Posts Tagged ‘money’

What You Need to Know About Health Savings Accounts

Posted on: September 28th, 2010 by

More companies are offering health savings accounts,in which you can stash cash to cover your medical bills.  Here’s what you need to know before signing up.

CPA Rockville, MD - Financial Planning

1. Your employer is more likely to offer this option:  When you get your open-enrollment packet  you may see something new on the benefits menu.  Companies are increasingly offering a health insurance package that includes a high-deductible policy plus a tax-advantaged health savings account (HSA) in which you can stash cash to cover your medical bills.  The appeal for you is lower premiums, typically 10% to 40% less than those of a traditional plan.  Employers, meanwhile, like this plan because it gives you an economic stake in your own wellness.

2. These plans look cheap:  While you’ll save on premiums over a traditional plan, the deductible (at least $1,200 for individuals; $2,400 for families) is a lot higher.  You’ll foot every dollar of your bills, excluding, usually, preventive care up to that amount.

Enter the HSA:  To cover costs, you can put pretax money in one, up to $3,050 for individuals in 2011, $6,150 for families, plus $1,000 more if you’re 55 or older.  Your employer may also contribute.  Withdrawals for medical bills are tax-free.  Unused dough rolls over year to year, growing without being taxed.

3. Some people may save money by choosing a high-deductible plan.  Young and healthy people, for example, can fare better because they pay low premiums and don’t use much care.  If you have a particularly costly medical condition, such as cancer, you too may benefit.  Once you hit the plans’ out-of-pocket maximum, no more than $5,950 for individuals, $11,900 for families – you pay nothing.  Comparatively, in traditional plans you’ll never stop owing co-pays.

4. Run the numbers for yourself.  The deductible, and coverage after the deductible, in these plans varies widely.  So you’ll want to do the math to see if enrolling will be worth your while.  Your company may provide a calculator to show how you’d fare in this plan, versus other options, based on last year’s health costs.  But if not, ask your insurer for a breakdown of your 2010 expenses, and add up how much you’d have paid under each plan.  Pay close attention to prescription costs.  In a high-deductible plan, drugs typically aren’t covered before the deductible.

5. An HSA can double as a retirement account:  If you have cash to pay health bills out of pocket, you might use an HSA to supplement your nest egg.   Even in retirement, you can tap the funds tax-free for medical needs.  And starting at 65, you can withdraw penalty-free for any reason, though you’ll owe income taxes.  You choose how the account is invested.  If you’re saving it for retirement, go with low-cost mutual funds.  (Don’t like your employer’s options?  You can go elsewhere — access Vanguard funds via  But if you’ll use the money for current health costs, a savings account is the right bet.

Keeping Your Money Safe Online

Posted on: May 17th, 2010 by

Dealing with Your Bank - FInancial Plan - Rockville, MDWhen you access your bank account online, you probably don’t think that at that very same moment, there could be a hacker somewhere, waiting to steal your information and your money.  Despite banks’ efforts to protect accounts from online theft, this is still proving to be a serious problem.  More banks were robbed online last year, than were in person.  One of the biggest threats to consumers are banking Trojans.  They are invisible and can steal multiple types of data, including passwords.  Some more advanced types of Trojans can make fraudulent transfers and drain your account while you are logged on to the account online.

The more questions and passwords you are asked to enter in order to log in to your account, the safer your bank’s website is.  If your bank only asks you to enter a username and password, like Wachovia, to enter its website, you are not entering a tightly secured site.  Other banks, like Bank of America, require customers to create a username, a site key name using a personalized picture, and a password.  It has been recommended that banks require customers to answer personalized questions before granting access to their site, but as you can see, not everyone is taking heed.

In the event that you become a victim of online theft, act quickly and know your rights.  The general rule for consumer checking and savings accounts is the bank is liable for most of the damage, as long as you report the illicit transfer in a timely manner.   But if you have a line of credit account or a business account, you need to be extra careful, because the bank will not always be obligated to pay for your loss.  Business accounts are the most vulnerable to online hackers and the least protected by the law.  Why would a criminal want to go after a smaller personal account when they can go after a six-figure business account?

You need to protect  yourself the best you can from these attacks.  You can not always rely on the banks’ websites to do that for you.  Make sure you do not access your account from a shared computer.  You never know who will be coming in behind you.  Be sure your computer has anti-virus, firewall and anti-spyware programs, including security software with automatic updates.  Also, if you are using wireless service, check the settings to make sure your connection is encrypted.  Don’t connect to your account using a public network, like the ones you find in coffee shops.  Always review your statement regularly and carefully (although, you should be doing this anyhow to be fiscally responsible).  And finally, always, always, always, log out after every session.  Don’t leave the window up and let it time out and don’t just “X” out of the screen.  Keep yourself and your finances safe but being proactive and aware of the dangers lurking out there.

Dumb Ways You Throw Away Your Money

Posted on: May 9th, 2010 by

Financial Planning - Rockville, MDIts easy for our emotions to take over and force us, or rather convince us to make irrational decisions.  Our money is not exempt from these decisions.  But, you have to remember, from here on out, that you need to only use logic when it comes to finances.  Some people can make a go of it on their own, others employ the assistance of a financial adviser.  One of the biggest mistakes people make is coming to the conclusion that because its on sale, its a good deal.  If you are going stereo shopping and you see two marked at $400, but one is $300 off, which would you buy?  If you use your logic and reasoning, you would buy the one that got a better rating from consumer reports; but if you react like most people, you buy the one that is on sale because its a bargain.  In fact, research has found that people who wouldn’t normally spend that kind of money on a stereo before will buy the discounted stereo based on the fact that it is discounted.  The reality is, $400 is $400, and if you normally wouldn’t spend that kind of money on a stereo in the first place, you shouldn’t do it now.  Before you splurge, evaluate whether the product is worth that in enjoyment.  Also, consider how often you will use the product and if there is a cheaper product of similar quality out there.

