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We are expecting our firstborn in October, I'm currently working and the wife stays at home. We are pretty set financially, no debt with decent savings. I'm looking for a checklist of "advanced FW" financial moves that I should make this year. Not the basic tips of having emergency cash or create a budget for the Dave Ramsey's crowd, but tips for the FW savvies.

What I have done so far:
- max contribution to FSA
- plan for dental work, etc to maximize coverage IF out of pocket max is reached
- select low deductible insurance plan from my work
- contribute to Colorado 529 (reduce income considered for CO state tax).

Anything else that I should consider?

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rated:
Waro said:   We are expecting our firstborn in October, I'm currently working and the wife stays at home. We are pretty set financially, no debt with decent savings. I'm looking for a checklist of "advanced FW" financial moves that I should make this year. Not the basic tips of having emergency cash or create a budget for the Dave Ramsey's crowd, but tips for the FW savvies.

What I have done so far:
- max contribution to FSA
- plan for dental work, etc to maximize coverage when reaching out of pocket max
- select low deductible insurance plan from my work
- contribute to Colorado Coverdell (reduce income considered for CO state tax).

Anything else that I should consider?

Make sure your will is in order and you have a guardian selected.
Life insurance for both you and your wife
Check out 529 plans to see if they are right for you. No extreme urgency here, but a good time to look.

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I don't see the reason for the low deductible health plan. I did the opposite and went with a HDHP before our child was born at the end of 2016. She has only done the routine stuff, such as check ups and immunizations. My wife has only had a couple of follow ups with her OB/GYN. Totally not worth the near double premium, especially since I had a bunch of HSA money (in your case, FSA money) lined up for the birth and post-birth care.

What's your rationale for that OP?

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See if your friends or family that have a used furniture, crib, baby tub, rocker/slider, changing table, etc. A lot of that stuff is lightly used and can be pricey if purchased new. We had two kids and had a combination of used and new and have since passed on most of the small baby stuff to other friends/family. Some people don't like the idea of used stuff, which I fully understand, but it can save you money.

I am confused about the insurance. Will you have the baby under the high or low deductible plan? If the low, I don't think you will reach the OOP max just on the birth.

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Waro said:   - contribute to Colorado Coverdell (reduce income considered for CO state tax).

 

You can only contribute up to $2,000 annually to the Coverdell account, and there are income phase-outs where you can't contribute at all.  Look at the Colorado 529 plan.  Colorado is one of only five states that allow an “unlimited” deduction for contributions to its Section 529 accounts.  You've got a fairly low state income tax rate though, so it is not a foregone conclusion that investing in the 529 plan is the best approach.  Depending on your investment options, it is possible that you could out earn the tax benefits of a 529 account in a taxable account.  There are multiple schools of thought on that front.
 

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if you're only allowed to adjust work benefits once a year, having a kid is typically an event that will allow you to adjust your benefits within 30 days after childbirth. you may be able to use that to your advantage (e.g. adjust fsa withholding amount later in the year, once you have a better handle on what your medical expenses will be)

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529 is great. I started putting money right before 2008 crash, and then stopped. But glad i didn't close it .. now money is close to doubled.

Good thing is you don't pay any ongoing taxes on dividend/cap gains. And you take the money out tax free when you need for college.

I only wish i started bit earlier, and put bit more.

SO my advice start 529 contributor as early as possible. Make sure to pick a plan that has low admin fee and low expense ratio. NY state 529 plan is great for people even out of state. But do check if you get any in state benefit - if your state provide a plan. Otherwise, pick the best one out of any other states.

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I am skeptical of 529 plans. The financial aid system generally means that's all money for whatever college the student attends - plus a big chunk of your other savings and income at that time. It seems to me there's a good chance it mostly goes toward reducing financial aid, not your net costs.

Colorado's has decent usability for procrastinators. Funds that pass through their 529 accounts toward college expenses are state tax deductible. So while ours had 0 balance before the kids started college, every payment went through a 529 deposit & withdrawal cycle, avoiding state income tax on that amount.

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Waro said:   We are expecting our firstborn in October, I'm currently working and the wife stays at home. We are pretty set financially, no debt with decent savings. I'm looking for a checklist of "advanced FW" financial moves that I should make this year. Not the basic tips of having emergency cash or create a budget for the Dave Ramsey's crowd, but tips for the FW savvies.

