Should I get a high-deductible health plan just so I can have an HSA?

Well, maybe. As with all things financial, it depends—but there’s a framework that might help. (And it’s worth stating explicitly: This discussion assumes your only concern when picking a plan is financial. If you have specific health concerns or doctors you need to make sure you can see in-network, then your health will of course be the number one priority!) 

If you’ve got an employer who will pay for all your medical expenses with no deductibles or premiums (shout-out to my past employer, Meta; Zuck, you’re the realest for the totally free healthcare), then yeah…I’d probably take that deal 11 times out of 10.

But what if you’re presented with a smorgasbord of confusing options? A PDF packet so thick it makes your eyes water? Then what?

You might have a few choices—some with high deductibles, and others with low ones. “High-deductible” is defined by our #BoizAtTheIRS as any health plan with a deductible higher than $1,650 for a plan covering just you, and $3,300 for a plan covering your family.

Moreover, the maximum out-of-pocket costs for these plans are $8,300 for plans covering just you, and $16,600 (gulp) for family plans. 

I don’t know about you, but I’d do some pretty questionable shit for a deductible as low as $1,650. Mine is $2,500 for a plan that just covers me, and my guess is that many of you will have access to a high-deductible health plan. (If you’re like, “What in God’s green pastures is a deductible?”, read this post for a healthcare primer about premiums, deductibles, copays, and more.)

More often than not, a high-deductible plan will have lower monthly premiums than your alternate options. You can calculate your total maximum costs each year by adding up:

• 12 months of premium costs (i.e., what’s being taken out of your paycheck to pay for the plan). If your insurance costs $200 per month, you know you’ll pay at least $2,400 per year in premiums even if you never set foot into a doctor’s office.

• Your out-of-pocket maximum (which is a limit that’s higher than your deductible, because the insurance companies are excellent at coming up with convoluted ways to continue passing the buck to you after you hit your deductible). The silver lining is that it should represent the most you’d possibly be on the hook for in a given year. (Key word: should. If you spend on services that your plan doesn’t cover, that’s not included in this limit.)

Then, when you’re debating between the low-deductible plan and high-deductible plans, you can ask yourself at a high level:

• Do I want to pay more per month but (probably) have a lower deductible and out-of-pocket maximum?

• OR, would I rather pay less each month but (probably) risk it with the higher deductible and out-of-pocket maximum?

Making matters more complicated (yay!), sometimes these plans involve varying “copays” or “coinsurance” that can make the analysis a little trickier.

For example, Henah and I were comparing health plan options the other night and noticed this:

The plan on the far left, “Empire PPO 1000,” is a low-deductible plan that costs $200/month, but with paradoxically higher out-of-pocket maximums ($5,000 single/$10,000 family) than the high-deductible plan’s ($70/month) out-of-pocket maximums ($3,425 single/$6,850 family). Huh?! (Because the nomenclature might be confusing, it’s worth clarifying that—in the plans shown—all three technically operate as PPOs, or preferred provider organizations. It’s a common misconception that high-deductible plans can’t be PPOs, but they aren’t mutually exclusive.)

What gives? Aside from the fact that someone needs a PhD in data science to make sense of this chart, notice the “Primary Care Visit,” “Specialist Visit,” “Urgent Care,” and “Emergency Care” rows. The low-deductible plan has copays—meaning you’ll pay $20 a pop at your primary care doc, $40 at a specialist, $40 for urgent care, etc. for all in-network visits.

And as a fun reminder, those copays don’t count toward the plan’s deductible—but they do count toward your out-of-pocket maximum.

The higher deductible plan in this example? Forget about copays altogether. You’re paying for everything out of pocket until you hit that deductible, honey (after which the listed 0% coinsurance kicks in). Best of luck to you and your wallet! The good news, of course, is that the maximum (again, as long as you stay in-network) you’ll be on the hook for in a given year with that example plan is $3,425 (just you) or $6,850 (family) after you pay your premiums. You’re probably just more likely to hit that deductible than if you’re using a low-deductible plan with copays for routine visits. 

For example, if Henah—who has the low-deductible plan—goes to see an in-network primary care physician, she’ll pay a $20 copay. If I go to see a primary care physician with the high-deductible plan, I’ll pay whatever they charge for an office visit (usually in the ballpark of $150).

That said, every plan is different, but please enjoy our Slack conversation, which became a flurry of confusion and numbers. Here’s a snippet of our Friday afternoon party in the DMs, where we panic-calculated cost-benefit analysis: 

As you can see, the cost calculation in this example is:

• High-deductible plan for an individual: $70/month + a $3,425 out-of-pocket maximum per year in costs (unless something major happens, you’re probably paying full price for everything out-of-pocket throughout the year) = Between $3,240 and $4,265 projected maximum cost

• Low-deductible plan for an individual: $200/month + a $5,000 out-of-pocket maximum per year in costs, but with copays that’ll likely cover routine stuff cheaply and a lower deductible ($1,000) you’d need to hit before insurance would begin kicking in and covering 70% of costs until you’ve spent $5,000 total = Between $3,400 and $7,400 projected maximum cost

This example illustrates why people often instruct those who are “young and healthy” or who have very few predictable health-related expenses to go for the higher deductible plan, assuming they won’t need to go to the doctor very often (or at all) and can use the insurance as protection against catastrophic health issues that would run up bills in the tens (if not hundreds) of thousands of dollars. Slowly gestures to the podcast episode about how backward the system is…

I digress.

