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How Does a Health Savings Account Work?
A Health Savings Account (HSA) allows the owner to save (and invest) money in an account, which can be used to pay for health expenses on a tax advantaged basis. Generally speaking, your contributions to a HSA are tax deductible, the earnings grow on a tax deferred basis, and you can withdraw the money tax free if used for a qualified health expense. As 2016, you are allowed to contribute $3,350 (for individuals) and $6,750 (for families) to the account, plus an additional $1,000 if you’re over 55. Continue reading...
What is Adjusted Gross Income?
For tax purposes, Adjusted Gross Income is the basis of an individual’s income tax calculations, before “below the line” deductions. Adjusted Gross Income (AGI) is Gross Income (all of an individual’s earnings for the year) minus above-the-line deductions such as retirement plan contributions, education and medical expenses, Health Savings Accounts, alimony, military exemptions, and so on. After these adjustments, a person can take the standard federal deduction or itemize their other deductions. These are known as below-the-line deductions. Continue reading...
Where Should I Put my Healthcare Savings?
There are two options for saving for healthcare needs: brokerage accounts and Health Savings Accounts (HSAs). Brokerage accounts provide more investment flexibility and no restrictions on withdrawals, but may be subject to taxes and penalties. HSAs provide a triple tax benefit, higher contribution limits, and no expiration date, but have restrictions on how funds can be used. The article emphasizes the importance of starting to save for healthcare expenses early and staying informed about healthcare options. Ultimately, the choice between these options depends on an individual's circumstances and goals. Continue reading...
Who Can Participate in an HSA?
In order to be eligible for an HSA, you must be enrolled in a high deductible health plan (HDHP) that is HSA-eligible. You must also not be enrolled in Medicare and you cannot be claimed as a dependent on someone else’s health plan. Your health insurance must also be part of a high deductible plan with substantial out-of-pocket costs. How Does a Health Savings Account Work? Where Should I Put my Healthcare Savings? What is Medicare and Medicaid? Continue reading...
What Health Insurance Do I Need if I Don't Have a Job?
Unemployed people are still required to have health insurance. Under the Affordable Care Act (ACA), you will likely qualify for a federal subsidy to help you pay for it. Younger people can buy a catastrophic policy, which offers minimal coverage but can still help prevent eroding all of your savings in the event of a major accident. How Much Will Individual Health Coverage Cost? What is Medicare Part D? Continue reading...
Can I Purchase Individual Health Insurance?
Yes, you can purchase individual health insurance if you are not covered by an employer-sponsored plan, or if you are too old to be on your parent’s plan. You can start your search at www.healthcare.gov, though you may end up finding the best plan on your state’s exchange (if your state has a health insurance exchange. Financial aid is also available for health plans if you are below a certain income threshold. Continue reading...
How Much Will Individual Health Coverage Cost?
There are many factors that determine how much you pay for health coverage, such as age, income level, and the type of plan you want. The least expensive plans will be for young people (age 30 or under) who just want catastrophic coverage – this type of coverage is high deductible and does not cover frequent visits to the doctor or even check-ups. It is designed to provide coverage only in the event of a major accident. Continue reading...
How Much Will Health Insurance Cost in Retirement?
It is difficult to forecast how much health care will cost in retirement, but J.P. Morgan research indicates that it’s a few thousand dollars a year. According to their research, the median amount spent each year on health care by 65 year old’s is $4,660. For those age 85 and older, the average amount spent each year is $18,030. At age 65, you can get covered by Medicare, but there are separate costs there, as well as in the optional Medigap policy. Continue reading...
How Can I Keep My Health Costs Down in Retirement?
You can keep your health costs down in retirement by frequently using preventative care, and working hard to stay healthy. You can also tame the costs by saving diligently in your retirement years, so that you have funds set aside for medical expenses. There is also the ability to purchase long-term care insurance, which can kick-in later in life when you have daily care needs. The insurance is often designed to pay out a certain dollar amount each day to pay for your care. Continue reading...
When Should I Start Saving Money?
The answer is simple and needs only common sense to understand: you should begin saving as soon as you can! However, because of most people’s spending habits and the day-to-day realities of life, it is often difficult to follow that advice. Let’s compare how your savings would accumulate, depending on the age at which you begin to save. Your total savings will be much greater by the time you want to retire – say when you’re 65 – if you invest $5000/year at age 25 for just 10 years, than if you continuously invested $10,000/year at age 35, or $15,000/year at age 45. Continue reading...