What I have done so far:
- max contribution to FSA
- plan for dental work, etc to maximize coverage when reaching out of pocket max
- select low deductible insurance plan from my work
- contribute to Colorado Coverdell (reduce income considered for CO state tax).

Anything else that I should consider?

  
Personally, whenever I know things are going to be very expensive (surgeries, hospitalization, procedures, etc...) that is when high deductible plans shine the most is when you easily reach the max out of pocket. At the same time, you have the advantages of an HSA. Unless your newborn has infrequent issues that require more than a simple preventative care doctor visit (which are covered 100% in HDHP), I would stick with high deductible if you're looking to strategize. PPO plans are best when you have mid-level expenses of healthcare (e.g. simple doctor visits/tests, expensive medications with co-pays).

Benefits of HDHP:
1. It is usually always the best option for when you have the least amount of expenses for healthcare.
2. It is usually always the best option for when you have the most amount of expenses for healthcare. This definitely held true for me this year. We had our kid this year and had some complications... to make a long story short, baby had an early landing and has been in the NICU for the last 2 months. We were done with our max out of pocket before we were even 2 days into the NICU - most of it was covered by the pregnancy itself. Plus, I opted to have an ENT surgery I had been waiting forever to have.
3. Ability to fund an HSA up to ~$6500 each year, plus invest it like a second retirement account. 

Here are my other suggestions:
1. Max out your 401k and your spouse's 401k to the max ($18,000 x 2)
2. Max out your IRA / ROTH IRA for you and your spouse ($5500 x 2)
3. Start a 529 to begin saving for newborn college the moment they are born.
4. Consider life insurance plans for both you and your spouse. I recommend 20 or 30 year term life policies
5. If your employer has any "extensions" to their Long Term disability policy, definitely pay extra for it. For example, my company will cover up to 40% when LTD kicks in. We can pay extra to bump it up to 60%. I've been told this is always well worth it.
6. Definitely make sure to get your baby shower setup and in-order. Nothing better for preparing for a kid than having other people buy the shit for you.
7. As others have said, anything else that you trust (such as furniture - not mattress pads) consider buying used, especially from other relatives that might just want to get rid of it since they are done with kids.

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prozario said:   529 is great. I started putting money right before 2008 crash, and then stopped. But glad i didn't close it .. now money is close to doubled.

Good thing is you don't pay any ongoing taxes on dividend/cap gains. And you take the money out tax free when you need for college.

I only wish i started bit earlier, and put bit more.

SO my advice start 529 contributor as early as possible. Make sure to pick a plan that has low admin fee and low expense ratio. NY state 529 plan is great for people even out of state. But do check if you get any in state benefit - if your state provide a plan. Otherwise, pick the best one out of any other states.

  
529 isn't always great - if for some reason you need to take from the 529 for unqualified expenses - such as your child not attending, having it all paid with scholarships, etc.. etc... Then you will have to pay full income taxes on the gains/dividends. Whereas, if you put it in a typical taxable investment account you can take disbursements at any time and would only have to pay the long term capital gains tax instead of full income tax rate. 

Personally, I'm thinking of trying to not put all my eggs in one basket and plan to mix the two for my kids college fund.

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SlimTim said:   I am skeptical of 529 plans. The financial aid system generally means that's all money for whatever college the student attends - plus a big chunk of your other savings and income at that time. It seems to me there's a good chance it mostly goes toward reducing financial aid, not your net costs.

 

A 529 plan in a parent or dependent child's name is not treated any differently for financial aid purposes than any other reported parental asset.  If you are saving in a 529 plan at the expense of putting money in your retirement plan, that's a bad move.  But putting money in a 529 plan versus a taxable account will not make any difference in the financial aid equation.   

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I'm not too hot on 529s either.

Look into getting a grandparent to set up a 529 for your child, there are some potential benefits from a grandparent's 529 vs. a parent's (year 4). If you don't trust your parents/inlaws then don't do this, they have total control over the money.

I'm with jaytrader; not sure why you went with a lower deductible plan. As long as there's no major health issue with your child the routine stuff is covered and the "uh oh's" aren't super expensive anyway.

