky enough to be able to support it for the time being, but I have no idea how most people do so. Even if you get a subsidy. The “A” in ACA is affordable. Unfortunately, it was a piece of legislation that did nothing to actually make health care affordable.

I blame doctors for why healthcare is so expensive.

#1 The US is comically obese and doctors don't do anything. It's like firemen watching a house burning down and not doing anything about it. Doctors talk blue in the face about preventive care but no one does a damn thing about it.

#2 Doctors are scared of hospitals telling them what to do. Large healthcare providers should replace traditional healthcare insurance. If that were to happen, hospitals would be all over doctors trying to reduce costs. Insurance companies pretend to do this, but they just adjust the risk accordingly and raise rates - they don't care if how expensive the cost of care is. Doctors want no part in being micro managed and are happy with the status quo. (Edit: actually insurance companies probably like that healthcare is expensive - more revenue that way. Their business is risk management not healthcare cost reduction)

It is all Midranger's fault you guys.

I honestly can’t tell if this post is sincere or satire.

You know I love you, but if it’s sincere, I couldn’t disagree more with you. Not just because I’m tremendously biased, there’s plenty that docs do wrong, opioids being a big one (though even that was only after pharma [onycontin specifically] funded a push to make pain the “6th vital sign” and Medicare tied reimbursement to patient Satisfaction and adequately addressing pain).

Obesity is not one of those things though. Obesity is calories in vs out. Everyone knows you’re supposed to eat fruits and vegetables and exercise. Gain 2 pounds over the holidays? Skip a meal or two and get back on track. Our food policy in this country is insane. It is not controlled by doctors. It is controlled by the USDA which is bought and sold by industry. Eat vegetables (as many as you want) and turn off Netflix (unless you watch it on the treadmill). Don’t smoke. Don’t drink. Don’t use drugs. That’s the top secret prescription America. It’s simple, but not easy. Do it.

Additionally, we’ve been moving toward larger and larger health systems while the cost of health care has skyrockets. Like any other monopoly, prices go up and services go down. Utilization in America isn’t really higher than other developed countries. In America it’s all about the prices. The prices are inflated to support bloated administrative overhead, pharma/industry profits, and hospital profits in systems that claim to be “not for profit” for tax purposes. Very little of this increase (if any) gets to docs. My reimbursement has fallen every year of my career. I’m not claiming poverty or anything, I’m really lucky, but the CEO makes 25x what I do and helps zero patients annually. Start there. The last time health care was remotely affordable was when it was controlled by doctors. We’ve been unhappy passengers on this path toward ruin, not drivers. If anything, we need more spine.

A more in depth discussion of health in America is likely beyond the scope of this thread though.

[Finn]

HSA's are often overlooked if you qualify. Use it tax free for medical expenses. If you pull it out for non medical you are taxed and penalized but once you turn 65 it works just like a 401k. You're taxed but no penalty. It's a way to stash a few thousand more per year if you're 401k is maxed. But you have to have a HDHP. Eventually everyone has medical expenses. Paying them with tax free cash is cool.

If you're company offers an HSA you can do it through them and the money comes off the top. Otherwise you open your own HSA, fund it with post tax cash and then deduct it all on your return. In my case my employer offers an HSA but it's crappy, high fees, so I opened one at Fidelity (Vanguard doesn't offer HSA'S).

We do have an HSA. I am reluctant to switch because I'm on medication that is really expensive. On our PPO I pay $20 to get it but no one can tell me with certainty if I'll get the same deal on the HSA. So I'd hate to find out after my first refill that I owe up to my deductible. I love the idea of it and would have done it in a heartbeat before I was diagnosed with Crohn's. I think part of it is just me being wary of insurance companies.

Yea, it's probably best to stay on your PPO then. With my HDHP + HSA, I have to pay 100% for everything (even prescriptions) until the 1500 deductible is reached (unless I go to the doctor's for preventive care). After I reach the 1500, I believe that's when copays and coinsurance kicks in.

In 2019, I was still on my PPO, and I was prescribed some eye drops. I paid $10 per refill. In 2020, I switched to a HDHP for the HSA. And they wanted $120 for the eye drops... Given that I didn't need them that bad, I just did without them.

But in your case, you need your expensive medication. So I would just stick with your current plan.

I mean, you could do the math and see if you would save anything with the HSA's tax advantages.

Umm, $1500 is NOT a high deductible (to be considered a HDHP, the deductible has to be at least $1400). My in-network deductible (Aetna in NY state) is $5800. My out-of-pocket max is $6650.

[Nowak008]

I can’t tell if this post is sincere or satire.