But that’s not even close to where this analysis ends, because some high-deductible health plans have an ace up their sleeve, in the HSA.

The HSA can be a game-changer, thanks to the tax savings

Because you won’t pay any federal, state, or FICA taxes on payroll contributions to your HSA, you can pretty easily calculate the potential savings you’ll gain (read: money that stays in your pocket instead of being sent off to Uncle Sam for his next highway improvement project) based on how much you earn.

Assuming you’re able to invest the maximum amount in your HSA ($4,300/year for a health plan that covers just you, and $8,550/year for one that covers your entire family in 2025), your potential tax savings are #thicc. In case you’re like, “That seems like a lot of money, dude,” it’s roughly $165 per biweekly paycheck for the “single” coverage and $329 per paycheck for the “family” coverage. 

That still may sound like quite a bit, but I think of it like this: Would I rather pay more to an insurance company for a lower deductible, or pay less to them every month and pay myself more (in an HSA)? Depending on the difference in your monthly premiums and the shitty-to-decent gradient of your plan options, it may be pretty close.

Wondering how much you could stand to save in taxes from HSA contributions? I did the hard work for you; I took the marginal tax rate + 7.65% FICA tax to see how much you’d save on your annual tax bill:

• 10% bracket saves $759 on the singles plan, $1,509 on the family plan 

• 12% bracket saves $845 on the singles plan, $1,680 on the family plan 

• 22% bracket saves $1,275 on the singles plan, $2,535 on the family plan 

• 24% bracket saves $1,361 on the singles plan, $2,706 on the family plan 

• 32% bracket saves $1,705 on the singles plan, $3,390 on the family plan 

• 35% bracket saves $1,834 on the singles plan, $3,647 on the family plan 

• 37% bracket saves $1,920 on the singles plan, $3,818 on the family plan 

(If you’re not sure which tax bracket your taxable income falls into after accounting for deductions and such, you can check out the 2025 brackets here.)

For example, a family in the 24% bracket who contributes the full $8,550 each year will claw back $2,706 in tax savings, which can directly offset the costs of the insurance. Of course, it also means you have to be able to tie up that much money in your Health Savings Account, which isn’t always realistic.

This also doesn’t take state tax savings into account, which could add even more money back into your pocket; notably, California and New Jersey don’t recognize HSAs as pre-tax vehicles so you won’t save on state taxes in either of these places. Womp womp. Good thing taxes in those states are so low! Oh, wait…

Time to pull it all together for the grand finale.

The tax savings from investing in an HSA can help give the high-deductible plan an edge over the low-deductible plan

Let’s do a quick example to drive home the point and revisit our earlier options.

Things look pretty neck-and-neck, especially when I consider the fact that the low-deductible plan’s copays are likely to make each individual visit to the doctor very affordable (as opposed to being on the hook for $200 for a checkup wherein you accidentally ask one (1) specific question). 

• High-deductible plan has the potential to cost $840 in premiums + $2,500 deductible, or a combined $3,340 (with a worst case scenario of $4,265). We’ll assume it’s probably pretty likely I’ll be on the hook for at least the first $2,500 of my care in a given year.

• Low-deductible plan has the potential to cost $2,400 in premiums + $1,000 deductible, or a combined $3,400 (with a worst case scenario of $7,400). Thanks to the copays, though, we can assume I probably won’t be on the hook for routine care (beyond $20 or $40 here and there). 

But what if I’m in the 24% tax bracket, and I’m able to contribute the full $4,300 to an HSA that just covers me? That contribution gets added to the “assets” side of my balance sheet, increasing my net worth, and I save $1,361 on my federal tax bill, which means I’m “making” an additional $1,361 that year—lowering the net cost of paying for premiums and hitting the deductible in the high-deductible plan to $2,039 (again, we’re not counting the contribution to the HSA as a cost, since you’re keeping that money—it’s not as much a cost as a cash flow consideration).

Now, the difference between our two options is:

• High-deductible plan’s net cost to hit deductible: $2,039

• Low-deductible plan’s net cost to hit deductible: $3,400

So we’d save $1,361 over the other plan’s premiums and deductible—is that worth the hassle? Well, remember, it’s not just the up-front savings we’re considering: It’s the fact that these funds in your HSA are invested and will continue to grow tax-free over time, too. (As opposed to the low-deductible plan, where there’s no associated investment vehicle, just potentially lower up-front costs.)

Sometimes I feel like insurance plans are created by a bunch of MBAs in suits throwing darts at a spreadsheet, so it may not always work out this way—but this example is intended to illustrate the framework for determining how much the tax savings may offset the higher deductible of a high-deductible plan, based on your specific plan options.