The number of people who have money in savings accounts, earning less than 2% I might add, while carrying credit card debt, usually with interest rates above 12%, is mind boggling.  People tend to use what is called “mental accounting” and compartmentalize their funds.  Often people have the money to pay off their entire debt, but choose not to do so because they are afraid to dip into their savings.  The reality is, you are not earning enough interest on your money in savings to justify not paying off your debt.  You are losing money everyday in interest.  If you have the money to pay off your credit card debt and still pay your bills, do it. Worse case scenario, if there is an emergency, use your now zero balance credit cards to help and then pay them off as soon as you can.

Finally, people have begun hoarding money again as a result of the economic climate.  People are so afraid of running out of money, they don’t enjoy the money they have.  If you are legitimately worried about running out of money, you should sit down with a financial planner and work out the math.  Make sure you consider worst case investment scenarios, not just the averages.  That should make you more comfortable about weathering a bad patch in the future.  Then, if you still have more than enough, make a plan that will allow you to enjoy your wealth by either spending the excess or giving it away.  Money, after all, is a means to an end, not the end.  You save it to make you and the people you love calm, comfortable, and happy.  Enjoy it!

Credit Card Perks You Didn’t Know You Had

Posted on: May 7th, 2010 by

Financial Planning - Rockville, MDNo one likes to read the fine print in credit card agreements, but you could be missing out on the perks.  Years ago, credit card companies started introducing “bargains” to customers to try and offset the hefty annual fees they were charging.  Over the years, these benefits have slowly been advertised less and less, thus falling by the wayside and people forget about them.  Today, with the economy the way that it is, there is renewed interest in trying to draw in a new customer base and make them aware of the benefits their card has to offer, as opposed to another.  So how do you figure out what your cards offer to you?  Call each of your credit cards and ask for a list of benefits.

Some of the perks you may be entitled to include first crack at concert tickets, rental car coverage, guaranteed returns, cell phone replacement insurance, trip cancellation coverage, cash without an ATM, emergency travel assistance, help with car shopping, and roadside assistance.  Some of these can be very useful on a regular basis.  For example, if you buy something at a store and they refuse to take it back, many credit cards will allow a 90 return and guarantee your money back.  These things can become very important when budgeting, especially if you are doubling up on certain coverages.  Make sure you read all the fine print to clearly understand your benefits and figure out what your card covers and if you need that same coverage additionally elsewhere.

How To Get the Largest Social Security Checks

Posted on: April 7th, 2010 by

Accountant - Rockville, MDYou can start collecting Social Security as early as age 62, however, this is not the most financially savvy move to make.  You could suffer a reduction of benefits of 25% or more for the rest of your life.  But if you continue to work past the normal age of retirement, you could be running up against the cap in which you can be penalized for earning too much.  You should try to retire at the normal age, as provided by the Social Security Administration, which, at this point in time is 66.

Second, marriage has its perks.  If, for example, your husband has higher lifetime earnings than you and you are ready to retire, but he’s not, all he has to do is file and suspend.  This means that you can collect your share, while he waits to collect benefits until later, when they will be worth more.  If the you have comparable incomes, though, there is another strategy that you can employ to boost your household income.  If one spouse wants to stop working earlier than the other, one spouse can retire and the other can claim spousal benefits only on the retired spouse’s record and wait until normal retirement age to collect their own, qualifying for the maximum benefits.

You also may be able to collect on your former spouse’s benefits as long as you were married at least 10 years and are 62 or older.  If your ex-spouse dies, you are entitled to a monthly survivor benefit (even if he or she remarried) equal to 100% of what your ex received during his or her lifetime (assuming that it is higher than your benefit amount, as you cannot collect 2 checks).

Lastly, if you started collecting Social Security and wish you had waited in order to get a higher benefit, the government will allow you to hit the re-do button.  You just have to pay back everything you have received, the government won’t charge you interest, and request a refund on the taxes you paid on that money (I recommend speaking to an accountant if you do this).  In essence, this strategy is allowing you to take an interest-free loan from the government.  Once you have paid the money back, the SS Administration will restart your benefits at a new, higher rate.  Speaking to a financial adviser before doing this is advisable because it could take up to 8-10 years to recoup your investment.

Hire Your Kids, Cut Your Taxes

Posted on: April 6th, 2010 by

Accountant - Kids Saving MoneyHiring your kids can actually help increase your family’s wealth by decreasing your income tax bill.  The keys to this being successful, however, is that your business must not be incorporated and you pay them reasonable wages.  That will allow you to deduct their wages from your income and shift the money to your children, who will be in a much lower tax bracket.

If your children are under 18, you will have to pay no Social Security or Medicare tax and, usually, no state unemployment or disability taxes either.  The courts have already rules that you can deduct taxes for any “reasonable wages” that you pay your children ages 7 and older to perform for your business.  The key is to show a profit objective though; as long as you can establish a profit objective, you don’t have to actually make a profit to claim the deductions.

Your CPA will strongly advise that you do everything in your power to substantiate every little deduction.  You may want to consider putting your kids on a time clock or writing down their times on a time sheet.  Pay them with a check.  They can always endorse the check over to you for cash.  And finally, make sure that you issue them W-2s at the end of the year.  This will provide them with a copy of what they have earned as well as a copy for the government.  If you need help with setting up any of this or questions concerning the appropriate hiring of your kids, please contact your local accountant.