Pre-Tax Savings and Financial Well-being Transcript
Host: The information in this podcast does not provide medical advice, diagnosis, or treatment. It should not be used as a substitute for healthcare from a licensed healthcare professional. Consult with your healthcare provider for individualized treatment or before beginning any new program.
Hello, and welcome to Well Wisconsin Radio, a podcast discussing health and well-being topics with experts from all around the state of Wisconsin. I’m your host Renee Fox, and today my guest is Xiong Vang, HSA and ERA Accounts Program Manager for the Wisconsin Department of Employee Trust Funds. Xiong, thank you for joining us today to talk about pre-tax savings and financial well-being.
We know that money can be a stressor for many individuals and families, impacting their financial and mental well-being. When money is tight, we may not be able to purchase the things we may need or want. How can having a pre-tax savings account help people with saving money and possibly reducing their stress?
Guest 1: Well, first of all, Renee, thank you very much to you and WebMD for having me here in this session. I’m glad to be here as well to be talking about financial well-being related to the pre-tax savings accounts. For the pre-tax savings accounts, there’s a variety of options, particularly like the health savings account or the flexible spending accounts that a member can participate in.
And one of the, one of the greatest things about it is that the contributions that you make towards, an HSA, or an FSAs reduces your tax liabilities that you have to pay for tax and federal taxes. And that also increases your returns or your paycheck as well, so if you really look at it from a member’s perspective, who is making about 40,000 to 45,000 per year. For a member that does not make any pre-tax contribution towards an HSA or FSAs, they’re looking at about a gross income spending about 29,000. Whereas if you look at a member who is making those pre-tax deductions for the pre-tax accounts programs, they’re looking at bringing about 30,000 dollars in spending income. So there’s about a good 500 to 600 savings, which can lose about 30%, That could help increase their income expenses without having to pay out of pocket as well, to reduce potentially any kind of financial concerns or restraints to medical costs as well to with that will help to help accumulate their expenses.
Host: Nice. That’s a really good example. Thank you. So is there typically a set amount of money that you have to contribute to a pre-tax savings account? And then on the flip side, is there a limit that you can’t exceed?
Guest 1: It’s not required for you to contribute towards an HSA. And some employers may contribute towards a member’s HSA.
Employers such as State of Wisconsin, UW System, UW Hospital and Clinics, and other agencies across Wisconsin do contribute towards a member’s HSA, 700 for individual coverage, and 1, 500 for family coverage upon eligibility. This is tax free money that is made by their employers, which also is a benefit of participating in these accounts.
There are IRS contribution limits for the HSAs. For the 2023 plan year, an individual coverage with the High Deductible Health Plan, or HDHP, that member can contribute up to 3,850 towards. And for family coverage, the member can contribute up to 7,700 towards an HSA.
Host: So what type of expenses are typically covered and what is not covered with the health savings or flexible expending accounts?
Guest 1: Yeah, any eligible medical expenses like hospital services, doctor’s appointment or checkups, including over the counter medicine, bandaids, covid test kits, sanitizing wipes for covid, are eligible expenses that can be paid with HSA or an FSSA. Typically cosmetic surgery, massages, nutrition supplements, sports lessons or weight loss programs are some examples that may not be covered by your HSA or FSAs. Unless it is prescribed by a doctor, it may be eligible for reimbursements, but you would typically need a doctor’s approval or a letter of medical necessity for these expenses to be approved.
Host: Thanks for that explanation. In thinking about health savings accounts and flexible spending accounts, are there some types of expenses that are not as commonly used, but maybe they provide a good opportunity for savings?
Guest 1: Yeah, I typically see participating members using their HSAs, FSAs, really purchasing over the counter medicines like OTC drugs, medicines without prescriptions, as well as menstrual care products as well. For example, when you’re out shopping at Walgreens, Target or Walmart and you’re finding that you need cold medicine for yourself or a family member, you can actually use your HSA or FSA to pay for these type of expenses. And it saves you from having to pay out of your own pocket at that moment. We’re also in a post COVID period, and so masks, gloves, sanitizing wipes, those are some common examples of eligible expenses as well that can help you save on these expenses from having to pay out of pocket.