Read and consider HDHP with a HSA.

General baby advise: don't buy anything until the baby is born. People you know will be gifting you things, and hand-me-downs since this is your first. Also the allure of buying all kinds of gadgets and strollers and mechanical baby toys is great; your kid might hate all of them and you're out $1k on stuff that never gets used.

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Stubtify said:   Look into getting a grandparent to set up a 529 for your child, there are some potential benefits from a grandparent's 529 vs. a parent's (year 4). If you don't trust your parents/inlaws then don't do this, they have total control over the money.

 


Also be aware that grandparent 529's can have a much worse impact on financial aid eligibility than parental 529's.

 

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jaytrader said:   I don't see the reason for the low deductible health plan. I did the opposite and went with a HDHP before our child was born at the end of 2016. She has only done the routine stuff, such as check ups and immunizations. My wife has only had a couple of follow ups with her OB/GYN. Totally not worth the near double premium, especially since I had a bunch of HSA money (in your case, FSA money) lined up for the birth and post-birth care.

What's your rationale for that OP?

  The premium difference between LDHP vs. HDHP is $700/yr ($1900/yr vs. $1200/yr), I figured I would save money if we have mid to high level medical bills.  The difference in max OOP is $7000 (LDHP) vs. $11000 (HDHP).   
hairybeast said:   See if your friends or family that have a used furniture, crib, baby tub, rocker/slider, changing table, etc. A lot of that stuff is lightly used and can be pricey if purchased new. We had two kids and had a combination of used and new and have since passed on most of the small baby stuff to other friends/family. Some people don't like the idea of used stuff, which I fully understand, but it can save you money.

I am confused about the insurance. Will you have the baby under the high or low deductible plan? If the low, I don't think you will reach the OOP max just on the birth.


Definitely will use used stuff, I have already "booked" our friends and families leftovers. As for the insurance, we have the LDHP now.  I edited the original post to say that I will plan for any medical work if I reach OOP max.  

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Waro said:   
jaytrader said:   I don't see the reason for the low deductible health plan. I did the opposite and went with a HDHP before our child was born at the end of 2016. She has only done the routine stuff, such as check ups and immunizations. My wife has only had a couple of follow ups with her OB/GYN. Totally not worth the near double premium, especially since I had a bunch of HSA money (in your case, FSA money) lined up for the birth and post-birth care.

What's your rationale for that OP?

  The premium difference between LDHP vs. HDHP is $700/yr ($1900/yr vs. $1200/yr), I figured I would save money if we have mid to high level medical bills.  The difference in max OOP is $7000 (LDHP) vs. $11000 (HDHP).   

  
Whats the deductible difference between the 2? Both of your options sound rather crappy to be honest.

I will say, anyone who says get a HDHP because child birth is cheap is an idiot. There are so many different items you have to pay for - in addition to many things can go wrong. I know this first hand.

Even if you have a picture perfect pregnancy, you will still have all kinds of labs, tests (ultrasounds), etc... that have to be paid for - in addition to the actual hospital visit for delivery, which in of itself is always expensive. I would choose the HDHP in that birth is expensive, not cheap. But judging by your coverage, your plans seem to suck all around. 

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Expanding on Stubtify's post a bit - maybe falling into the advice that you weren't seeking, oh well. This may sound harsh, but start grooming your wife (and yourself) in the FW Way, especially if either/both of you are not naturally frugal/money conscious.

Having kids is the prime marketing time for companies to attract new consumers - you are tired, stressed, learning a ton every day, and you want the very best for you kids - the allure of that sling, or rocker, or whatever that promises to give you some extra sleep or soothe crying is tough to resist. And baby stuff is expensive. Setting the tone now can avoid lots of $ spent over the next couple of months/years. We have seen friends spend tens of thousands of dollars on a new house, new car, new kitchen upgrade, new baby room, and all the fixings, to prepare for the new addition to the family. And we have seen other friends spend basically zilch getting hand-me-downs, not making drastic lifestyle changes, etc. We have tended toward the latter camp with our 1 1/2 yr old, and it seems to be less stressful and of course cheaper. Figure out where you want to be on the spectrum, and remind yourself often to stick to your guns. Especially once the momma blogs come calling.