You know I love you, but if it’s sincere, I couldn’t disagree more with you.

Sincere.

I have longer more nuanced thoughts about the topic. I’d buy you a cup a coffee so you can tell me that I’m wrong.

[midranger]

I’m always interested to hear peoples’ thoughts on health care. More importantly peoples’ thoughts on health.

I’m not claiming to have any answers. We have a huge, rapidly aging generation (boomers) of entitled whiners who have abused every system they’ve encountered all their lives (including their bodies) and are now demanding to be fixed. It’s a tough spot, and no one wants to make tough choices.

Health care doesn’t exist to make people healthy, it exists to make people less sick. Healthy starts and ends at home.

[MickeyDavis]

HSA's are often overlooked if you qualify. Use it tax free for medical expenses. If you pull it out for non medical you are taxed and penalized but once you turn 65 it works just like a 401k. You're taxed but no penalty. It's a way to stash a few thousand more per year if you're 401k is maxed. But you have to have a HDHP. Eventually everyone has medical expenses. Paying them with tax free cash is cool.

If you're company offers an HSA you can do it through them and the money comes off the top. Otherwise you open your own HSA, fund it with post tax cash and then deduct it all on your return. In my case my employer offers an HSA but it's crappy, high fees, so I opened one at Fidelity (Vanguard doesn't offer HSA'S).

Out of curiosity, who was your work's HSA custodian?

Mine is HSABank. I'm debating if I should use their TDAmeritrade option (only for balances over $1000), or use Fidelity (I hear they are the best). I am considering Bank of America, since I am a customer of theirs.

My company uses HealthSavings.com. As soon as my first deposit went in they hit me with a $45 "annual maintenance fee". That was it for me. I closed it. They also have a $25 account closing fee but I drained the account first. I had only made 2 deposits so not much as in there and I had a small medical bill. Let them try to collect. Most HSA's issue a debit card, very convenience.

[MickeyDavis]

I know people who are put on meds (blood pressure, high cholesterol. high blood sugar) and they never change their eating/lifestyle because they figure the meds will take care of it. Insane. There is a lot wrong with health care and many MD's are too quick to medicate but personal responsibility is important. Anyway, we're getting off topic of investing

[Stannis]

HSA's are often overlooked if you qualify. Use it tax free for medical expenses. If you pull it out for non medical you are taxed and penalized but once you turn 65 it works just like a 401k. You're taxed but no penalty. It's a way to stash a few thousand more per year if you're 401k is maxed. But you have to have a HDHP. Eventually everyone has medical expenses. Paying them with tax free cash is cool.

If you're company offers an HSA you can do it through them and the money comes off the top. Otherwise you open your own HSA, fund it with post tax cash and then deduct it all on your return. In my case my employer offers an HSA but it's crappy, high fees, so I opened one at Fidelity (Vanguard doesn't offer HSA'S).

Out of curiosity, who was your work's HSA custodian?

Mine is HSABank. I'm debating if I should use their TDAmeritrade option (only for balances over $1000), or use Fidelity (I hear they are the best). I am considering Bank of America, since I am a customer of theirs.

My company uses HealthSavings.com. As soon as my first deposit went in they hit me with a $45 "annual maintenance fee". That was it for me. I closed it. They also have a $25 account closing fee but I drained the account first. I had only made 2 deposits so not much as in there and I had a small medical bill. Let them try to collect. Most HSA's issue a debit card, very convenience.

So you just contribute everything post tax?

In the end, do you think you save more with pre tax/payroll contributions over post tax contributions? Or is it about the same in the end?

One other thing to consider if you want to use pretax payroll contributions... I heard some HR departments allow pretax payroll contributions to your own HSA if you provide them with your account provider and number. My HR department is a little archaic though, so I'm scared to ask them anything lol. But it might be worth a shot for you.

I'm using pretax payroll deductions right now. I gotta look over my fees again, but I think my company covers them while I am employed with them.

I might consider just making post tax contributions with my own HSA.

[midranger]

Another tip. You can transfer 529 to anyone for education expenses. So if you’re maxing our your kids’ plan to the tax limit, you can open accounts for yourself and spouse and max those out as well. Then you just use them on the kids when the time comes.

Just trying to understand the practical side of this.

My kids are almost 4 and almost 6 months old. For kid 1, right after he was born I was able to dump $10k in at birth and just do something like $100 monthly. For kid 2, I may have been able to do the $10k again but given 2 kids and high daycare costs I didn't really want to cut our bank account down that far, so I am doing $500/month for roughly 2 years to catch up, then back to $100 for him. This also times the market out as we probably expect it to level out or maybe drop anyways sometime in the next year or two.