Put another way: Depending on your tax bracket and single vs. family coverage (assuming you’ll contribute the maximum to your HSA), a high-deductible plan can cost more on the surface than a low-deductible plan, and still end up being net-cheaper.

As complicated as access to healthcare in the US is, if we can view these questions like math problems, it can help us make a decision

The reason choosing a health plan is complicated (aside from the obvious; see previous unintelligible charts) is because we often don’t know what type of medical expenses we’re going to incur ahead of time, making the choice process uncertain and stressful (USA! USA!). But by calculating the “absolutes” of maximum possible costs and factoring in our potential HSA tax savings, we can make a more informed decision. 

Or, we could move to Sweden. There’s always Sweden.

Jenny co-founded a community called “The Inclusive Traveler” with her friend and coworker, Kelsey Ibach, who began using a wheelchair at the age of 25 after a car accident with a drunk driver left her paralyzed from the waist down.

I invited them to join me for this week’s episode of The Money with Katie Show to share more about the hidden costs of living with a disability—from the challenges of traveling to planning for medical care in retirement. One in four people in the US will become disabled before they reach traditional retirement age. 

It’s a “minority” group that the majority of people (whether through genetic preconditions, an accident, or the process of aging) will join either permanently or temporarily at some point in their lives, yet it’s a topic that’s almost wholly absent from personal finance discourse. 

In her first year after the accident, Kelsey racked up nearly $100,000 in costs just to maintain her same, pre-accident standard of living.

The driver fled the scene, but due to poor signage in the area, Kelsey was able to sue the city of Chicago to recover some of the costs associated with her accident—highlighting the way successful litigation is often one of the only ways to guarantee financial help after an accident, even if you have health insurance, like Kelsey did. (And we all know lawyers aren’t cheap; that’s why I married mine!)

The costs Kelsey outlined in our discussion may seem extreme, but they aren’t out of the ordinary:

A 2020 report from the National Disability Institute found that adults “with a work disability require an annual average of 28% more income (or an additional $17,690 per year for a household at the median income level) to create the same standard of living as a comparable household without a disabled family member,” and that working-age adults with disabilities are twice as likely to have incomes under the poverty line than those without. 

This emphasizes the way in which costs can be both direct (in the case of extra accommodations needed to live day-to-day life, like retrofitting a shower or finding accessible transportation) and indirect (in the case of employment discrimination, or when a caretaker needs to take a lower-paying job or work fewer hours to care for a family member with a disability).

Having a disability is expensive, and it’s usually something we don’t plan for

…despite the fact that most of us will be part of the disabled community at some point in our lives. Let’s break down the major expense areas that are typically impacted:

Housing

Depending on the nature of the disability and where you live, you may need to either seek out accessible rentals or renovate your home. Kelsey, for example, lived and worked in Chicago and had to pay a premium for an apartment with an elevator near accessible transportation, typically found in “prime” locations that cost more.

If you own your home and need to install a chair lift, a sit-down shower, wheelchair ramps, additional railings, and other accommodations for mobility—it can cost upward of $20,000 to cover the basics. 

Unfortunately, many insurances won’t cover these costs, despite being necessary. While you may be able to get a tax break for these updates, you’re often paying out of pocket, which highlights how crucial an emergency fund can be (and how unexpectedly you may need it).

Transportation & Travel

“Adapted vehicles” are cars modified to meet the needs of someone with a disability, and according to the National Highway Traffic Safety Administration, they can cost up to $80,000 (more than the median American earns in a year).

Many people with disabilities rely on public transportation or ridesharing, which usually means living in an urban area where public transportation is common. The cost of public transportation and rideshares combined can average about $200/mo. or $2,400/year.

And while buses and trains in major cities tend to have accommodations for disabilities, air travel is more of a crapshoot (this is part of what inspired Kelsey and Jenny to start The Inclusive Traveler). Whether it’s the process of navigating a large and busy airport, using a bathroom on a plane, or trusting untrained personnel with your accessibility devices, traveling with a disability requires a lot more forethought than I had ever considered.

Healthcare

Kelsey’s health insurance didn’t cover the cost of certain medical supplies—and many insurances don’t cover the cost of custom-fit wheelchairs, which can be necessary to retain independence.

Living with a disability often means requiring some sort of device to perform everyday functions: talking devices, canes, prosthetics, specific lighting, hearing aids, medication…the list is long! 

While some of these costs can be reimbursed by a Flexible Spending Account, Health Savings Account, or health insurance, the coverage is frustratingly spotty. According to the latest available numbers from the CDC, the average person with a disability spends $17,431 per year on the associated costs. 

And yet this doesn’t account for the actual cost of healthcare itself, from the higher insurance premiums for higher quality plans to the out-of-pocket costs for doctor’s visits, tests, and therapies. (We’ve chatted extensively about the bewilderingly obvious grift that is the US healthcare marketplace in Money with Katie World before; here’s how I’ve budgeted for healthcare costs in the past.) 