And Congrats! In my very limited experience thus far, being a dad is awesome.

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Waro said:     The premium difference between LDHP vs. HDHP is $700/yr ($1900/yr vs. $1200/yr), I figured I would save money if we have mid to high level medical bills.  The difference in max OOP is $7000 (LDHP) vs. $11000 (HDHP).  
 

  
If you're interested, let us know the deducible and coverage differences between the plans and we can provide some analysis. The flexibility and tax savings of an HSA are very valuable, often easily tipping the scales to the HDHP. For example, the tax savings on that $11,000 max OOP (which, granted, would take two years to save given the contribution limits) make it effectively ~$7k depending on your tax rate. The limits on FSA elections are much lower and provide very little flexibility.

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dcwilbur said:   You can only contribute up to $2,000 annually to the Coverdell account, and there are income phase-outs where you can't contribute at all.  Look at the Colorado 529 plan.  Colorado is one of only five states that allow an “unlimited” deduction for contributions to its Section 529 accounts.  You've got a fairly low state income tax rate though, so it is not a foregone conclusion that investing in the 529 plan is the best approach.  Depending on your investment options, it is possible that you could out earn the tax benefits of a 529 account in a taxable account.  There are multiple schools of thought on that front.

I meant to say 529 instead of Coverdell due to the CO state tax savings. I will select the available Vanguard's Total Stock Market Index but I'm interested to know how you can out earn this in a taxable account.  
We are also planning to have another kid so even if the first one don't need it, maybe the 2nd would but yes I can see how that is a risk.

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Waro said:   
dcwilbur said:   You can only contribute up to $2,000 annually to the Coverdell account, and there are income phase-outs where you can't contribute at all.  Look at the Colorado 529 plan.  Colorado is one of only five states that allow an “unlimited” deduction for contributions to its Section 529 accounts.  You've got a fairly low state income tax rate though, so it is not a foregone conclusion that investing in the 529 plan is the best approach.  Depending on your investment options, it is possible that you could out earn the tax benefits of a 529 account in a taxable account.  There are multiple schools of thought on that front.

I meant to say 529 instead of Coverdell due to the CO state tax savings. I will select the available Vanguard's Total Stock Market Index but I'm interested to know how you can out earn this in a taxable account.  
We are also planning to have another kid so even if the first one don't need it, maybe the 2nd would but yes I can see how that is a risk.

It is more the exception now than the rule, but some 529s, especially in the early days, had such high expense ratios and limited investment choices that they just weren't generating very good returns, especially given your relatively long investment horizon.  Good investment options combined with state tax benefits probably dismiss that notion for you.

Don't ignore the poster above who said to maximize your retirement savings first.  If you aren't doing that, skip the 529 for now and put your resources there first.  

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Waro said:   
dcwilbur said:   You can only contribute up to $2,000 annually to the Coverdell account, and there are income phase-outs where you can't contribute at all.  Look at the Colorado 529 plan.  Colorado is one of only five states that allow an “unlimited” deduction for contributions to its Section 529 accounts.  You've got a fairly low state income tax rate though, so it is not a foregone conclusion that investing in the 529 plan is the best approach.  Depending on your investment options, it is possible that you could out earn the tax benefits of a 529 account in a taxable account.  There are multiple schools of thought on that front.

I meant to say 529 instead of Coverdell due to the CO state tax savings. I will select the available Vanguard's Total Stock Market Index but I'm interested to know how you can out earn this in a taxable account.  
We are also planning to have another kid so even if the first one don't need it, maybe the 2nd would but yes I can see how that is a risk.

  
Some of us live in states like Texas (myself) that have no 529 tax advantages since there is no state income tax. Obviously, that's a significant factor.

But I outlined in my post above why if your  child chooses not to go to college, or if you have money leftover that paying taxes on the dividends and capital gains from the 529 as an Income tax costs more than a normal taxable account with Long term capital gains tax... which has no penalties, regardless of how it's used.

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doveroftke said:   If you're interested, let us know the deducible and coverage differences between the plans and we can provide some analysis. The flexibility and tax savings of an HSA are very valuable, often easily tipping the scales to the HDHP. For example, the tax savings on that $11,000 max OOP (which, granted, would take two years to save given the contribution limits) make it effectively ~$7k depending on your tax rate. The limits on FSA elections are much lower and provide very little flexibility.
  