My one fear with 529s is that education drastically changes in the next 15 years or my kids don't go to college. There are worse things than getting a $70k windfall with penalties...or at least if 1 kid goes then I guess I can use both for him since I'm not sure the ~$70-80k saved (with random family contributions on top of my own) will be enough anyways.

But back to the original point - I don't know of a time where I'd max it out anytime soon...would it just be something that once I'm pretty sure my kid is going to college like sophomore year of HS and it seems like I'm still $50k short of what it's all going to cost that I just dump the max in every year to be a tax deduction on each end? Or even when the kid(s) are in college?

I think the limit for tax relief is something like 2250 per year per person in Wisconsin. The benefit is you don’t pay state income tax on whatever money you put in up to that limit. So it’s not a huge tax savings, but it’s something. You can contribute more each year, but you don’t get a tax break in additional contributions.

If you’re not maxing our for the kids, it doesn’t make sense to start accounts for yourself. But say you have 10k for college savings each year, if you break it into 4 accounts rather than two, you save on almost all of it.

[midranger]

I would hope that if the government did something like free college for all (or similar), they’d have the good sense to allow people to withdraw their 529 contributions without penalty.

I would hope the same for hsa if Medicare for all became law.

[midranger]

Not really investment related, but a money saving tip with a healthcare twist.

Download GoodRx. Look there first for any medication. It will be a ton cheaper typically than if billed through insurance. Caveat: It will not count toward your deductible, so if you plan on meeting deductible it likely makes more sense to go through insurance.

Seriously though. You’ll feel slimy seeing how much less the cash price is than the contracted insurance price. The pharmacists can’t tell you this. There is an actual gag order on this transparency. Should be criminal.

[soxperry]

My plan/scenario ties together real estate and backdoor roth. My main goal is to pay zero taxes or close to it when I retire (technically 30+ years away but looking to retire early).

With real estate, the goal for me was to keep my expenses high so it offset income. Granted I still made sure the building (small multi family) is a good money maker. Keeping my expenses high is in regards to mortgage payment, improvements, etc... if during one year my expenses were higher, I could transfer more from my traditional account to my roth without having to pay additional taxes (which I already paid on my 9-5).

The bonus with real estate is the depreciation expense. That is where I am hoping I can transfer a lot of wealth from traditional to roth. I am no way an accountant or financial adviser but below is a rough calculation of how things could look...

Real Estate Building Value - 2,000,000
We will assume yearly rental income is 200,000
We will assume yearly building expenses (insurance, property tax, maintenance, etc..) is 100,000

We want to have a mortgage as the mortgage interest is tax deductible. So for one year roughly 65,000 will be part of mortgage interest (bunch of assumptions like down payment, rate, term length) so your income to the IRS shrinks to 35,000. Adding in depreciation (2,000,000 / 27.5) is another 73,000 expense so your building to the IRS is a 38,000 loss.

When I do retire early I want to still have the mortgage payment and depreciation (lasts 27.5 years) so I can do transfers. I would rather do most of my transfers when I am not working full time because I could transfer more at a lower tax rate. Looking at the current tax brackets (married and filing jointly), I could transfer about 118,000 (38,000 from real estate loss and 80,000 from income limits) and only pay to the 12% tax bracket.

During my working years, I use the real estate "loss" to offset the taxes I am paying now. But when I quit/retire, I will use more of the money to do backdoor roths at lower tax rates. As soon as I pay off my rental mortgage and depreciation expires, then I live off the rental income of 100,000 (from example above). I could also continue to buy more property.

Again all of the above has tons of variables but it is the general idea that might help people.

I sort of understand this but not quite. If i'm just now at 35 getting into a very nice income bracket but have yet to invest in real estate, who do i go talk to that can help me build a strategy like this?

[MickeyDavis]

Out of curiosity, who was your work's HSA custodian?

Mine is HSABank. I'm debating if I should use their TDAmeritrade option (only for balances over $1000), or use Fidelity (I hear they are the best). I am considering Bank of America, since I am a customer of theirs.

My company uses HealthSavings.com. As soon as my first deposit went in they hit me with a $45 "annual maintenance fee". That was it for me. I closed it. They also have a $25 account closing fee but I drained the account first. I had only made 2 deposits so not much as in there and I had a small medical bill. Let them try to collect. Most HSA's issue a debit card, very convenience.

So you just contribute everything post tax?

In the end, do you think you save more with pre tax/payroll contributions over post tax contributions? Or is it about the same in the end?