Per the Kaiser Family Foundation, the average annual premium for an individual’s healthcare coverage was $7,911/year in 2022. 

So what’s the total? (Plus, long-term disability coverage)

Everything we’ve discussed totals nearly $15,000 additional (potentially fixed) costs each year between increased housing expenses, insurance premiums, and transportation (which is in line with the estimated average around $17,000 per year).

But as Kelsey mentions in the episode, long-term disability (often abbreviated as “LTD”) insurance can help offset these costs because it replaces lost income from work. (We covered long-term disability insurance in depth in this episode.)

Expect to pay anywhere between 1%–3% of your annual income in LTD premiums. I’ll say the quiet part out loud: This stuff is not cheap, but it can be lifesaving in the event of disability. The paradox, unfortunately, is that those most in need of this type of insurance are often those most unable to afford it—but Kelsey told me her one regret was not getting it before she needed it. (So if your employer offers LTD, say yes!)

Most policies will pay you benefits up until the time you reach retirement age, depending on the details of your policy. There are usually no limitations on how the money can be spent. It can be invaluable as income replacement if you’re unable to work, as Kelsey was for many months after her accident.

There are other resources out there to support living with a disability, like Social Security, Medicare, and Medicaid, to name a few—but they’re not always comprehensive and are typically limited to those who meet fairly narrow age or income requirements.

The reality is that one in every four people will be disabled before they reach retirement age. While it’s hard to save for these circumstances specifically, it makes a great case that quality healthcare, buffered savings cushions, and long-term disability insurance are probably all worthwhile expenses.

So, please consider either (a) keeping an open mind if you’re skeptical about the single payer system or (b) using these talking points in future heated debates (Thanksgiving dinner!), as necessary. I live to serve, honey!

This has been top of mind for me since our country experienced pandemic-spiked unemployment in 2020, and millions of people lost their health insurance when they needed it most—during a global pandemic. It’s estimated that 26 million American adults (around 8%) still don’t have health insurance, meaning they’re at the mercy of any medical bill that comes their way. 

The Affordable Care Act improved a lot of things. Among its most notable achievements: 

• It removed the “lifetime limits” that insurance companies could inflict (meaning, you could hit a “lifetime limit” of medical costs with your health insurance and they’d just stop covering you altogether).

• It removed the mind-numbingly cruel “cancellation” ability, wherein an insurance company that you’re paying to insure you can fabricate a reason to withdraw coverage.

• Perhaps most revolutionarily, it prohibited insurance companies from being able to reject people for having “pre-existing conditions.” (Basically, if you came to an insurance company with a spotty health history, they used to be able to be like, “Nah.”)

Sadly, though, we’re still a long way from a true single-payer system. 

While I’d consider our system relatively indefensible—it consistently ranks amongst the worst in the developed world—there are still (some) ardent supporters of the “insurance middlemen” system, who believe a single-payer system would somehow be worse than what we have now. 

Why do some people still so fervently support and defend this “middlemen” system? Well, because it’s massively profitable for those who stand to benefit from the big payouts. And while it’s fair to be concerned that a universal healthcare system might kill jobs, I’ve yet to see anyone study how many jobs insurance executive bonuses have killed (more on that later).

To those supporters, I say: Come along with me on a myth-busting journey. Please keep your hands and feet inside the vehicle at all times. We can’t afford any ambulance rides to the ER.

Myth #1: “A single-payer system would be more expensive than the system we have now.”

Unfortunately, our current healthcare “system” (it’s technically more accurate to call it a healthcare marketplace, but I digress) is incredibly expensive to maintain. 

Just how expensive? The countries with universal healthcare systems that consistently receive top marks (think Norway, the Netherlands, Australia) spend nearly half as much as the US as a percentage of GDP (and when measured by “per citizen”).

Healthcare spending (Medicare, Medicaid, private insurance, etc.) in the US represents nearly 20% of our total GDP, compared to the aforementioned Norway, the Netherlands, and Australia, which spend between 10% and 11% of GDP on healthcare systems that cover everyone. 

And remember, we’re paying more for a privatized system—it’s almost as if the American taxpayer is subsidizing the massive profits reaped by insurance companies. 

Doesn’t exactly scream “fair” to me, but hey, what do I know? Decide for yourself:

A healthcare marketplace with for-profit middlemen isn’t just worse for taxpayers. It’s also worse for the private employers (everyone from Fortune 100 companies to small businesses) who bear the brunt of employees’ health insurance, if they choose to provide it. This creates rising costs that strain American companies.

The average “employer and employee” together spend more than $22,000 per year for an employee’s family health insurance coverage (which is separate from the amount the family pays in deductibles, copays, or coinsurance). If you’re single, your boss pays around $7,800 for you as an individual.

Let’s take a rage cheerleading break: G-R-I-F-T—what does that spell?! American health insurance!

That means even if your employer covers everything (and you have no premiums or deductibles yourself), your compensation is still many thousands of dollars lower than it could be if your employer was not responsible for paying thousands (if not tens of thousands) of dollars to insure you. 