HDHP / LDHP comparison
Premium: $1,900 / $1,200
Deductible: $1,500 / $3,750
Coninsurance: 80% / 70%
OOP: $7k / $11k

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justignoredem said:   3. Start a 529 to begin saving for newborn college the moment they are born.
4. Consider life insurance plans for both you and your spouse. I recommend 20 or 30 year term life policies
5. If your employer has any "extensions" to their Long Term disability policy, definitely pay extra for it. For example, my company will cover up to 40% when LTD kicks in. We can pay extra to bump it up to 60%. I've been told this is always well worth it.
6. Definitely make sure to get your baby shower setup and in-order. Nothing better for preparing for a kid than having other people buy the shit for you.
7. As others have said, anything else that you trust (such as furniture - not mattress pads) consider buying used, especially from other relatives that might just want to get rid of it since they are done with kids.


3. I suppose I don't need to wait until the baby is born, I can open one now in my name and then transfer?
4. I have one through work that I'm thinking to bump up. I haven't done the calculation to check if it is cheaper to bump current employer plan or buy from outside. If I quit/ got fired then definitely outside plan is the way to go at that time.  However, I'm  sure why I would need life insurance for my wife since she is not working.
5. Good one, will look into this.
6-7. I'm on this like Donkey Kong, I love free stuff.
 

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Waro said:   
doveroftke said:   If you're interested, let us know the deducible and coverage differences between the plans and we can provide some analysis. The flexibility and tax savings of an HSA are very valuable, often easily tipping the scales to the HDHP. For example, the tax savings on that $11,000 max OOP (which, granted, would take two years to save given the contribution limits) make it effectively ~$7k depending on your tax rate. The limits on FSA elections are much lower and provide very little flexibility.
  
HDHP / LDHP comparison
Premium: $1,900 / $1,200
Deductible: $1,500 / $3,750
Coninsurance: 80% / 70%
OOP: $7k / $11k

  
I'm guessing you mean LDHP / HDHP and not the reverse like you wrote. Also you need to clarify what "LDHP" is. Is that a PPO plan?
Also are those deductibles/OOP Single or Family amounts? Because based on the rules I'm seeing, even your LDHP qualifies as a HDHP and you should be eligible for an HSA if that is your single deductible amounts.

That said, both of your plans look rather bad to me. Given the small price difference I would probably opt for the $1,900 premium one (LDHP).
 

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Waro said:   
justignoredem said:   3. Start a 529 to begin saving for newborn college the moment they are born.
4. Consider life insurance plans for both you and your spouse. I recommend 20 or 30 year term life policies
5. If your employer has any "extensions" to their Long Term disability policy, definitely pay extra for it. For example, my company will cover up to 40% when LTD kicks in. We can pay extra to bump it up to 60%. I've been told this is always well worth it.
6. Definitely make sure to get your baby shower setup and in-order. Nothing better for preparing for a kid than having other people buy the shit for you.
7. As others have said, anything else that you trust (such as furniture - not mattress pads) consider buying used, especially from other relatives that might just want to get rid of it since they are done with kids.


3. I suppose I don't need to wait until the baby is born, I can open one now in my name and then transfer?
4. I have one through work that I'm thinking to bump up. I haven't done the calculation to check if it is cheaper to bump current employer plan or buy from outside. If I quit/ got fired then definitely outside plan is the way to go at that time.  However, I'm  sure why I would need life insurance for my wife since she is not working.
5. Good one, will look into this.
6-7. I'm on this like Donkey Kong, I love free stuff.

  
3. I've heard it's easier to just wait until they are born so you can immediately name them as the benefitiary. It's not like you're going to invest $20k in it and have it grow to $40k in the meantime waiting for the kid to b e born, so I would personally just wait. But that's up to you.
4. Most work policies cancel the moment you are fired/leave, etc.. Based on that alone is why most people go outside of their employer coverage. In addition, I have heard outside ones can be cheaper depending on how healthy you are in the assessment. In the employer one you are essentially in a group plan with a share of unhealthy people that you share the costs with. But YMMV.

Maybe consider cloth diapers if you really want to get down and dirty? Our baby is still in the NICU at the moment, but were planning to give cloth diapers a try when she is out.

