Health Savings Accounts are a good idea

Does your employer offer a health savings plan? Many do, especially if your company’s health insurance has a high deductible. If you aren’t taking advantage of it, you should and here’s why. Health Savings Accounts (HSA) were created as a way to help control rising health care costs. An HSA is an account, similar to a personal savings account or an IRA that you can open at work or on your own. Employers consider it a supplement to their high deductible employee health insurance plan (HDHP). How do you know if your health insurance plan qualifies as a high deductible? Usually HDHPs won’t start paying out until after you’ve spent at least $1,300 (individual) or $2,600 for a family in expenses with your own money. HSAs are used to pay for things your employer plan doesn’t cover. Qualified medical expenses such as co-pays, health plan deductibles and other non-insurance covered medical expenses such as dental and vision expenses. You—not your employer or insurance company—own and control the money in your HSA. The government and the health insurers believe that most people will spend their health care dollars more wisely if they’re using their own money. HSAs function somewhat like a 401(K) or 403(B) plan. You can make contributions from your paycheck on a pre-tax basis. Your employer can also match some percentage of your contributions. No matter how much you make, you can open a HSA plan. Even though you may have already maxed out all of your other available tax-deferred savings plans, you can still open a HSA. Health Savings Plans offer a triple tax advantage in an...

How to mess up an inherited IRA

Whoopee, your great aunt died and left you her Individual Retirement Account (IRA). The first thing you want to do is cash the check and take the family out to dinner. Wrong! The first thing you should do is read the rest of this column. An inherited IRA can be a tricky. It requires some knowledge of estate, financial and tax planning. If you are not familiar with any of the above concepts, meet with a financial advisor or send me an e-mail. You see, one wrong decision can have expensive consequences. For most people, the worst thing you can do is cash out the plan before seeing an advisor. Know this: the money in an inherited IRA must be taken out eventually. How much and how soon depends on a number of variables. The best case scenario tax-wise and (probably worst emotionally) is that you have inherited an IRA from your deceased spouse. In this case, there are no tax consequences and you are not required by the IRS to withdraw taxable distributions until you reach the age of 70 ½. But let’s say that you are a non-spouse and the money came from your great aunt. You have two options: you can choose to take distributions over your life expectancy. It is called the “stretch” option and would allow the remaining funds in the IRA to grow tax-free for as long as possible. Each year the required distribution, which is computed based on a life expectancy table generated by the IRS, is taxable at your current income tax bracket. The second option is to liquidate the account...

The candidates and the economy

As the GOP political convention winds down and the Democrat convention gears up, we continue to hear a steady stream of economic ‘one liners’ from the candidates. We all know that fixing the economy is one of the major issues of this campaign but so far the candidates are long on words and short on specifics. “If I’m elected,” promise both candidates, there will be more jobs, trade, wages and growth. According to them, all we need do is check the right boxes come Election Day and the rest will be a foregone conclusion. Historically, Wall Street and corporations vote Republican because the GOP is good for business, while labor, minorities and the “have nots” back the Democrats. However, times and the issues are changing and so are the candidates. Take the banking sector, for example, both parties and candidates this year have targeted Wall Street as a villain in need of chastisement. The GOP has made a re-instatement of the Depression-Era, Glass-Stegall Act a plank in their platform. Repealed under the Clinton Administration, the Act had prevented commercial banks from entering the capital markets. Democrats Elizabeth Warren and Bernie Sanders (as well as the public) have blamed the banks for the entire financial crisis fiasco which was brought about by the repeal of the act.  The banking sector’s involvement in capital markets and the creation of derivative products such as mortgage-backed securities in large part brought down an enormous financial house of cards that threatened to sink all of us. Free trade is another area where roles appear to be reversed between the candidates, if not the parties....

How to Avoid the Pitfalls of Multi-Level Marketing

  So you want to be your own boss, make lots of money and do it all from the comfort of your home? It is the siren song of direct sales that has recruited legions of Americans through the years. Some make it, most do not. Here are some tips to help you in your new adventure. Whether you want to sell jewelry, vitamins, candles, cosmetics or home products, a healthy dose of skepticism should be applied to the promises these companies make on their websites. Many reports, including those filed with the Federal Trade Commission, warn that almost 99% of multi-level marketing (MLM) distributors lose money. In addition, the dropout rate is upwards of 60-70% per year. Those are daunting statistics. Consider them well before jumping on board an MLM. Critics argue that this style of personal retailing is a thing of the past. Retailing directly to friends and family on a one-on-one basis requires people to change their buying habits. The future wave of selling is largely internet based where convenience, price and a myriad of choices are just a keyboard away. Remember too that despite the existence of MLM companies since the Eighties; their combined market share of retail sales in the U.S. is under 1%. Over the years, quite a few of these companies have gone bankrupt. In addition, disgruntled ex-recruits have waged a good many lawsuits against several of these MLM businesses. The chief complaint: that they are simply pyramid schemes or just out-and-out scams. Lawsuits allege these companies promise you the world, but only after you buy your way to success through increasing...

Markets Reset on Fed warning

  The markets fell and kept falling most of the week. Investors fear that at the Fed’s next open market committee meeting in June, Federal Reserve Bank Chairperson, Janet Yellen, will decide to raise interest rates again. Let us put this in perspective. The Fed’s notes from its last monthly meeting (released on Wednesday) did not say the central bank was going to raise rates. They just told Wall Street that June is still on the table for a quarter point interest rate hike if economic conditions warranted it. They also warned that Wall Street was a bit too complacent in assuming the Fed would wait and not raise rates. In addition, the most recent economic data appears to bolster the case for a rate hike. This week retail sales posted a strong gain, consumer prices grew by 2% and even industrial production was stronger than expected. After a weak first quarter, many economists are betting that we will see a rebound in the second quarter. This data seems to strengthen that view. Remember that the Fed wants to get ahead of any chance that the economy will overheat (by raising rates) and send inflation skyrocketing. This week, the Fed dispatched no less than five Fed members who gave speeches warning investors that not only was a hike next month squarely on the table but there may be even more hikes coming before the end of the year. If some members at the last minute worried that the market’s expectations of a June hike “were unduly low,” they are not now. Last week, the futures market was placing a...

Estate Planning—the final chapter

The weekend is over. During the last two days your family came together and had that “talk,” but before everyone goes their separate ways; some follow-up is required. Here are some of the things you should make sure are accomplished. As readers may recall, in this series we have covered a wide variety of subjects from leaving your legacy to collecting and reviewing all of your assets. Trusts, insurance policies, tax deferred savings plans, wills, living wills and durable powers of attorney are just some of the items we have discussed. We have talked about the family meeting and who should attend. Be sure that someone is responsible for taking notes during this event because you will need them in the future. According to Bob Mauterstock, an author of two books on estate planning and an expert on the subject, this is an on-going process. In his book “Passing the Torch,” he recommends that you leverage this “first” in family communication and make a habit of discussing family affairs as part of an on-going process. The first thing you should do is review the notes taken at the meeting. What areas need to be followed-up? Do you have some family members with special needs, for example, that were not addressed? Maybe you are on a second marriage with children from the first; has your family meeting covered these issues? These are just two examples of topics that might remain outstanding and require more work. Ask various family members to pursue any loose ends that were not resolved during the meeting. Be sure everyone (including you) has a dead-line to...