The point is, our system is incredibly expensive for everyone involved—government, employers, and employees.

Perhaps it’s most expensive for the uninsured, who have to navigate jacked-up medical bills that exist in response to the insurance middlemen taking a 15%–20% cut of every transaction.

Often, people will respond to conversations about single-payer systems by saying, “Well, if I didn’t have health insurance, my XYZ surgery would’ve been a million dollars!” But that’s precisely the point—without the for-profit health insurance industry, the sticker price wouldn’t be seven figures. The prices are fake. It’s no surprise medical bills are the leading cause of bankruptcy in the United States.

A single-payer model would almost certainly be cheaper for taxpayers, employers, and employees, which would help to buoy wages that are suppressed by exorbitant, employer-sponsored insurance premiums.

Hell, even a study funded by the infamously soulless Koch brothers saw that a single-payer system would save the US $2 trillion over 10 years.

That’s why when you think about the “cost” to you, you can’t just look at what you’re paying in premiums or deductibles—you have to consider the percentage of your tax dollars going to the system (remember, it represents more than 16% of our total GDP) and the amount your employer is paying on your behalf that would otherwise land in your pocket instead.

But hey, I’m really happy for Cigna’s CEO, who took home more than $91 million in 2021 compensation, or the few lucky execs who earned hundreds of millions. I’m sure they’re thriving!

TL;DR: A single-payer system would make this entire mess more efficient, and therefore less expensive, because there’s now ONE massive entity—the US government—representing most people, with major bargaining power. Of course, most other wealthy nations also have private doctors you can visit and pay out of pocket if you want premium, immediate care, but the important part is nobody’s left behind in a single-payer model. Plus, taxpayers and small business owners alike aren’t left sponsoring the bonus packages of Aetna’s C-suite.

Myth #2: “A universal healthcare system would eliminate consumer choice.”

Au contraire, my libertarian friend! A single-payer system would increase consumer choice, because you’d still have the option of visiting any doctor for any reason—but now, there’s no such thing as “in-network” or “out-of-network.” No more networks! Just doctors—and one universal health insurance card that’s presented for payment.

In the US today, there are 10 healthcare administrators for every one doctor, creating incredible bloat in the system. Instead of the world we have now wherein 25%–33% of all premiums pay for paperwork and administrative costs in a complex multipayer system, you’re now freeing up medical staff to not spend half their day working on paperwork and talking on the phone with insurance companies. 

Another common, related myth is that the “government would control your healthcare outcomes.” But guess what, babe?! Someone else already does! And it’s not the publicly elected officials accountable to you, whom you have the ability to vote out if you think they suck—it’s the CEO of Clover Health, who wants to ensure he’ll continue earning his $390 million per year compensation package.

An insurance company can deny coverage for something a medical professional thinks you need, and boom—you’re up a creek, now funding the insurance-inflated price yourself with a creative and well-written GoFundMe campaign (or going without potentially life-saving care).

To believe you’re in control of your health outcomes in the US—where private insurance companies are more focused on hitting their Q4 profit goals than your care—is a farce, and a dystopian one at that.

Myth #3: “Healthcare will be slower and worse if we have a single-payer system.”

While I’m not sure how it can get much slower or worse than it already is (I had to wait two months to see a general physician; I have yet to enjoy the “speed” our system’s defenders are always referring to), the data just doesn’t support this claim.

This is a popular talking point that relies on fear-mongering to keep Americans stuck in our shitty, broken system—but per the World Population Review, “data from nations with universal coverage, coupled with historical data from coverage expansion in the United States, show that patients in other nations often have similar or shorter wait times.”

The average wait time to see a general physician in the US is 26 days in 2022, which is 20 days longer than the average wait time to see a general physician in France, a country with universal coverage. 

28% of Americans wait longer than a day to see a doctor, compared to only 24% of Swedes, 22% of Norwegians, 14% of Australians, and 13% of Germans. The only country with longer wait times than the US? Canada.

While specialist wait times are a little more variable, citizens of Switzerland, the Netherlands, and Germany all wait less time on average than Americans to see specialists.

When we were traveling in Norway, my husband felt ill—we called a local hospital (unaware of whether it was private or public, because the website was in Norwegian and your girl hasn’t brushed up on the language) and—within two hours—a doctor was in our hotel room with all his supplies, conducting multiple tests. 

He told us he was a private doctor, and it would’ve taken “much longer” for a public doctor to arrive. 

“How much longer?” I asked, trying not to wince—my beliefs about universal healthcare systems hinging on his answer.

“Oh, at least four hours.”

I laughed so hard I nearly cried. 

Still, the house call ran us $400, as he was a private doctor who arrived at our room in under two hours to conduct a multitude of tests and we aren’t Norwegian citizens with health insurance in the country. 

But an out-of-pocket uninsured cost of $400 for extensive testing during a speedy house call? 

Be still my American heart (but not really, because I can’t afford an American cardiologist and I’ve been slacking on my Cheerios Oat Crunch intake). 