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Waro said:   
4. Consider life insurance plans for both you and your spouse. I recommend 20 or 30 year term life policies

4. I have one through work that I'm thinking to bump up. I haven't done the calculation to check if it is cheaper to bump current employer plan or buy from outside. If I quit/ got fired then definitely outside plan is the way to go at that time.  However, I'm  sure why I would need life insurance for my wife since she is not working.
For you, a term life policy outside of your workplace will almost always (always?) be cheaper, plus it isn't at risk if you change jobs. Take any group policy that your employer gives you for free, and get the rest of your coverage elsewhere. The exception would be if you couldn't otherwise qualify due to a serious health condition.

As for your wife, you aren't insuring against a loss of income; you are insuring to cover all the cost of the things she will be doing at home - childcare, managing the household, etc. If something should happen to her, how will you afford to hire someone to do all the things that she will be doing?   

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justignoredem said:   
Waro said:   
doveroftke said:   If you're interested, let us know the deducible and coverage differences between the plans and we can provide some analysis. The flexibility and tax savings of an HSA are very valuable, often easily tipping the scales to the HDHP. For example, the tax savings on that $11,000 max OOP (which, granted, would take two years to save given the contribution limits) make it effectively ~$7k depending on your tax rate. The limits on FSA elections are much lower and provide very little flexibility.
  
HDHP / LDHP comparison
Premium: $1,900 / $1,200
Deductible: $1,500 / $3,750
Coninsurance: 80% / 70%
OOP: $7k / $11k

  
I'm guessing you mean LDHP / HDHP and not the reverse like you wrote. Also you need to clarify what "LDHP" is. Is that a PPO plan?
Also are those deductibles/OOP Single or Family amounts? Because based on the rules I'm seeing, even your LDHP qualifies as a HDHP and you should be eligible for an HSA if that is your single deductible amounts.

That said, both of your plans look rather bad to me. Given the small price difference I would probably opt for the $1,900 premium one (LDHP).


I just realized that I got confused, my employer doesn't offer HDHP.  They only offer low and high deductible PPO plans.  The numbers above are for family deductibles.

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HDHP just means high deductible health plan so a high deductible PPO is a HDHP

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justignoredem said:   Based on the rules I'm seeing, even your LDHP qualifies as a HDHP and you should be eligible for an HSA if that is your single deductible amounts.
 

  
There's more to HSA eligibility than the deductible. Certain types of coverage can disqualify you from contributing to an HSA, so it's important to check that that the plan is a HSA-eligible.

Waro said:   I just realized that I got confused, my employer doesn't offer HDHP.  They only offer low and high deductible PPO plans.  The numbers above are for family deductibles.
 


PPO and HDHP/HSA-elibility are not mutually exclusive. Can you check whether your plan allows to you to contribute to an HSA?
Waro said:   HDHP / LDHP comparison
Premium: $1,900 / $1,200
Deductible: $1,500 / $3,750
Coninsurance: 80% / 70%
OOP: $7k / $11k
 

  
Any non-preventive benefits prior to meeting the deductible?
 

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doveroftke said:   PPO and HDHP/HSA-elibility are not mutually exclusive. Can you check whether your plan allows to you to contribute to an HSA?  
I have checked the IRS rules and my high deductible plan doesn't qualify for HSA because the individual deductible is less than IRS' requirement of $2,600 min.
 
Low deductible / High deductible comparison
Premium: $1,900 / $1,200
Indv. Deductible: $600 / $1,250
Family Deductible: $1,500 / $3,750
Coninsurance: 80% / 70%
OOP indv: $3.5k / $5.5k
OOP family: $7k / $11k
doveroftke said:     Any non-preventive benefits prior to meeting the deductible?
I'm not sure what you mean by this 

rated:
justignoredem said:   
prozario said:   529 is great. I started putting money right before 2008 crash, and then stopped. But glad i didn't close it .. now money is close to doubled.

Good thing is you don't pay any ongoing taxes on dividend/cap gains. And you take the money out tax free when you need for college.

I only wish i started bit earlier, and put bit more.

