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A retirement savings account can include health savings accounts

By Hook Law Center

As companies divert the costs of health insurance to their employees, health savings accounts (HSAs) and health reimbursement accounts (HRAs) have become increasingly popular. According to the Employment Benefit Research Institute (EBRI), adults in the U.S. retained $23.8 billion among 11.8 million HSAs and HRAs. This represents an increase of 2,725 percent from 2006.

HSAs can also be used as a stealth individual retirement account, but the majority of people are unsure of how to inquire about them. While flexible spending accounts (FSAs) allow users to put away a maximum of $2,500 in pretax dollars every year for medical bills, HSAs do the same but with a higher maximum amount. In 2014, HSAs permitted individuals to set aside a maximum of $3,300, and families a maximum of $6,550, as well as a $1,000 catch-up contribution for people ages 55 and older.

Any remaining funds in the HSA will be rolled over each year and grow tax-free. You can withdraw funds on a tax-free basis from the HSA to cover medical bills at any age. But if you withdraw funds after you reach age 65 for other reasons, the amount will be subject to tax at normal income tax rates.

However, HSAs are not always affordable. They are normally combined with high-deductible insurance plans, which provide lower premiums, but call for greater out-of-pocket payments prior to the time at which coverage becomes effective. In 2014, the minimum deductible for one person was $1,250, and for a family, $2,500. The maximum out-of-pocket expenses for one person was $6,350, and for a family, $12,700.

Even when HSAs are within your budget, you should carefully examine the investment choices offered by an HSA. The majority of the time the funds are invested in money market accounts. It is advisable to first use plans that have greater yearly contribution limits, such as 401(k)s and IRAs.

Posted on Wednesday, November 25th, 2015. Filed under Estate Planning, Long-Term Care.

What men can learn from women about saving for retirement

By Hook Law Center

Although men’s 401(k) balances tend to be larger than women’s, there is evidence to suggest that women may outperform men where retirement planning is concerned. Vanguard observed that at the majority of income levels, women are more inclined to take part in their employer’s 401(k) plan, more inclined to enroll in the plan on a voluntary basis and more inclined to contribute a greater percentage of their income than men.

For instance, women who earn $75,000 or more on a yearly basis contribute approximately a full percentage point more of income than men who earn the same amount. One percentage point can translate into a significantly greater nest egg and much greater income for retirement.

Women may be better at saving, but because of men’s larger incomes and longer period of time working, their 401(k) balances tend to be larger. While men’s 401(k) balances are about $121,000, women’s are about $78,000.

There are many news stories that indicate that women are more sophisticated investors. They say that an index of hedge funds managed by women performed better than a wider hedge fund index. It has also been said that women spend more time conducting research of investments, exercise more patience and ask questions to others regarding their viewpoints on certain stocks.

Nevertheless, both men and women can find ways to improve their saving, investing and planning. It is advisable to be diligent and disciplined, and to ensure that your saving and investing are part of a long-term plan to realize a certain objective.

Posted on Friday, November 13th, 2015. Filed under Estate Planning.

The new reverse mortgage rules: Are they right for your retirement plan?

By Hook Law Center

The reverse mortgage rules that became effective on Aug. 4, 2014 should address any concerns held by married couples who are contemplating taking out such loans. Reverse mortgages, which are also called Home Equity Conversion Mortgages (HECM), are home loans for those who are age 62 or older that allow them to convert the equity that they have in their home into cash. They provide a way for homeowners to receive additional income during their retirement years. The loan is required to be paid upon the death of the borrower, a change in residence of the borrower or sale of the home.

However, one complication that has arisen is that when husbands have taken out reverse mortgages, upon their death, their wives were unable to pay off the loans, and were faced with foreclosure. As a result, the U.S. Department of Housing and Urban Development (HUD) was the defendant in a class action lawsuit filed by AARP, which alleged that HUD failed to protect the women.

Under the new rules, if one spouse takes out a reverse mortgage, and later dies, the surviving spouse can keep residing in the home without any apprehension about foreclosure provided that she or he pays the tax and insurance, and maintains the home. The new rules also state that a couple can still obtain a reverse mortgage where only one of the spouses is 62 or older. And the younger spouse’s age will determine the amount of the couple’s payout even in the event that that spouse is not on the mortgage title. In this way, the amount of the loan will be smaller.

Reverse mortgages are complex financial products, and if you are considering one, you should consult an attorney or trusted financial adviser.

Posted on Friday, November 6th, 2015. Filed under Estate Planning.
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