This erroneous concern—about care becoming slower—is reflective of the core fear that things will somehow get worse. And to that, I say: Friends, it hardly has room to get worse. The way our system is currently built incentivizes worse health outcomes.

Take the pharmaceutical industry, as another example. Think about the incentive model at play: Rather than dealing with the root causes of whatever ails you to actually fix the problem, they’d rather put you on medication for the next 40 years so you’ll be a recurring customer. The most prominent type of health communication the American public receives? Pharmaceutical advertising, which has been increasingly deregulated.

Not to mention the obvious reason health outcomes in the US are worse: If you’re fearful that a trip to the doctor will run a four-figure bill, how likely are you to go unless you think you really need to? Any healthcare system that actively, financially disincentivizes interacting with it will—almost certainly—create worse health outcomes over time. 

There’s bipartisan support, but private interest groups (and their fat budgets) create strong opposition

Two of the books I’ve read on the topic—one incredible exposé by T. R. Reid called The Healing of America and another scathing criticism by Marty Makary called The Price We Pay—showed me there’s bipartisan support for the idea that our healthcare system is busted. Authors on both sides of the aisle come to very similar conclusions.

We need to vote in a way that makes it clear we care about fixing this system. CalCare was an attempt earlier this year at creating an “everyone in, nobody out” universal healthcare system in California, but unfortunately, it didn’t pass, thanks to strong opposition from private interest groups representing Big Healthcare.

If you like the sound of more money in our pockets and a lower chance of being obliterated by medical bankruptcy, it’s in all our best interests to support candidates who will fight for a single-payer system.

And ever since then, I’ve lived with this undercurrent of fear that—at any moment—something in the economy could shift dramatically and leave me without a paycheck. While this is likely a fear that everyone with gainful employment experiences, I’d postulate it’s more intense in the US, where your healthcare, retirement savings, and ability to pay for childcare are all tied to your employer. It’s a high-stakes arrangement, right? That’s enough to induce fear in anyone, regardless of how good you are at your job. 

So whether you’ve recently lost your job (or fear that you may for some reason), I wanted to put together a bit of a thought exercise: How to rationally approach a serious, scary situation to lessen the financial and emotional toll I imagine it takes. 

First things first—let’s usher the elephant out of the room

Yes, you are likely aware that you should already be searching for gainful employment elsewhere. We’re not really going to focus on the new job search—just the financial checkboxes you can start ticking off if you’re stressed about job loss in any capacity. 

And on that note, I apologize if any of this feels obvious to some of you, but I figured it made sense to round all of our bases and leave no stone unturned. Analogies abound.

For the purposes of this post, we’re going to assume there’s no juicy severance package or short- or long-term disability pay associated with the job loss—we’re assuming that for whatever reason, you’ve found yourself without the income you can typically rely on. 

That means the first thing you should do is look into applying for unemployment benefits in your state. This was a life raft during the pandemic when unemployment benefits were increased, but if you’re looking around at your savings coffers while doing these exercises and you’re only seeing cobwebs, it makes sense to apply for unemployment. Of course, there’s no guarantee you’ll get it, but it’s there for a reason—and you can get it even if you were let go with a severance package. Your tax dollars fund it. Use it!

Step 1: Analyze your environment. 

That’s a fancy way of saying: Figure out what you’ve got. Do a little inventory of your balance sheet and nail down a few numbers, primarily: How much do you have in cash readily available to you? 

This is probably going to be in checking and savings accounts, but it also might be cash that’s earmarked for things like emergencies, weddings, home improvement projects…and it can feel sketchy to start dipping into funds that were supposed to be for something else. I would note that you have it on your imaginary inventory list, but add caveats wherever savings were already dedicated to something else, and think of those as “last resort” options if absolutely necessary.

The other part of this analysis is figuring out what else you’ve got coming in. If you’re part of a partnership with combined (or pseudo-combined) finances, losing one job may not mean it’s all-hands-on-deck panic time. Same goes for if you’ve got side hustle income that can help eat up some of your impending expenses. 

On that note, a goal to strive for if you’re in a couple: The best way to insulate yourselves from job loss and compensation downturns is to live on one post-tax salary, and ideally, the lower salary. Why? Because even the higher-paying job is lost, there wouldn’t be a disruption in spending. That’s not always easy, though; for transparency, my husband and I are only about two-thirds of the way there in our own home. 

To summarize, in anticipation of (or immediately after) job loss, we’re taking stock of (a) what we have in cash already, and where, and (b) if there’s any other income coming in, and how much. 

Step 2: Calculate your runway.

This is where all the badgering I’ve done over the years to try to get you to figure out “how much your life costs” comes into play. We need to figure out how much heavy lifting our cash on hand needs to do (after all, if you’ve got side hustle income or another earner in your home who can cover some or all of the costs, you may not need to use much of your savings at all). 

We want to calculate how many months we have based on our current spending patterns. This mostly includes things that cannot be easily “behavior-changed” away—your rent or mortgage, utility bills, basic groceries, doctor’s appointments…stuff that’s more or less necessary even if you’re playing life on “Austerity Mode.” 

