Castle Rock Investment Company

Independent Guide, Trusted Partner.

money

HSAs and what you need to know about them!

by

By Mack Bekeza

Since 2003, Health Savings Accounts (“HSAs”) have been an excellent tool for families to help cover current healthcare costs, along with future healthcare costs. HSAs are also known to be an excellent tax-planning tool since participants are allowed to contribute on a pre-tax basis and the funds grow tax deferred. Additionally, participants are able to make tax-free withdrawals for qualified medical expenses. Funds in an HSA may also be invested in a list of mutual funds, or even have a brokerage link for more savvy investors. On top of that, people have until April of the following year to make contributions (similar to an IRA).

With all of these excellent benefits, there are a few caveats:

  • There is a yearly contribution limit of $3,400 per year for individuals and $6,750 for family plans in 2017. If your health plan runs from January to September, you can only make contributions for these months.
  • There can be tax penalties if withdrawals are made for non-qualified medical expenses before age 65. This involves paying income taxes for the non-qualified withdrawals as well as a whopping 20% penalty.
  • In order to qualify to contribute to an HSA, individuals must have a high-deductible health care plan (“HDHP”). This means that an individual plan must have a minimum deducible of $1,300 and minimum “maximum out-of-pocket costs” of $6,550 for 2017. For family plans, the minimum deductibles and maximum out of pocket costs would be $2,600 and $13,100 respectively. You also cannot be enrolled in Medicare.
  • Finally, if you are currently enrolled in a health plan that is a part of a healthcare.gov exchange, finding a health plan that is HSA eligible for 2017 will be nearly impossible since the requirements for a health plan to be eligible for a government exchange go against the requirements for a plan to be HSA eligible.

These setbacks should not prevent people from taking advantage of these accounts. In fact, HSAs will more than likely save people money in the long term and even in the short term. With having a HDHP, premiums will be notably less expensive for individuals and families, meaning that people can use those up front savings towards HSA contributions. Also, people can reimburse themselves for medical expenses that occurred in the past as long as the HSA was opened before that expense occurred. This means that if someone needed to make a non-qualified distribution, he or she can make it appear as if they were reimbursing themselves for a prior medical expense.

Although you will have to increase your deductible and maximum-out of pocket costs, utilizing a Health Savings Account could be one of the best decisions you will make if you want to plan for future health needs, even in retirement. And, don’t forget to keep your medical receipts…you may need them later!

© 2016 Castle Rock Investment Company. All rights reserved. Please share your insights with us at mack@castlerockinvesting.com or via phone at 303-719-7523

How to use Credit Cards the right way!

by

By Mack Bekeza

Credit Cards, just a piece of plastic that spirals people into debt right? Well… not always. In fact, many people who use credit cards tend to actually save money on certain items. That’s right! People can actually save money by utilizing a credit card! But how? Although there are plenty of ways one can utilize credit cards, here are the two most common ways people can save money with them:

  1. Utilizing a Cash-Back Card for everyday purchases and racking up rewards in a form of a statement credit or even a check.
  2. Frequent travelers using a Travel Rewards Card to lower their travel expenses substantially via points when staying at a hotel, renting a car, or even everyday purchases.

Although these perks are great for people trying to save money, it is crucial that you pay off these credit cards on-time and on a regular basis. It is also important to note that cards with very generous rewards are known for charging higher interests rates (even to those with excellent credit).

So what is the best way to manage your credit cards without paying interest?

  1. One rule of thumb is to check and pay your balance once a week or every other week depending on how frequently you use it. Not only will doing this increase your credit score, you also will not have to worry about paying your bank any extra money!
  2. Another tip is to only use a credit card if you can pay the balance instantly, meaning that if you couldn’t pay for an item with a debit card without going into overdraft, don’t use a credit card!
  3. Last but certainly not least, do not pressure yourself to spend more money just to get a sign-up bonus, in fact, do not change your budget what so ever! Only attempt to go for the sign-up bonus if your regular spending habits will allow you to do so.

Now that you have an idea on how to manage credit cards, how do you know which one is right for you? There are a few things to consider:

  1. If you haven’t done so already, check your credit score or even your full credit report(credit reports are only free to view once a year). Many Banks and Credit Card Companies only issue certain cards to people who meet specific criteria such as credit score and income thresholds.
  2. Think of how can you best utilize a credit card. For instance, do you travel a lot? Do you frequently go grocery shopping? Or do you just spend a lot of money in general? Either way, there is a high chance that there is a credit card that can help you save money on certain or even all frequent expenditures.
  3. Like previously mentioned, make sure that you find a credit card that you can get the sign-up bonus without having to alter your spending habits.

If you have any questions about certain credit cards or how to interpret your credit score, don’t hesitate to contact us at mack@castlerockinvesting.com

© 2016 Castle Rock Investment Company. All rights reserved. Please share your insights with us at mack@castlerockinvesting.com or via phone at 303-719-7523

 

The Importance of Saving

by

By Mack Bekeza

Saving, sounds hard, right? Well actually not as much as you think, but it does require will power and a positive attitude. In most cases, people begin to start saving but end up quitting because of a few things:

  1. They save too much and end up having to spend most of it to pay for life’s necessities.
  2. They save too little and think there is no point to continue saving at all.
  3. They save a fair amount of money but end seeing a big sale at their favorite stores and decide to blow it on clothes or other things.

So how can someone avoid those three things? It can be achieved by following a few steps:

  1. Develop a monthly budget for your bills and discretionary spending (budgeting tips can be found in our previous personal finance blog attached here).
  2. Think of a couple things that you can set a savings goal for. For instance, you could plan to start an emergency fund that can cover 3-6 months of expenses (Please take note that this should be done over a course of a couple years so don’t rush yourself on this).
  3. If you have not done so already, another goal you can start is creating a retirement savings goal. You know that 401(k) that your employer offers…take advantage of it! Not only will it possibly allow to exclude a portion of your income for tax purposes, it can be a big help to get you prepared for retirement.
  4. To fund these great savings goals, think of a suitable savings rate that can cover these goals. For instance, a rule of thumb is to be able to save 10%-15% of your income for an emergency fund and eventually contribute another 10% to your retirement goals. This might sound like a lot, but you do not have to automatically save this amount right away. These things take time to start building, so start with at least 5% for both and gradually increase the amount over time.
  5. Now that you have these in mind, how do you resist the temptation of using these savings for things you do not need? For starters, you can open your new savings account with an another bank so you really feel like you are putting money away and do not have instant access to it. However, for an emergency fund, it is important to have at least a check book to pay for emergencies (Money Market Savings Accounts allow you to have a check book and might even allow you to have a debit card). Check out banks that offer High Yield Money Market Accounts here.

Hopefully you will take this to heart and begin a plan to save! Although we will continue to write personal finance blogs over time, do not hesitate to contact us at mack@castlerockinvesting.com if you would like us to help with your goals!

© 2016 Castle Rock Investment Company. All rights reserved. Please share your insights with us at mack@castlerockinvesting.com or via phone at 303-719-7523