Host: Do you have any recommendations or resources for any of our listeners who may just be getting started or trying to figure out how much to contribute and to really help calculate anticipated medical costs for the coming year?
Guest 1: Yeah, we do. We actually have an online calculator or worksheet on the enrollment brochure that a member can use to help calculate or estimate their medical expenses for the year. You can access that resource, tax calculator or worksheet at www.myoptumfinancial.com/etf.
Host: Great, thank you. And we’ll have that link in our show notes too for listeners who want to go directly to that resource. So what guidance do you have for someone who is trying to figure out if this is a good saving strategy for them personally?
Guest 1: Yeah, we typically see young professionals in their 20s and 30s who don’t have a lot of medical expenses, right? And this is a great avenue for them to start building their HSAs for the future and save on medical expenses in the later run. Even with our older age population who’s looking to retire, we’ve seen that they’re able to save more in return from participating in the HCHP and with an HSA as well.
Although you do pay a higher annual deductible and out of pocket limit up front, the expenses that you pay at the end of the year is much less than a traditional health plan coverage. Hence, whether you are young or at retirement age, looking to retire, an HSA really allows you to save in several ways.
We call this what they call a triple tax savings, because you don’t have to pay taxes on the contribution you made towards an HSA. Secondly, you don’t pay taxes on the HSA on the medical on the eligible expenses that you get reimbursements from. And thirdly, you don’t pay taxes on the interest or investments accrue may withdraw HSA as well to with that.
So, there’s definitely a variety of strategies and saving opportunities for. Anyone who participates in an HSA.
Host: So, what happens to money in your account during transitional times? Like you mentioned retirement, maybe someone is changing jobs or they’re changing health plans. Is there anything that people should do in the initial setup or before that experiencing that transition to protect the money in their account?
Guest 1: The great idea about an HSA is that you own the account, and your employer cannot touch it or take the funds from it. It’s sort of like a bank account and it belongs to you. You can actually transfer your HSA funds to another provider or take it with you to another employer. There’s very, very limited information that your employer can obtain or see within your HSA, due to the regulations prohibiting your employer from touching the HSA as well too. So, it does carry with you for a lifetime. There is beneficiary payout if you’re no longer living as well. And so, a HSAs have a variety of values in that sense that it helps members with.
Host: So I know you talked about some benefits for folks who are in retirement of using this account. Can you elaborate more and tell us about using pre-tax savings as a strategy to really help save for this stage of life?
Guest 1: Yeah, encompass of all the pre-tax saving accounts besides an HSA, there’s also benefit programs, just as the healthcare FSA, the limited purpose FSA, and the dependent daycare account as well, too. With the healthcare FSA, that’s more like the health saves account. It’s paid for, it’s used to pay for medical expenses, whereas the limited purpose, it’s limited to vision dental expenses and post medical expenses.
And then you got the dependent daycare account that you can make contribution towards pre-tax saving that way as well, but can be used to pay, put your kids under age 13 and childcare or any elderly care that cannot take themselves while you’re working from work or doing work as well. All of these benefit accounts have what we call pre-tax deductions, meaning that you do not have to pay contributions made towards it, as long as they are eligible for related medical or dependent daycare expenses and you’re able to get reimbursements from it. So, that’s why we call this pre-tax savings accounts because there is a variety of opportunity to save in that way.
Host: So where can our listeners get more information about the pre-tax savings accounts?
Guest 1: Yeah, you can definitely access the information online through ETFs Microsoft Lending page with Optum Financial, which is at www.myoptumfinancial.com/etf.
Host: Wonderful, thank you. We’ll also have that in the show notes. Any other final recommendations or advice for our listeners?
Guest 1: Yeah, I know this session is very briefly short, but there is a sense of a great opportunity and savings and if you’re looking for financial wellbeing, again these accounts do increase your net pay and reduce your tax liabilities. I know he spoke briefly on it, but you can get more details by accessing the information online. Reach out to your HR or benefit staff at your employer. You can even call ETF call center, and we can provide some guidance information to help better educate and make best decisions for you for open enrollment as well.
Host: Wonderful. Thank you so much for this important information. Really appreciate your time.
Guest 1: Thank you, Renee.