For those of us with the privilege of discretionary income, I’d venture a guess that not all of your spending every month is necessary, which brings me to step 3…

Step 3: Identify the costs we can cut.

When I think through our joint budget of $7,500 per month, there are a few major areas I recognize right away as opportunities to trim with reckless abandon:

• Cleaning ($200/month)

• Travel and the associated pet care (roughly $300/month)

• Meal prep service ($1,000/month)

• Restaurants ($400/month)

• Shopping and miscellaneous (call it $200/month or so)

Right there, that’s about $2,000 each month that I can just eliminate, shaving our budget down by about 25% to $5,500/month. 

Now, would I be happy to forgo these luxuries? Well, no—but I know I could if I needed to throw that ass in gear. The other big things (like rent, electricity, groceries, etc.) have to stay put, but my weekly takeout habit can go. 

This exercise should help you understand how far your existing cash cushion and/or other streams of income can be stretched once you “trim the fat,” but it brings me to my next major point…your liabilities.

Step 4: Think of any liabilities.

Look, I’m not saying you have to do anything drastic because you’ve lost a job. But if for some reason you feel concerned that it might be awhile before you get another one, or your existing cash cushion is relatively slim and you don’t have too many discretionary expenses to cut (because let’s be honest, having a ton of discretionary expenses in the first place is a pretty privileged starting position), it might make sense to look to your liabilities.

Do you have any remaining student loans in forbearance that you’ve been paying down anyway, that you could pause payments on? Could you consolidate credit card debt or do a balance transfer to get a lower interest rate and buy yourself more time? Do you have two cars in your household, and the ability to drop down to one? (With the thought being, you may be paying off two sets of car payments and car insurance and really only need one.)

The idea is, where can you offload liabilities? Maybe you’ve got a mortgage that’s a little steep, but you can rent out an extra room to a friend as a roommate and recoup some of that payment in rent. While Step 1 was about assessing cash on hand, this step is about looking around and figuring out…where are my current assets or liabilities either holding me back or providing an opportunity? 

Step 5: Figure out health insurance.

This one honestly irritates me, but alas, here we are (and by “here,” I mean: not in one of our peer nations where healthcare is considered a human right—but I digress). 

Was the job in question providing you or your family health insurance? This is something we don’t often think about until it’s too late, but determining your risk tolerance around going without insurance for a little bit is probably wise. 

Ideally, your spouse or partner is still employed and you can get on their coverage (or maybe you already were on their coverage!), but if that’s not an option, you may want to get a cheap marketplace plan in the meantime for catastrophic purposes like, if you required a procedure or service that would be financially ruinous otherwise. (In some states, there’s a penalty for not having health insurance.) 

So like…maybe try to lie low and table the extreme sports until you’re back on that late-capitalist, for-profit, employer-provided private healthcare. (sighs loudly)

Step 6: Check in with your mental state.

You never know how you’ll react to being laid off. Do an emotional assessment and see if there’s anything you can do to take action that’ll make you feel better. I know that—for me—I’d probably want to retain a sense of control. 

I’d probably be consolidating all of my cash in one place so I could keep track of it easily. I’d probably sell items that I didn’t need. If I still had a high balance on a credit card from when I was employed, I would look at doing a balance transfer to a credit card with 12 or 18 months of 0% introductory APR, so I knew I could buy myself some time and not have to pay it down immediately to avoid interest charges. (Note there’s usually a ~3% fee for doing so, but depending on the balance, it could be well worth it to buy the time and avoid the immediate interest and urgency-fueled stress.) 

The other thing to assess at this step is…do I want to rush back into the job market if I don’t have to? If you step back and assess your cash position and outgoing expense needs, you might find that you have quite a bit of runway and may have the freedom to think about this like a mini sabbatical. Even if the job loss was unexpected, if you’re in a financially secure position, it may be a blessing in disguise. 

I remember one conversation with an architect who found herself without work and decided she didn’t want to return to “white collar” America. Instead, she got a job in a local coffee shop that paid most of what she needed to pay her bills, and used her savings to supplement the rest for a little while, thereby extending her “savings runway” by quite a bit—she described wanting a change of pace and to do a job outside of the “knowledge work” sector. This could be a time to reinvest in yourself, depending on what your financial audit unveils—go back to school, get certified in another field that interests you, etc.

In conclusion…

If you’re feeling scared because the “worst case scenario” has already happened, or you’re just trying to prepare for the worst because you’re getting funky vibes from your boss Carol and you don’t want to risk it, know that your feelings are valid, natural, and—honestly—helpful, if they’re the reason you’re reading this blog post right now. 

At the very least, enacting these steps (whether before or after you’re faced with termination) will give you the two things that help most during times like this: security and control. (And hey, if you can coopt the unfortunate circumstance into the whole “sabbatical” thing…send pictures from Copenhagen, please. Word on the street is they’ll give you free healthcare.)