One other thing to consider if you want to use pretax payroll contributions... I heard some HR departments allow pretax payroll contributions to your own HSA if you provide them with your account provider and number. My HR department is a little archaic though, so I'm scared to ask them anything lol. But it might be worth a shot for you.

I'm using pretax payroll deductions right now. I gotta look over my fees again, but I think my company covers them while I am employed with them.

I might consider just making post tax contributions with my own HSA.

It's a wash. I contribute post tax now but deduct it all at the end of the year. So I get a larger refund. It's easier to do it pre tax and not have to claim it, but I'm fine doing it this way. My company uses Fidelity for 401K and then this rip off company for HSA. I told them about it and heard back "thanks for the feedback". I'm sure they get a kickback for using that HSA. And not nearly as many people use an HSA compared to a 401K so I don't think they give a crap.

[midranger]

I believe you can only write off real estate depreciation against your primary income (say you’re an attorney or something) if your spouse is a certified real estate professional. You can’t really have a full time job AND be a legal real estate professional to defray taxes on your non-real-estate primary income.

[Kerb Hohl]

I would hope that if the government did something like free college for all (or similar), they’d have the good sense to allow people to withdraw their 529 contributions without penalty.

I would hope the same for hsa if Medicare for all became law.

Yeah was gonna add that. You’d hope so.

[Nowak008]

We have a small group health plan and the deductible/premiums are outrageous and rise about 12% per year. My family would need to utilize about 27k worth of health care per year before having insurance becomes a winning bet for us. Hopefully we never need it and I’m lucky enough to be able to support it for the time being, but I have no idea how most people do so. Even if you get a subsidy. The “A” in ACA is affordable. Unfortunately, it was a piece of legislation that did nothing to actually make health care affordable.

I blame doctors for why healthcare is so expensive.

#1 The US is comically obese and doctors don't do anything. It's like firemen watching a house burning down and not doing anything about it. Doctors talk blue in the face about preventive care but no one does a damn thing about it.

#2 Doctors are scared of hospitals telling them what to do. Large healthcare providers should replace traditional healthcare insurance. If that were to happen, hospitals would be all over doctors trying to reduce costs. Insurance companies pretend to do this, but they just adjust the risk accordingly and raise rates - they don't care if how expensive the cost of care is. Doctors want no part in being micro managed and are happy with the status quo.

It is all Midranger's fault you guys.

Doctors tell people to exercise more than anything else they probably tell people. They can't put leashes on them and take them for walks.

That's like the police saying "can't control crime so we might as well do nothing and wait for crime to happen."

[HaroldinGMinor]

I blame doctors for why healthcare is so expensive.

#1 The US is comically obese and doctors don't do anything. It's like firemen watching a house burning down and not doing anything about it. Doctors talk blue in the face about preventive care but no one does a damn thing about it.

#2 Doctors are scared of hospitals telling them what to do. Large healthcare providers should replace traditional healthcare insurance. If that were to happen, hospitals would be all over doctors trying to reduce costs. Insurance companies pretend to do this, but they just adjust the risk accordingly and raise rates - they don't care if how expensive the cost of care is. Doctors want no part in being micro managed and are happy with the status quo.

It is all Midranger's fault you guys.

Doctors tell people to exercise more than anything else they probably tell people. They can't put leashes on them and take them for walks.

That's like the police saying "can't control crime so we might as well do nothing and wait for crime to happen."

It's not like that at all. Healthcare is a very complex issue. To blame costs on one factor is incredibly shortsighted and as midranger said well beyond the scope of the investing thread.

[MickeyDavis]

I believe you can only write off real estate depreciation against your primary income (say you’re an attorney or something) if your spouse is a certified real estate professional. You can’t really have a full time job AND be a legal real estate professional to defray taxes on your non-real-estate primary income.

Yes I think you are correct

[midranger]

I blame doctors for why healthcare is so expensive.

#1 The US is comically obese and doctors don't do anything. It's like firemen watching a house burning down and not doing anything about it. Doctors talk blue in the face about preventive care but no one does a damn thing about it.

#2 Doctors are scared of hospitals telling them what to do. Large healthcare providers should replace traditional healthcare insurance. If that were to happen, hospitals would be all over doctors trying to reduce costs. Insurance companies pretend to do this, but they just adjust the risk accordingly and raise rates - they don't care if how expensive the cost of care is. Doctors want no part in being micro managed and are happy with the status quo.

It is all Midranger's fault you guys.

Doctors tell people to exercise more than anything else they probably tell people. They can't put leashes on them and take them for walks.

That's like the police saying "can't control crime so we might as well do nothing and wait for crime to happen."

Not for nothing, but that’s exactly what police do and why they exist.