If I Retire, Can I Keep the Health Plan My Employer Offered?
Some employers will offer legacy employees continued health care coverage even after retirement, but it is not very common these days. The costs of health care are rising too quickly for most corporations to keep up. Some corporations will continue to pay a percentage of premiums for their retirees, but more often than not it is up to the retiree to obtain their own health care. Following employment, most people are eligible for COBRA, and then later in life you can purchase plans through Medicare and Medicaid. Continue reading...
Does My Spouse Need Separate Health Insurance When I Retire?
You and your spouse could be on the same health plan, especially if it is offered through your employer, COBRA, or Medicare and Medicaid. If you are purchasing long-term care insurance, you would generally get a separate policy for each person. Do I need Life Insurance for My Spouse? Will My Spouse and Children Receive Social Security Benefits if I Die? Continue reading...
What is a Coverdell ESA?
A Coverdell ESA is an account which can be used to save for educational expenses. These used to be called Educational IRAs until someone realized that didn’t make sense. A Coverdell Educational Savings Account (ESA) allows you to save money for your child’s future education costs. As opposed to a 529 Plan, which is limited to post-high school education, money from an ESA can be used as early as Kindergarten. Continue reading...
What Websites and Apps Can Help Me With Personal Budgeting?
There is a thriving industry committed to helping people plan and maintain a personal budget through online tools and apps. Perhaps the most-used personal budgeting tool as of this writing is Mint, which allows a user to link their bank accounts into the budgeting software, and then sends the information right into a tax filing after the new year. A list such as this is almost definitely going to be outdated by the time you read it; your favorite search engine or app store may turn up more relevant results than this. Continue reading...
How do I Calculate my Expenses?
Keeping track of your expenses is one of the most important (and basic) steps to leading a responsible financial life. It might be tempting to “eyeball” your expenses and somehow get by without a plan, but in almost all cases, such carelessness will spell financial disaster. Budgeting your money for specific categories of expenses and carefully documenting the actual spending is critical. You should add up amounts spent on monthly mortgage and car payments, rent, groceries, clothing, entertainment, utilities, transportation, and other miscellaneous expenses, and try to get as close to possible to a monthly budget. Continue reading...
What is COBRA?
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that mandates employers to keep you covered under your current employer-provided health plan for up to 18 months after you leave. Of course, COBRA doesn’t apply to all employers, so you have to check in your specific case (there generally has to be over 20 employees). In some cases, you might have to pay the entire premium for the insurance, plus some sort of administrative fee (and this can be more expensive than purchasing an individual plan). Continue reading...
What are Net Sales?
Net sales are the amount of sales that will actually be counted towards a company’s bottom line, meaning they account for goods returned or damaged goods. If a good is fully delivered to a customer and any return policy is expired, the good can be booked as a net sale for the company. Therefore, net sales gives a more accurate picture of the actual sales generated by the company, or the money that it expects to receive. Continue reading...
What is Lifestyle Inflation?
Lifestyle inflation is a term used in personal financial planning for the tendency of people to increase their spending and standard of living right along with any raises and monetary resources, even if it’s is at the detriment of any plans for debt reduction or long-term savings. Monetary inflation describes the phenomenon when more money has no more utility value than a lesser amount used to because the cost of goods is going up. Lifestyle inflation is when people select higher-priced goods and lifestyle spending habits when they have the money available to do so. Continue reading...
What if I Cannot Get Individual Coverage?
Under current law (the Affordable Care Act), everyone is eligible to receive health insurance coverage. However, not everyone may be able to afford health insurance. There are subsidies provided by the federal government for those who cannot afford it, but cost may still be an issue for many. How Much Will Individual Health Coverage Cost? Can I Purchase Individual Health Insurance? What Health Insurance Do I Need if I Don't Have a Job? Continue reading...
What Should My First Savings Vehicle Be?
Start basic, and just open a savings account at a bank or create a brokerage account at a major custodian (Charles Schwab, Fidelity, for example). As a rule of thumb, you should have six months’ worth of living expenses in this account. Another good rule of thumb is to avoid touching this money at all costs, and never invest this money in risky assets like stocks. It’s better to keep the money as liquid as possible, so even buying Certificates of Deposit (CDs) may not be the best idea. The purpose of this money is not to make you rich – this is your safety net. Continue reading...