Host: So while we talked about pre-tax savings as a strategy for saving money and possibly lowering our levels of stress, I now want to shift gears and talk more about stress management strategies. So my second guest on our podcast is Amy Fink, WebMD health coach and stress specialist. Amy, thank you so much for joining us today to talk about stress reduction and mental wellbeing.
Guest 2: Thanks, Renee. Thank you for having me. I’m excited to be here today.
Host: So whether our stress is coming from finances or from any other stressor in our life, what tips do you recommend for identifying our source of stress?
Guest 2: Yeah, that’s a really good question. And I think that before even identifying your stress, it’s important to know what stress is. So when you think about stress, you want to think of your body’s reaction to a threat, and when we are threatened, a chemical reaction takes place in our body to prepare us for that threat.
You may have heard of the fight or flight response. What’s happening is adrenaline is released into your body. It makes your heart rate and your blood pressure go up. Your breathing becomes faster, your muscles tighten up, and you’re preparing yourself for that threat. This response happens regardless of what the threat may be.
So this could be short lived stress like being in traffic and feeling frustrated, or more chronic stress like financial stress that is ongoing. But what’s interesting is our stress response can be activated by a perceived threat. So our own thoughts can be seen as a threat even if our thoughts are false.
So, for example, when you are stuck in traffic and you tell yourself, I’m going to be late, I’m going to be fired, being fired may not even happen, but because you perceive that threat can activate that stress response. What’s interesting too is, we have around 6,000 thoughts per day on average. So it’s important to ask yourself, what are you telling yourself?
Are you causing your own threat? Um, because our own thinking can be causing physical risk for ourselves. So, as far as identifying your, your stress level there are lots of things that you can kind of tap into. I also recommend, you know, listening to your body.
There are emotional, symptoms such as feeling agitated or moody, feeling overwhelmed. You can have physical symptoms like really low energy. Many people tell me they hold their stress in their shoulders and neck, so they may have tense or sore muscles. Um, one of my go to’s when my stress response goes on is racing heartbeat. I can definitely feel my heart racing, so that’s another physical symptom.
Then there’s also the cognitive symptoms like constant worrying, those racing thoughts we get at night, feeling negative throughout the day. So just being aware of your own feelings is a huge part of managing your stress and understanding what to do when you’re feeling that way.
Host: Yeah, that’s extremely helpful. So once we have recognized those feelings and we’re getting a better sense of what is causing stress, what are some things that we can do to really start that process of letting go of that stress and find balance in our lives?
Guest 2: There are a few things to think about here when you’re thinking about finding that balance. Um, and the good news is our body is wired to defend against stress. So again, listening to your body and your mind is a good first step. You can start with the basic needs that we need to deal with stress, which would be getting enough sleep, eating properly, trying to move your body.
So we’re at our best to defend the stressors in life with those basic foundations. Um, and then secondly would be to be adding in those tools and techniques to get you through the day, such as relaxation techniques to regulate your body. That could be mindfulness practices, deep breathing exercises.
And then being aware of those thinking patterns, like I mentioned, if you’re thinking negatively throughout the day, or sometimes people think catastrophically where they go to worst case scenario a lot, you may be causing yourself more stress than you really need. And so evaluating that can be helpful as well.
And then also finding ways to fill yourself back up when you’re feeling stressed, you’re draining, your energy is draining and that can affect your ability to concentrate. So having those activities that you like to do to kind of fill yourself back up during a draining day can be helpful as well.
And then evaluating and utilizing your support. Having stress in life can be really challenging, so make sure you know your support and how to utilize that support is also important.
Host: You know, I’ve heard that some levels of stress can actually be helpful and good for us. So how can we determine if our stress has become more chronic or overwhelming and really understand when we might need to seek help for that?
Guest 2: Yeah, you’re exactly right. So stress can be a good thing when it motivates us and drives us to accomplish things. Yeah, definitely stress can be a great way of increasing our performance. There actually is a study that was done in the early 1900s, a theory was developed called the Yerkes-Dodson Law.
And this law indicates that performance increases with stressors, but only to a point. So, the Yerkes-Dodson Law is shown if you can kind of think of a bell curve on the left side of the bell. As your stressors increase, so does your performance. And when you get to the top of that bell, you’re at your optimal performance.
