On last month’s income statement, I alluded to a couple of big checks that we were expecting to come in April, but didn’t quite make the cut. One of them dropped on May 1st. It’s a check for almost $7,000 from a car accident settlement that finally resolves a car accident that I was in about 2.5 years ago.
Recap On Accident And Injuries
The accident was pretty straightforward. I stopped at a red light. The car behind me didn’t. It didn’t end particularly well. I had whiplash on the day of the accident, but have two lingering lower back issues that are going to stay with me for a very long time (perhaps indefinitely – which plays a roll in why I’m a bit afraid of the idea of pregnancy).
FWIW, we ended up using a personal injury lawyer to help settle the claim, despite our apprehensions about consulting a lawyer for real estate matters, and feel like we came out ahead for doing so.
Goals For Our Settlement Dough
We didn’t look at the accident as a way to get rich. But since the accident was not my fault (a fact that was never in question since the accident was so clear cut), we wanted help paying for expenses that my injuries were going to cost us in the future considering we had a good idea how much they cost (A LOT!) when they were acute.
After 2 years, my car insurance was tapped out on paying medical bills associated with the accident as there had been over $15,000 of them. Can I say that again? $15,000+ in medical bills. Tests on your back are freaking expensive. And don’t get me started on how much my brief ambulance ride cost the insurance company. Getting the car fixed cost the insurance company another ~$7,000. Nice reminder to have car insurance, right?
With that in mind, here are our current goals for the settlement money:
- Set it aside for future health care expenditures
- Since Mrs. PoP has good health insurance now, have it somewhere that it can grow in the meantime to keep up with (and perhaps surpass?) health cost inflation
- Protect said growth from taxes as much as is feasible
We’ve got an idea of how we want to do this, but wanted to run it by some of our very smart readers (in particular Average Joe!) to see if this makes sense.
Our Current Idea
Use Mr. PoP’s HSA as a tax exempt savings/investment vehicle for this money.
For those not familiar, an HSA is a Health Savings Account that is tax advantaged savings account available to people in the US with high deductible health insurance plans (like Mr PoP) because those plans don’t have first dollar coverage. The HSA lets you stow away a certain amount of money each year (currently $3,250 for self-only HDHP coverage like Mr PoP has) and invest it to be used later for health care expenses. It’s above-the-line tax deductible when we deposit the money (great because we can’t itemize our tax deductions), and exempt from taxes when we take it out later as long as the money is spent on qualified health expenditures. For more details on HSA, check out the IRS’s HSA page here.
With the yearly limits on contributions, it’ll take us at least a couple years to get the money fully invested. But the plan right now is to put the money into a low cost SP500 ETF and let the money grow to hopefully beat the high rates of inflation that the health care sector is known for. This source cites that long term health care inflation rate at about 5.54%, so that’s the number we’re aiming to meet/beat.
Is It Too Risky To Put It All In Stocks?
Maybe. But we don’t expect to need to look at that money for at least 5 years. As long as I’m working this job I have good (maybe 8/10?) first dollar coverage that includes care for chiropractic and neurologic needs that arise. Now that my car insurance is exhausted from paying these bills, my health insurer is picking up the slack when my back hurts like the dickens and all we cover are $25 copays, which we pay for using pre-tax dollars from my FSA (flex savings account).
But it’s also this job that aggravates the pain in my back since sitting upright for long periods (compressing my lower back) is what hurts the most. So there’s also the hope that after I no longer sit for 9+ hours per day at a desk that I need fewer chiropractic and neurologic interventions to help with the pain. So I’m really hoping that this money lasts a while covering a few chiropractic sessions per year and the fairly expensive topical NSAID that seems to be the only non-narcotic pain reliever that helps. (Vicodin also helps, and I was in a GREAT mood when on it, but getting addicted to narcotics seems like a bad long term plan.)
We’ve run this by our tax guy (answers to questions and long term planning like this are part of the service we’re glad we pay him for), and he thinks it’s a pretty good plan to reach our stated goals for the funds.
But what do you guys think? If you had an injury settlement what did you do with the money? Does anyone have another suggestion on a plan that might meet (or exceed) the goals for this ~$7,000?