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What Are Health Savings Accounts?

January 24, 2017 1 Comment

HSA

HSA

I have had a health savings account at my bank for many years. It is a simple savings account earning little interest. My accountant advised me to contribute to it, and I did without understanding the full reason. Now that I am on Medicare, in a relatively safe position, I am extremely happy I have a hefty HSA. I can use it for any approved medical expense that is not covered by my insurance. To qualify in the first place I had to carry a high deductible health insurance policy. This virtually guaranteed all the expenses would be paid by me, since I never hit my deductible amount in a single year. Now that I am on Medicare I can’t contribute any more, but that is fine also. I believe I have just the right amount for my own situation. I was not taxed on the initial deposit and the expenditures always qualify as legitimate medical expenses on my taxes.  I get to essentially write it off twice, even though it earns little interest.

There are  few caveats, such as making sure the use you make of it is an approved expense under the law. I made a costly error couple of years ago by paying for some body work from that account that did not qualify.  I paid an IRS penalty larger than the original payment, just to make sure I am in compliance with the law.  Now I will never cross that line again, as I know the consequences.  I did get a written prescription from a doctor for lymphatic drainage treatments, shiatsu, and reflexology at the U of A Supportive Care for Healing at the hospital.  Without the written orders those treatments would not be allowed, but with doctor’s orders it is fine. The same is true of over the counter medicines or vitamin supplements. Make sure you have the doctor’s orders filed with your tax documents, just in case you need them. My plan and my HSA account is personal, so there is no other entity for me to satisfy other then the IRS and the bank where the account resides.

There are plans in which employers contribute to HSA as an alternative or supplement to insurance. The law creating HSA’s was signed by George Bush on Jan 1, 2004.  Previous to that time a similar medical savings accounts existed for employees of small businesses.  The present law is open to employers of all sizes, not just those with fewer than 50 employees. Now the HSA is being promoted as an alternative to health insurance.  I am very pleased I have one, but it is no way an alternative for insurance. It is effective to the extent that it meets the individual’s needs.  It can be spent on preventive care not covered by most policies, so it can upgrade the health care of the customer.  It can be invested in a more lucrative way than my own interest earning savings plan at a bank.  I have a debit card I use for all medical payments during the year.  The feature I like the best is the full accounting of all the money I have spent on health care during a given year.  The HSA  bank statement is all I need to do my taxes at the end of the year and keep track of my health care spending.  I am glad to have it, if for no other reason than ease of tax accounting.

Do you have a health savings account, gentle reader?  Is yours done through an employer or is it a personal plan?  I think it is a good idea, but there is much to know to choose the right one and deposit the right amount for your future needs.

IRS

IRS

What is Fiduciary Responsibility?

August 20, 2015 2 Comments


Americans are not financially literate as a group. The depressing collapse of the markets in 2008 followed by a bank bail out has left the country with gross inequity.  Working folks with real estate holdings, retirement plans and other investments took big hits while the banks returned to business as usual.  Regulations designed to curb the abuses of financial institutions, like Dodd/Frank have not been implemented.  We are still in a situation dominated by lenders, bankers, and mortgage brokers.  Stock brokers have been able to operate under an assumption that suitable, reasonable investments were the only offers made to clients.  In reality any system that is commission based encourages transactions.  The broker makes a cut from each trade, and wants to maximize the client’s contribution to his total commission.  His company also rewards him for selling in house products by offering a higher commission for the sale than competitive products may have.  The client becomes the least of the broker’s concern within this structure.

I switched to a fiduciary to manage my investments years ago. I am much more secure and happy with my portfolio since I made the change.  I worked with brokers from different brokerages in the past, but never found one with my interests in mind.  There is a simple reason for that.  The rewards were structured against my financial well being and in favor of trades to create commission.  Now I split the profits with my fiduciary firm, which works perfectly.  I make as much money as they make.  If they make nothing for me I pay them nothing.  This incentive to make good decisions for both of us carries weight and works like a charm.  I do discuss the strategy a few times a year to make sure we are on the same page, but my involvement is very light.  We are in the same financial boat which makes me feel happy.

Brokerages are starting to lobby the public with misleading ads about this new proposed regulation.  I urge you to take some time to understand the issues.  Brokers pretend that fiduciary responsibility to you will somehow cut you off from good advice.  What it will do is make it illegal to sell you products that are not the best investment or the best deal in terms of fees for your situation.  This is a protection Americans need to stay financially stable into retirement. Caveat emptor, gentle reader.