On the right, as the bell curve starts to go down, our stressors are still increasing, but our performance is now decreasing. So it’s important for us to recognize this and create a way to help us to stay on that left side. You can identify which side you’re on by how you feel. If you are on the right side, meaning the stressors are too high.
You’ll start to feel unproductive, burnt out, lack of energy and concentration, all those symptoms that tell us we are overwhelmed. When you’re on the left side, you’re feeling energized and motivated and productive. So, seeking support when you find yourself on that right side is really key. What you could do is make a list of your support, such as your friends, family, coworkers, health professionals, wellness programs. List anyone or thing that is supportive to you and then you’ll have the list available when you are feeling overwhelmed so you don’t have to think about that when you’re already feeling that stress.
Host: That’s a really good idea. So, how can WebMD health coaches help someone who might be feeling anxious, maybe that’s about money or finances in their life, or just lowering their levels of stress for any other reason?
Guest 2: Yeah, I mean, let’s face it, stress is difficult and, you know, some people are hesitant to reach out to health coaches. But especially if you’re having a lot of stressors, it can be an emotional topic and you might not want to talk about it with just your support people or the people that are close to you, especially when it comes to money.
Money is our necessity. It’s our livelihood. It’s hard, and we need to feel at peace with our finances, no matter what situation we’re in. And to do that, you need to address and change how you feel about money and how you perceive your money, and then at WebMD with the health coaches, we have mental health coaches and stress specialists that have advanced trainings in these harder topics.
We can be that support and that listening ear. Our coaches are such caring people. I have such respect. for how passionate we are about what we do. We want to listen. We want to help you build resiliency. We want you to feel good about your life. We’ll help you to create a positive action plan to help you battle what you’re going through.
If you were to ask me what I love about coaching, it’s highly personalized. It’s not a one size fits all program, so we really listen to the person as an individual and help them identify what they may need and what. would work for them.
Host: Yeah, and I have really enjoyed my time working with coaches and definitely love that personalized approach. It is so helpful and I’ve gotten so much support. So thank you for just talking more about that and how coaches can be a support for our listeners.
So, I know you talked about the importance of making sure we’re getting enough sleep, maybe trying something like mindfulness. Are there other lifestyle behaviors that we can follow to help just continually manage financial stressors that might pop up—maybe something like unexpected home repairs or medical expenses.
Guest 2: Right, and those unexpected expenses are the worst. They are so stressful, and the worst thing about them is you have no control when they’re going to happen. Right, and if you’re already stressed out about finances, this can be really hard.
Yeah. So what I like to say is plan for the future, but deal with the day to day, and what I mean by that is budgeting and seeking financial counseling and looking at ways to cut back or increase income is important to reduce the stress. But eliminating the stressor is an outcome. It will happen in the future.
We can create a plan, execute the plan that gives us control back and releases, relieve some of the stress. But we also need to go through the day to day, the constant worry that you might have, the racing heartbeat, the rapid breathing, all of those symptoms that tell us we are overwhelmed and activating that stress response.
So in order to do that, we want to utilize our strategies like I talked about, sleeping well, moving our bodies, breathing exercises, reframing our negative thoughts. But it’s really not enough when we are thinking about those harder stressors, especially money. We need to look at our relationship with money.
So maybe ask yourself a few questions like, does spending money fill you with panic? Do you feel guilty unless you’re spending a lot of money on others? Some people find that, you know, they only have 20 for the birthday present, but they feel like that’s too inexpensive. So they want to give 50 and then that puts them in a bad place.
Do you completely avoid budgeting because you want to purchase what you want? You know, that can be a part of the stress as well. Yeah as avoidance and just trying to continue on your quality of life the way it is, but you know that it might be making things more difficult. So, when you know why you feel the way you do about money, it’s easier to make the change.
I wanted to give you a quick example of one of my coaching calls where a participant was feeling financially stressed. She mentioned her main group of friends did not usually engage in activities other than going out to eat. They were foodies, she called them, and they would order a lot of food and they would just split it regardless of what each of them ordered or ate and it would be a lot of money for her. She was conflicted because she loved her friendships but was spending way more than she could afford.
