Before You Step on the Gas, Plan Your Travel Strategy

June 11, 2022

The pros and cons of planning a summer road trip this year have gotten more complicated as rising gas prices threaten to make a bigger dent in your travel budget.

The national average for gasoline could be close to $6 by later this summer according to Tom Kloza, global head of energy analysis for the OPIS, which tracks gas prices for AAA.

To cut your gas costs, consider using the following tips to get more miles per gallon as you embark on the summer excursion you’ve been dreaming about all year.

Slow down.

Each 5 mph you drive over 60 mph is like paying an additional $0.15 per gallon for gas. Aggressive driving—speeding, rapid acceleration, and braking—wastes gas. Eliminate these practices and you may save $.12-$.82 per gallon for gas.

Keep your car maintained and running smoothly.

Make sure you have your car maintained before you hit the road by getting a tune up and clean air filters, inflating your tires properly, and using the proper grade of oil. Don’t fill up with premium gas if your car doesn’t require it. Before you drive, make sure your tires aren’t under-inflated. If they are, you will likely burn more fuel per mile than when your tires are correctly inflated.

Use your engine wisely.

Avoid excessive idling and use cruise control and overdrive gears.

Be smart about driving.

Plan errands to do them together, rather than on separate trips; carpool, walk, or cycle; use public transportation; and telecommute. If you’re in the market for a new car, consider buying a more energy-efficient or a smaller car.

Keep your car light.

Don’t store unnecessary items that add weight to your car. When you place cargo on the car’s roof, avoid excess weight that will put a strain on your engine and affect your fuel mileage.

Use apps to find the cheapest gas prices near you.

Stay updated on gas prices by using apps and sites like Gasbuddy.com, Waze, , AAA, and GasGuru. They help check gas prices in your location, so you can find pumps where you can save the most money.

Pay cash or use a cash back credit card.

You may be able to save about $.10 per gallon if you pay with cash at the pump.  If you don’t want to deal with cash, consider opting for a cash back credit card for gas expenses.

Utilize fuel rewards programs.

Find convenience and grocery stores with gas fueling stations that offer rewards programs for a percentage off gas fill-ups based on total amounts you spend shopping in the stores.

Look forward to the future.

Although current fuel rates may take a big bite out of your travel budget this summer, trust—as in past years of 2008, 2012, and even the early 1980s—gas prices will eventually bounce back. Wisely use the gas-saving tips mentioned above to ease your way through the current high gas prices.

InsureYouKnow.org

When you travel this summer, keep records of your auto insurance, car maintenance, travel insurance, and rental car and hotel expenses at insureyouknow.org. You’ll be able to refer to these documents while you’re on the road and after you return home when you reflect on your wonderful summer vacation.

The Great Resignation Continues in 2022

January 29, 2022

“The Great Resignation” is a term coined in May 2021 by Anthony Klotz, Ph.D., an associate professor of management at Mays Business School at Texas A&M University who predicted the mass exodus of employees abandoning jobs during the pandemic.

In April, a month before Dr. Klotz made this prediction, a record 4 million people quit their jobs, many of them in low-paying, inflexible industries such as retail trade sectors and food services. He explained that during the pandemic, employees have been able to reflect about family time, remote work, commuting, passion projects, life and death, and what it all means which led workers to consider alternatives to their current positions.

Because the latest data suggests this trend, also called the “Big Quit,” will continue through 2022, employees, as well as employers, must prepare for changes in the workforce.

Employees

Before you submit your resignation, consider the following suggestions to guide your decision:

• Reassess your duties: Expanding your responsibilities within the company may offer the growth that you’re looking for without leaving your workplace. Promotion within your company may lead to a higher salary and additional benefits. On the other hand, you may feel overworked or are experiencing burnout, resulting in work-related stress, and seeking a less demanding opportunity may be a solution during this difficult time.

• Meet with your employer: If you prefer to work remotely, meet with your employer and plead your case to work all or part of your workweek away from the corporate office, especially if you have health and safety concerns, childcare issues, or COVID-related care responsibilities. Explain how important work/life flexibility is to you and ask if your employer is willing to consider your needs for your home life situation. Take this opportunity to ask if your salary, benefits, and health insurance could be improved to entice you to stay.

• Be flexible with your transition: If possible, notify your supervisor in person when you decide to resign and be flexible about the ending date in your position. Be professional in your exit interview, request a letter of recommendation for your files, find out when you’ll receive your last paycheck, and ask about the continuation of your benefits.

• Assess your financial situation: If you determine that you need to continue receiving a steady paycheck and insurance benefits, secure another position or outline a solid self-employment opportunity before you resign. If you are close to retirement age, figure out if you can delay collecting Social Security and retirement benefits so you can collect higher monthly payments in the future.

Employers

Employers who want to reduce staff turnover and retain experienced employers may benefit from the following tips adapted from the article, “How Employers Can Overcome The Great Resignation” from the Worth Media website.

• Be creative in putting together benefits packages that can support a diverse workforce with broad, varying needs.
• Remain flexible when employees choose their work locations.
• Keep an open line of communication with your employees.
• Emphasize the importance of employees’ mental and physical well-being.
• Prioritize pay equity and adopt a spirit of transparency.
• Remind your employees about your company’s mission, values, and vision.
• Treat employees who do leave with respect, a sense of professionalism, and kindness.

Employers’ main goal during this tumultuous time should be to remain calm, listen to employee feedback, and use it to make any necessary changes to their business model, benefits package, and salaries.

InsureYouKnow.org

Are you planning to join “The Great Resignation” in 2022?  If so, consider not only how you can improve your present work situation but also what the future may hold for your career choices, continuing education, home life, insurance coverage, and financial goals. As you put each of these options in place, keep records regarding your decisions at insureyouknow.org.

