Bernie Carlson, a professor of History at the University of Virginia researches the combination of two different ideas whose combination creates something new and productive. Well-known examples of mashups are the clock radio and the smartphone.
These configurations are known as mashup inventions.
Another example of a mashup creation is the combination of Fast-Food Maps. This concept combines location information of major U.S. fast food restaurants with Googe Maps so you can see where to shop for a pizza in a city you may be visiting.
A mashup that you might find attractive from a financial perspective is using a Health Savings Account (HSA) to pay for future Medicare expenses.
The Health Savings Account (HSA)
If you are a young person in the Federal Employees Health Benefit (FEHB) Program, consider exploring a Health Savings Account (HSA). The Office of Personnel Management link on HSAs provides details so see if it may be a good choice for you.
If you never – or rarely – need to see the doctor, then you can take your employer’s contribution and the monthly premium savings and add them straight to your HSA account every year. After a few years, you could potentially have a large nest egg built up which is tax-free if used for medical expenses.
The other attractive feature of HSAs is the money stays with you (not your employer) and you can use it at any point in your life. So even if you’re the model of perfect health right now, you can invest that money for 30-40 years and use it when you’re retired. Money in your HSA can even eventually be applied to deductibles, coinsurance, and copays if you decide to switch back to a traditional plan in the future.
The HSA contribution limits for 2024 are $4,150 for self-only coverage and $8,300 for family coverage. Those 55 and older can contribute an additional $1,000 as a catch-up contribution.
If a person took advantage of contributing $4,150 this year and allowed it to grow annually with an average annual rate of 8% for 30 years, the result would be $41,760.03. The growth for an amount of $8,300 at 8% for 30 years would be $83,520.05.
Maxing out your HSA contribution each year could result in a very large HSA balance at the end of your career.
The HSA/Medicare Mashup: Paying Medicare Premiums With an HSA
And here is another reason to consider doing so. The HSA funds can be used to pay your future Medicare Part B premiums.
Future Medicare Part B premiums may be decades away but they are a certainty that cannot be wished away. But what if you could get a tax deduction today for putting dollars away for your health care and for those contributions not needed to pay for health care could grow tax-deferred for decades? In your mid-sixties, you could use those tax-deferred dollars to pay for your Medicare Part B premiums, and those tax-deferred dollars would not be taxable if used for such a purpose.
Once enrolled in Medicare, an individual can no longer contribute to an HSA. However, a Medicare beneficiary can use HSA distributions to pay for qualified medical expenses, such as premiums for Part B, a Medicare Advantage plan (Part C), a prescription drug plan (Part D), and long-term care insurance, and Medicare expenses, such as copayments and deductibles.
An HSA account used to pay for Medicare premiums is an amazing additional financial planning tool. One gets a tax deduction for funding the HSA account like a Traditional Thrift Savings Plan (TSP) or Traditional 401(k), and if those funds are accessed years later to pay for Medicare Part premiums they are not taxed as ordinary for federal income taxes.
An HSA account could be a huge factor in the decision as to whether to delay taking Social Security retirement benefits. Collecting Social Security is by no means a prerequisite to getting Medicare. Most people, however, have their Medicare premiums paid directly from their Social Security benefits.
A downside to signing up for Medicare without collecting Social Security is having to make your premium payments directly, as opposed to having them deducted from your Social Security benefits. An HSA account, however, can be the source for paying the Medicare premiums if you elect to delay your Social Security retirement benefits, and you can continue to pay for the Medicare benefits until your HSA account is empty.
