A number of readers have expressed that they would like to read an “old fashioned” Update (Ron’s View). To say the least, I was surprised and somewhat flattered.
A good friend and highly regarded industry expert summed it up best.
“I can read serious industry news 24/7 but what you wrote was unique. You brought us into your life and ended the column with sound advice. It was different and enjoyable to read. Even my wife looked forward to reading ‘Ron’s View,’ but that’s no longer the case.”
Okay Jim, here we go.
It’s one tough month.
My anniversary, Mother’s Day, and my wife, Marea’s, birthday all occur within a couple of weeks of each other. According to Marea’s math, three occasions equals three gifts.
So after some online research and a few tedious trips to man’s greatest adversary – the mall – I ended up performing quite well. Marea only returned two of the three items I bought. That’s a .333 batting average, and certainly better than the usual goose egg I put up every year. Not surprisingly, I was feeling pretty good.
So a couple of days ago, I decided to surprise Marea by taking her out to lunch. When I drove up to the house, there was a truck in my driveway, which is never a good sign (for obvious reasons).
I walked in to see Eddie, Marea’s personal contractor, standing on the kitchen island
installing hanging light fixtures.
“Eddie, what is going on here?” I asked, as if I didn’t know.
“I’m mounting three new hanging pendant island lights,” he replied, avoiding eye contact.
Marea sauntered into the kitchen, saw me, hesitated and said, “You ruined the surprise.”
“Oh no, I’m surprised. I’m definitely surprised to see Eddie standing on the counter.”
She completely ignored me, turned to Eddie and said, “Eddie, I’m sorry you have to hear all this complaining.”
Eddie laughed and said, “I love it. Most husbands wait until I’m gone.”
I turned to my wife. “This isn’t exactly lighting up my day.”
“Funny. And if you must know, recessed lights are no longer ‘in’ over a kitchen island.”
“You’ve got to be kidding me. When we built the house, you specifically wanted recessed lighting in the kitchen.“
“That was 20 years ago and styles change, so lighten up.”
I realized there was no good reason to continue the light-fixture conversation other than to amuse Eddie, so I changed the subject.
“Are there any other surprises I should be aware of today?”
Marea smiled and said, “Yes, there is. We’re changing all of the handles on the kitchen cabinets. It will look like we have a new kitchen.”
Who knew? Remove recessed lighting, add new cabinet handles, and Presto! New kitchen. I’m sure we recently heard this little tidbit on HGTV.
In the past, readers have asked me if I make up these stories. Frankly, I’m not very creative; the Updates are basically a summary of real life events as seen from my perspective. (With the exception of Marea, names have been changed to protect the innocent and avoid potential law suits.)
I’ve also been asked about how much time I spend thinking about how to link the weekly event to financial advice. Truthfully, the story lines are pretty much unknown until I sit down and start typing. It sort of just happens.
Let’s see. Hanging light fixture…surprise…enlighten…trend…I’ve got it!
Speaking of lights, I’d like to spend a few minutes shedding some light on an interesting trend.
The latest health care data indicates that many people may actually be over-insured. With health care inflation moving back to historical levels, more firms are adopting high deductible policies (HDHPs).
The current average cost of a high-end PPO plan for a family of four is $19,026. Comparatively, a high deductible plan for that same family (with an $11,000 deductible) is $11,897, which translates to $7,129 (or 37.5%) in savings.
Employers typically pick up 75% of the premium as an employee benefit, so in this case, a firm would be responsible for $14,270 of the PPO’s total cost. The problem is that premiums are expected to increase by 6% to 7% annually. Theoretically, employees may be sacrificing a portion of future salary increases to pay for insurance that may not be needed.
Over 32% of people in private health plans have chosen an HDHP, and within a couple of years, HDHPs may be the most common option for employees of mid-size and large companies.1
So are HDHPs something we should all embrace? Consider this important preliminary finding: regardless of age, gender, or chronic health condition (such as type II diabetes), an HDHP may provide measurable financial advantages for both employers and employees.
Companies can benefit because workers accept substantially more of the financial risk, and employees will enjoy an increase in disposable income even after all health-related expenses have been paid.
Who knows? You may want allocate some HDHP savings for new hanging pendant island lights in your kitchen, too.
There is also another advantage to HDHPs: health savings accounts (HSAs). Individuals enrolled in HDHPs can save an extra $3,350 annually ($6,750 for a family) in an HSA. After age 55, a person can save an additional $1,000.
The best part? Savings are tax-free.
Remember, a 401(k) is a tax-deferred investment, but an HSA is tax-free as long as it is used for qualified health care expenses. Furthermore, HSA assets are not means tested and can play a role in lowering health care premiums in retirement. Finally, many employers will contribute to HSAs on a tax-free basis.
Here is an enlightening example.
A 45-year-old female with type II diabetes can accumulate $175,000 in an HSA over 20 years (assuming a $1,000 annual employer contribution and a 6% return on net savings.) It is important to note that the $175,000 in savings is after all health care expenses are paid.
To learn more about the importance of having reserves to cover retirement health care expenses, consider a recent article by columnist Mark Miller on the decline of extended employer benefits for retirees. According to Miller, 66% of employers provided in-retirement health benefits in 1988 compared to 23% last year.”2″ It may be worth taking some time to research the potential long-term payback of converting your family to a high deductible plan and investing the difference in an HSA.
By the way, this week’s Update was written under the bright lights from our fashionable new fixtures.