And sometimes she would even use her credit card to pay. So, during our conversation, I asked her a few questions and I asked her, how do you feel when you get an invitation for dinner from your friends? And she said, I feel excited. Life is busy, I want to hang out with them and I want to enjoy their company.
And then I asked, how do you feel the day of the event? And she said, I start to feel worried. I know the bill’s going to come and, sometimes I feel like I should cancel, but I want to spend time with them too. So she still felt conflicted. And then I asked her, how do you feel when the bill comes to the table?
So she said, I feel anxious. I feel guilty. I start to shake. Sometimes she doesn’t know what card to use, whether her bank card or credit card or her other credit card. And then I finally asked her, with me asking these questions, what have you learned? And what could you do differently about having a better relationship with your money and she came up with a few options.
One was to pick a specific amount of time she spent with her friends so that it would fit her budget. The other option was to let her friends know she’s really trying to be better with her money and ask if it would be okay if she just paid for what she ordered when they went out. And if you have good friendships, they’re going to be okay with that And the third thing she talked about was maybe inviting them to a less costly meal, like inviting them to breakfast, which in general usually is less costly than a dinner.
So a good first step in changing your relationship with money is going through your day. And whenever you spend money, ask yourself, how do you feel? Is spending money the way you are now producing any negative emotions? And reflect on that and what you might be able to do differently. So another strategy is to align your values with your spending.
So there’s a great exercise that I call the tree activity. I actually adapted this from another tree activity regarding values, but I tried to adapt it to finances for people. So what you do is you draw a tree. It’s nothing fancy. You really just need a space on the bottom, which would be your roots, a trunk, and then space on the top, which will be your branches.
And so at the base, you write down your values, starting with household expenses and bills, because we know you’re going to have to pay those, um, but then add other values like your family, social outings, your health, professional goals, whatever it might be. And then during the week or even during the whole month, if you’re not a big spender, you know, from week to week on the top of the space, write down what you’re spending your money on.
And so at the end of the week or month, reflect on your tree and look at how you spent your money. Ask what you did or did not do that aligned with your values. Um, if your item did not align with your values at the roots, you could cut the expense out, what we would call trimming the branches. If it did align with your values, you can keep it in place or even review how to spend less on that particular purchase.
Similar to the example of my coaching call, this will give you a better understanding of how you spend your money with your values and that can help improve your relationship with your money as well.
Host: I love that. That’s a really great analogy. I love thinking of it in terms of a tree and trimming your branches. Really helpful way to visualize and, set a strategy around how we’re spending and opportunities to save. Thank you so much, Amy.
Guest 2: Yeah, you’re welcome. And then hopefully with that being said, you can save a little bit more for those unexpected expenses that we talked about in the beginning.
Host: Yes, absolutely. Thank you. Any other just final recommendations or thoughts for our listeners today?
Guest 2: I think just as a recommendation in general, just really tapping into how you feel about those bigger stressors is really important and trying to, um, think about your relationship with that stressor can be very helpful in.
And not just with money stressors, but you know, if you’re trying to lose weight, what’s your relationship with eating and what’s your relationship with exercise? Do you hate exercise? How do you make it better? How do you improve that relationship so that you can reach your goals?
So you can really put that in all different aspects of your life to help you.
Host: Hmm. That’s wonderful. Thank you so much. Really appreciate you joining us today.
Guest 2: Thank you, Renee. Take care.
Host: Do you have a goal to reduce stress and improve financial well-being, get more sleep or change your eating habits? When it comes to making changes, we can all use some help. A WebMD health coach can be the beneficial guide you need to get the real results you’re looking for. Hear how coaching impacted a fellow Well, Wisconsin participant’s life.
Coaching Participant: I have found the WebMD health coaching to be a very valuable resource. Not only does somebody call and check in with me, they also follow up and have my information right there. Carley, my health coach, is really awesome, and she is a great cheerleader and is full of information.She has helped me make positive changes and cheers me on, even when sometimes I fall short of my goals, but helps me tweak them and make them better. So this is a very valuable program.
Host: WebMD coaches are trained health professionals, ready to support you, whatever your goal. Get started today by calling 800-821-6591 or send a confidential message on www.webmdhealth.com/wellwisconsin.
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