SO my advice start 529 contributor as early as possible. Make sure to pick a plan that has low admin fee and low expense ratio. NY state 529 plan is great for people even out of state. But do check if you get any in state benefit - if your state provide a plan. Otherwise, pick the best one out of any other states.

  
529 isn't always great - if for some reason you need to take from the 529 for unqualified expenses - such as your child not attending, having it all paid with scholarships, etc.. etc... Then you will have to pay full income taxes on the gains/dividends. Whereas, if you put it in a typical taxable investment account you can take disbursements at any time and would only have to pay the long term capital gains tax instead of full income tax rate. 

Personally, I'm thinking of trying to not put all my eggs in one basket and plan to mix the two for my kids college fund.

  
yes .. i do have both.  I only put amount I would definitely not need at all in 529.  Very unlikely someone will have no expense in college - even with a big scholarship.  I guess that would be a good problem to have though.  Worst case .. i think you can just give it to someone else .. like grand kids?   

These days most college switched to need based $$ even for scholarship - so you can sort of figure it out based on your expected income.

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prozario said:   These days most college switched to need based $$ even for scholarship - so you can sort of figure it out based on your expected income.
Six out of six schools where my kid was accepted this year would disagree.  Plenty of merit-based money out there for those who aren't even close to qualifying for need-based assistance.  

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I have a different strategy for 529 plans. First, there has been significant advice on 529 plans because of how they impact financial aid calculations. For me, it doesn't matter because we aren't getting any financial aid that isn't merit based for our kids. We also cannot get the federal tax credits for education.

I have been contributing money to a 529 for some time, only $25/mo at the start. I used it to pay for the last bit of nursing school for my wife. However, we kept contributing and I had it set to bump the monthly contribution by another $5 each year; we're now at about $50/mo. So, I had a few thousand saved and I have a child that is entering senior year at high school. We have already decided which school and program will be advantageous. So, it will be a world-renowned state school with $9k/year for in-state tuition. Our newly-minted senior has about a 3.48 GPA right now and if it can be raised to at least a 3.5, a scholarship will be awarded for 1/3 of tuition, so we will be down to $6k/year. I don't see any reason why this won't happen, course load is diminished for the senior year and the focus is on. Bottom line, we won't be covering 1/3 of the tuition whether it is from a scholarship or having our student work and pay for it. There is also an opportunity for numerous scholarships from the high school, notably a $1k scholarship from the high school band which will be a strong possibility. The plan is to try to at least get another $1k/year from scholarships or programs at school. This will leave us to cover $5k/year in tuition, plus books and transport (living at home).

So, we have about $3k saved up right now and we plan to contribute $5k this year. We get a 20% state tax credit up to $5k deposited (for a credit of $1k). We will be contributing $5k/year for each year of university. It should be a maximum of 4 years as there is some transferred in credit from high school (foreign language, AP courses, etc), and we will be identifying some CLEP exams, as well. We can deposit the money and immediately withdraw it after it has cleared. This will give us a $1k/year break on cost and allow us to now take on any debt. We will likely have a year gap after college graduation for this student until we have our next student entering university... and the plan their is vet school at a top-3 vet school that is also a world-renowned state school here (different school). So, we are still a ways out there, but the plan is that we will be a little ahead of where we are now, in terms of 529 balance... maybe by about $1-2k.

We have an older child that doesn't want to go to school, but we have been encouraging this child to take some courses as the Starbucks benefit is available for Arizona State University Online. The encouragement being to take at least 2 courses per semester... one general ed course and one fun elective (art or something). We'll see where that goes.

The point here is that... yes, college planning matters, but it isn't always about socking away money. 18 years from now, your financial picture will be different, education will be different... a lot of unknown. Just make sure you instill a strong and smart work ethic and look for ways to reduce costs by getting transfer or dual-credit. I have a feeling that in 18 years, it will be commonplace for high school seniors to also graduate with associates degrees, at least as a significant percentage of graduates. Socking away too much money may be to your detriment. However, there has been some talk about 529 plans being worthwhile anyhow... even with the 10% penalty for withdrawing funds for non-educational purposes; but that is an entirely different discussion.

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dcwilbur said:   
As for your wife, you aren't insuring against a loss of income; you are insuring to cover all the cost of the things she will be doing at home - childcare, managing the household, etc. If something should happen to her, how will you afford to hire someone to do all the things that she will be doing?