I’ve never really thought much about my HSA. FI experts always talked about it like it was this secret, secondary IRA, and to an extent I understood why, but I didn’t feel convinced enough to prioritize it as part of my ongoing financial plan. Here’s why:

Your HSA is designed for medical expenses. If you’re going to use the money for a qualified medical expense, you can put the money in tax-free, invest it and grow it tax-free, and withdraw it tax-free (yep, no taxes start to finish) – and that’s pretty sweet. But I wasn’t sure if I wanted to lock up $4,300 per year (the contribution limit for singles in 2025) for medical expenses since I had such a stellar FI plan that relied on things like the 401(k), the Roth IRA, and my taxable investing accounts.

(It’s worth noting that after age 65, the HSA essentially morphs into a Traditional IRA. You can take money out similarly to the way you’d withdraw it from a Traditional IRA in retirement and use it for anything you want, not just health expenses, but you may pay taxes on it depending on how you go about using it.)

Although the HSA “becomes” an IRA in traditional retirement (or rather, functions like one), I didn’t have a sketchy, backdoor blueprint for using the money tax-free like I do with Traditional IRAs (the Roth conversion process). For that reason, I always prioritized my taxable investing above the HSA – but today, things changed.

Whether my initial approach to HSAs was right or wrong, when it came time to file my taxes, I was reminded (in a 6 a.m. text exchange with my dad) that I could fund my HSA (that I had barely used) with post-tax money in order to claim it as a deduction in my tax return.

Why was I so excited to defer some income, you ask?

Because I found out that I owed money to the IRS.

(I basically had more taxable income than I expected this year, and didn’t pay taxes on it throughout the year as it came in. Such is life.)

Desperate to lower my taxable income by paying myself first and with no other alternatives, I funded my HSA:

Because yes, you have until the filing deadline for the current tax year (in April) to contribute to your HSA for the previous year. Holla!

As soon as I contributed the money, I pivoted back to my tax return that I was halfway through and clicked into the “HSA Contributions” section: “$3,400,” I wrote, surprised that I didn’t have to upload any forms or proof – they were just taking my word for it.

Immediately, I received an alert that I had overfunded it; apparently, my employer made a $400 contribution I was unaware of, so I had $250 of “excess contributions” for which I had to select an option that hilariously said, “Kathleen will withdraw $250 from her HSA before April 15, 2021.” Okay, baby. You got it.

But when I clicked back to “Tax Home,” my taxes owed dropped by almost $900—just like that.

If you’re like, “But wait, how?!”

Welcome to tax deferral investment vehicles, my friend!

My taxable income was in the 24% tax bracket, so my contribution of $3,400 would defer (24% * $3,400) taxes: approximately $816.

Who can open an HSA?

Anyone with a high-deductible healthcare plan (also known as an HDHP), as defined by good ol’ Healthcare.gov as “a health insurance policy with a minimum deductible of $1,650 for singles and $3,300 for families.”

Whether or not an HDHP makes sense for you probably varies a lot based on your health conditions, but for young, healthy people without pre-existing health conditions that require a lot of care, the HDHP + HSA combination will probably work well. Here’s a breakdown that will illuminate that decision.

(My friend Kylie’s Uncle Phil is an orthopedic surgeon in Dallas and we were living with him when we got our first full-time jobs and were setting up our health insurance preferences. Right away, he guided us toward the HDHP option that had a low monthly cost and HSA associated.)

You can allegedly open an HSA with a lot of different brokerage firms or banks, but I was surprised to hear this because mine came directly from my employer as part of my healthcare plan.

Unfortunately, I can’t make any solid, first-hand recommendations on where to open your HSA because I’ve never had the choice, but I can tell you that I use Optum Bank – there’s a monthly $3 fee once you invest your HSA, and that pisses me off, so I suppose it’s safe to say I wouldn’t recommend them.

Investing inside your HSA so the cash doesn’t just sit there

Once you have more than (typically) $2,000 cash in your HSA, you’re able to invest the funds.

This is crucial, because if this money were just in cash, I don’t think I’d be down to hide away virtually untouchable cash just to save $900 in taxes.

But when you let me invest it in VTSAX and VFIAX as you see below, I’m up for it.

Conclusion

• You can open an HSA if you have a high-deductible healthcare plan (and you may already have one from your employer); “high-deductible” is defined by the Feds as a deductible over $1,650 for singles and $3,300 for families in 2025

• The money you contribute will go in tax-free (technically, it might go in post-tax but then give you a deduction later, as I outlined in this post), grow tax-free, and come out tax-free if used for “qualified medical expenses” (I’ve used mine for everything from Latisse prescriptions to Tums at CVS, though ideally you wouldn’t use it for anything and instead keep receipts and allow it to grow)

• When you turn 65, it functions like an IRA and you can use it without paying the penalty that you’d ordinarily pay for using it for something other than medical expenses

• The contribution limit for the 2025 tax season is $4,300 for self-only plans and $8,550 for family coverage

If you owe taxes this year, this is a great avenue and last-ditch effort to stiff the Feds.