Kevin Elliott’s Blog

Health Savings Accounts

A Health Savings Account (HSA) is an account that you can put money into to save for future medical expenses.

There are certain advantages to putting money into these accounts, including favorable hsa tax treatment. HSAs were signed into law by President Bush on December 8, 2003.

Who Can Have an HSA?

Any adult can contribute to an HSA if they:

- Have coverage under an HSA-qualified “high deductible health plan” (HDHP)

- Have no other first-dollar medical coverage (other types of insurance like specific injury insurance or accident, disability, dental care, vision care, or longterm care insurance are permitted).

- Are not enrolled in Medicare.

- Cannot be claimed as a dependent on someone else’s tax return.

- Contributions to your HSA can be made by you, your employer, or both. However, your total hsa contribution limits are limited annually. If you make a contribution, you can deduct the contributions (even if you do not itemize deductions) when completing your federal income tax return.

- Contributions to the account must stop once you are enrolled in Medicare. However, you can keep the money in your account and use it pay for medical expenses tax-free.

PROs

- Tax Deferral: Like an IRA, an Annuity earnings are Tax Deferred. This could make this investment more appealing than buyings CDs, Money Markets or other safe investments.

- Safety of Capital: Your principal money is safe in Fixed and Index Annuities. Insurance companies are required to keep cash reserves to ensure this.

- Liquidity: Some of your money is accessible. Most annuity contracts have an annual withdrawal clause that will allow you to for example take out 10% of the annuity without in curring a penalty.

- Rate of Return: Annuities typically offer a higher rate of return than other safer investments.

- Income Stream: Alot of Annuities can give you a lifetime income stream that other investments don’t give.

CONs

- Short Term Money: If you think you would need more than 10% of the principal within a short to medium term period, annuities might not be the best investment for you.

- Surrender Schedule: Because annuity contracts have surrender charges for withholding money before the contract matures in lieu of up front sales charge, you will be obligated to the terms of the contract. Some surrender charges can be in excess of 10%.

- Liquidity: If you might need more than 10% per year during the surrender period, this can be a problem. remember, this is best purchased as a long-term investment.

Fixed and Index annuities are great investments for some people. Please consult your Financial Advisor for more details about specific products.

These above PROs & CONs are meant for informational purposes only. Each company has their own rules for their contracts.

Life Insurance 101

This month’s topic is going to discuss the 2 types of Life Insurance – Term and Permanent and the 4 Unique Characteristics of each product.