This is not necessarily true.  Just because she is staying home from work, now, doesn't mean that will be the case in the future.  Once the little one is in school, it is pretty common for stay-at-home moms to become income earners in some capacity.  My wife has worked for different periods of time, as needed/desired.  It has mostly been about helping to reach some goals.  She is about to go back to work as she found a great opportunity that is less physically stressing than being a floor-nurse and the plan is for her to do this for at least 5 years where she will be contributing to retirement plans, doing some employee stock purchasing (it is worth it at this place), and investing outside of retirement accounts.  We will use extra monies for some of our educational expenses with the kids (non-tuition expenses that come up, like having a maintained vehicle and the associated costs) and some vacations.  She probably hasn't earned more than $35k in any year that we have been married because even when she has worked, it usually has been part-time or only for part of the year.  This year she will top $60k plus other benefits.  So, it is hard to predict the future... I wouldn't say you aren't insuring against loss of income... at least not in terms of potential future income.

    

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Waro said:   
 
  The premium difference between LDHP vs. HDHP is $700/yr ($1900/yr vs. $1200/yr), I figured I would save money if we have mid to high level medical bills.  The difference in max OOP is $7000 (LDHP) vs. $11000 (HDHP).   
 

  Wait, what? Your health care is only $1900 per year for a family of three?

ETA: even for one person, this is super cheap. I would go with the lowest deductible plan possible. Granted, it's through your employer, but with the state of the health care market right now, get the best coverage you can get if it's that cheap. I'm paying $1200/month for a family of three (myself, wife, 6 month old) but I'm also paying the full premium via COBRA (cheaper than the market for like coverage). My employee cut of that same plan when I was working for that company was about $450/month. That's for a HDHP too. Company before that was about $400/month for two people (wife and myself) for a HDHP. One was Cigna, one was Aetna.

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dcwilbur said:   
prozario said:   These days most college switched to need based $$ even for scholarship - so you can sort of figure it out based on your expected income.
Six out of six schools where my kid was accepted this year would disagree.  Plenty of merit-based money out there for those who aren't even close to qualifying for need-based assistance.  

  I've seen a lot of schools with merit scholarships that have a maximum amount if you have not need, and other schools that allow up to a full scholarship on merit alone. Obviously, this will vary by school and any specific funding mechanisms -- for example, I know several schools that cap merit scholarship but have a related foundation that gives full rides+ to a very small number of kids each year (regardless of their need).

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Am I the first with this one?

Make sure (via deductible contributions to 401k) that you're below the phase out for the child tax credit for 2017.

And now, a useless anecdote:

During open enrollment before we had our firstborn, my company's representative alerted me to an ALFAC-like cash payout policy we could opt in to that would give us $2000 in cash money if either one of us was hospitalized in the next year. Hospitalization for childbirth was included, and we could cancel the policy (and stop paying minimal premiums) after receiving the inevitable check. That was a sweet deal. I don't think policies exist like this anymore, since they are kind of foolish for employers to offer

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jaytrader said:   Wait, what? Your health care is only $1900 per year for a family of three?
 

  
$1900/yr for me and the wife.  It will be $2500/yr with kids.

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catanpirate said:   Am I the first with this one?

Make sure (via deductible contributions to 401k) that you're below the phase out for the child tax credit for 2017.
 


Good one, I'm have been maxing out my 401k. 

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dcwilbur said:   
prozario said:   These days most college switched to need based $$ even for scholarship - so you can sort of figure it out based on your expected income.
Six out of six schools where my kid was accepted this year would disagree.  Plenty of merit-based money out there for those who aren't even close to qualifying for need-based assistance.  

  
good to hear ... based on what i have been reading, i thought i would need to pay for the entire thing myself.  I was reading many if not most of the college now just gives out need based $$ and no such thing as scholarship.

 

Skipping 43 Messages...
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I guess I need to pull my foot out of my Mouth. I did say she buys them through the hospital... sorry about that. Poor choice of words. Her sister works there and they buy them in bulk once or twice a year so I assume that's where the connection is but maybe not.I just thought it might be worth asking if you had a small local hospital if there was some type of program like that. As a soon to be new parent I have no clue what exists out there.

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