The Problem with Patrimony

June 20, 2015 5 Comments

Dick and Ruby marry 1942

Dick and Ruby marry 1942

Men and women have coexisted in inequality for all of history.  Treatment for women around the world is just now starting to bring the female population out of slavery to the male population.  The serious wounds to culture, development and education can be healed, but only through a process of patience and forgiveness.  In the developed world we struggle for equal pay, but in the third world females have a very hard time getting an education or determining their own fate.  How do we make a path that will lead to respect and appreciation for both sexes in our societies?  There are economic barriers as well as political practices that impede progress toward equality.  Cultural beliefs about roles and appropriate careers change slowly without outside help.  Figures show that educating women and making small business loans available to them is the best way to jump start local economies.  Many great examples are popping up around the globe.  Still, Boko Harum kidnaps and marries school girls.  Violence against women continues, as does slavery and sex trafficking.

Tomorrow is Fathers Day, a time to commemorate the contributions of all fathers living and dead.  I am extremely grateful all my forefathers survived in order that I might exist.  I wonder about their politics.  I have studied them throughout history and wonder about their secrets and inner beliefs.  There is evidence of discord in some of my family history, between husbands and wives, but there are also examples of dedicated and happy families (according to history).  My family was probably about average on the bliss and harmony scale.

I was fortunate to be born a boomer because women’s liberation as a socio/political movement in the United States gained momentum when I was a teen.  I can clearly remember calling my father a male chauvinist pig when I was in high school, only partly joking.  My parents wanted no liberation for my mother, but had mixed feelings about my own. They always said I could achieve anything, but still focused on dress code more than education.  My mom scored some liberation in her 60’s because my parents took up hot air ballooning.  Ruby was not only the ground crew, a sometime pilot, but most importantly, she could sew the balloon when it was damaged.  My parents were exposed to younger people in the ballooning circles, and I noticed that my dad needed her as an equal in that situation. He started to treat her with a bit more respect in the balloon days.  They were born in the 1920’s, so there was only so far they could be expected liberate.  I suppose they went as far as they could toward equality.

My father had a stroke and pretty steep decline of his facilities which left him unable to handle finances.  The problem was at that time my mom had never balanced their checkbook, let alone had any understanding of the investments/insurance/retirement plans they had.  She was not really in shape to learn everything about finances at age 78.  She learned Quicken and began to do the bill paying and simple tasks.  I convinced them to move to Tucson to a retirement home so I could keep an eye on them.  This worked well for a while until my dad’s health took another serious dive.  He was in the hospital, looking very much like he might die when I asked him about his estate.  He told me to ask his accountant.  I called and learned that his accountant had no idea what all his assets were, or where they were.  Neither did my dad.  He did survive that scrape and lived for a few more years, but the crisis gave me the opportunity to find out that:

  1. Although they told me they had a trust, they had no assets in trust, just a folder
  2. My father had obligations to partners in New Mexico who could call for cash any time
  3. There was no market for the oil shares in New Mexico, so he could not sell them
  4. His vast holdings and constant call for cash had the potential of breaking his bank

This reality hit me like a brick when I was already emotionally stressed about my dad and his near death.  I managed to help them get their assets into a trust.  By then they had to have separate property trusts drawn up to protect my mom from my father’s deeply speculative dealings.  This was expensive, but the alternative was divorce after more than 60 years to protect my mom.  The oil properties had to be legally described and placed into trust, then he stopped paying the cash calls.  His lawyer told the partners he had nothing to contribute, which was true.  Finally after about 3 years of negotiating the partners let him out of his obligations.  I have no idea what happened to all the wells, but the deed was signed in Texas the day after my dad died in Tucson. His final act on earth was to be released from that piece of bad judgement.

My father believed that the price of oil could never go down over time. He plunged more money that he rationally had into that belief because he was a petroleum engineer.  He had no financial sense, and by the time he started buying into those wells he had no sense of any kind. My mom had no protection and no way to guess how wacky his finances had become because he stayed in charge after he was incompetent.  From that experience I learned a lot about finances and investments.  Not only did I help them put their house in order and in trust, I put all my assets in trust.  I am happy I learned enough to save my mother’s financial fate, and possibly my own.   This Father’s Day I honor my dad and all his forefathers.  Here’s hoping that their ideas of patrimony fade, for everyone’s sake.

Dick 1945

Dick 1945

 

 

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