The Most Wonderful/Stressful Time of the Year

December 1, 2021

Welcome to what is referred to as both the “most wonderful” and the “most stressful time of the year.” During the second year of the COVID-19 pandemic, you may be experiencing stress and depression—unwanted emotions that can ruin your holidays and impact your physical and mental health.

Although you can’t control inflation, high gas prices, food and toy shortages, and shipping delays, you can be realistic, plan ahead, and seek support to overcome holiday stress and depression. You may even end up embracing the “most wonderful time of the year.”

Tips to Deal with Seasonal Pressures

Be realistic. COVID-19 cases are on the rise in some areas and even if you’ve been vaccinated, you may decide not to gather with friends and relatives in person. You can opt for a virtual celebration or increase efforts to share photos, texts, emails, phone calls, or videos with loved ones.

Avoid overspending, especially if you’re already feeling financial stress. Consider alternatives to expensive gifts by donating to charities in giftees’ names or by making and giving homemade presents.

Strive to decorate your home, create meals and desserts, and select gifts that will be appreciated not because they are “perfect” but because they are heartfelt and sincere.

Plan ahead. Compile lists of recipients and specific gift ideas; don’t go to browse in busy stores, hoping for inspiration. Save time and frustration caused by traffic and parking congestion by shopping online for items on your gift list. Schedule specific times to shop, bake, and attend social events. Plan menus and then create a detailed grocery list to prevent forgetting needed ingredients.

Acknowledge your feelings. Stress about gatherings with family and friends, or feeling grief about missing loved ones, may result in sadness and grief. Take time to acknowledge and express your feelings. You can’t force yourself to be happy just because it’s the holiday season. If you celebrate in person or in other ways as described above, set aside differences and controversial topics and concentrate on positive conversations.

Practice mindfulness by bringing your attention to the present moment and avoid getting stressed about past or future events.

Reach out. If you feel lonely or isolated, seek out community, religious or other social events, or communities. Many helpful organizations have websites, online support groups, social media sites, or virtual events that can offer support and companionship.

Volunteering your time and doing something to help others also are good ways to lift your spirits and broaden your friendships. Consider dropping off a meal and dessert at a friend’s home or to a community center that serves less fortunate individuals during the holidays.

Learn to say no. Set priorities based on preserving your well-being and don’t overextend yourself or you may wind up feeling resentful and overwhelmed. Learn to feel guilt-free when you decline invitations and recognize that you sometimes need to allow yourself to say no to demands on your time.

Maintain healthy habits. Get ample sleep, eat well—even at holiday events—and stay physically active in your daily routine. Maintaining healthy habits during the holiday season will be one of your best defenses against stress. When you feel a bout of stress coming on, have a healthy snack before a holiday party to curb your desire for high-calorie food and drink. Try deep-breathing exercises, meditation, or yoga. Avoid excessive tobacco, alcohol, and drug use.

Take a breather. Make time for yourself. Find an activity you enjoy like taking a walk, listening to calming music, or reading (or listening to) a book. Disconnect temporarily from social media and electronic devices.

Seek professional help if you need it. Even after following all the tips listed above, you may find yourself feeling continuously sad or anxious, beset by physical complaints and lack of sleep,  and unable to face daily chores. If these feelings last for a while, talk to your doctor or a mental health professional. If you rely on medications to maintain your physical and mental health, make sure your prescriptions are up-to-date and that you have an adequate supply when your doctor’s office or pharmacy may be closed or have reduced hours during the holidays.

Saving with a 529 College Plan

August 30, 2021

As college students return to campuses this fall, they (and in many cases, their parents) face costs that have tripled in 20 years, with an annual growth rate of 6.8 percent.

Melanie Hanson at educationdata.org reports that the average cost of college (considered to be any postsecondary educational institution that offers an undergraduate degree program) in the United States is $35,720 per student per year. Current college cost data also reveal:

• The average in-state student attending a public 4-year institution spends $25,615 for one academic year.
• The average cost of in-state tuition alone is $9,580; out-of-state tuition averages $27,437.
• The average traditional private university student spends a total of $53,949 per academic year, $37,200 of it on tuition and fees.
• Considering student loan interest and loss of income, the ultimate cost of a bachelor’s degree may exceed $400,000.

In the academic world, the cost of college is generally referred to as the cost of attendance (COA). Each college has its own COA consisting of five items:

• Tuition and fees
• Books and supplies
• Room and board
• Transportation
• Personal expenses

Twice per year, the federal government recalculates the COA for each college and then adjusts the figures for inflation to determine students’ financial needs when they apply for financial aid.

Planning in Advance

Advance planning for education costs is advisable to keep ahead of college inflation.

Regular investments add up over time. By investing even a small amount of money on a regular basis in a college fund, you have the potential to accumulate a significant amount if you start when your child (or grandchild) is young.

Once you have a sense of your college savings needs, make sure you are investing the money appropriately. Among several available college savings options described by Fidelity, a great place to start is to open and contribute to a 529 college savings plan account. It’s popular with parents and grandparents because there are few restrictions and the benefits are plentiful. You can potentially reduce your taxes and retain control over how and when you spend the money.

Education savings plans were first created in 1986, when the Michigan Education Trust established a prepaid tuition plan. More than a decade later, Section 529 was added to the Internal Revenue Code, authorizing tax-free status for qualified 529 tuition programs. Today there are more than 100 different 529 plans available to suit a variety of education savings needs.

To make sure you are on track with your savings goals, and to ensure you have an appropriate investment mix, revisit your plan at least annually. Over time, you will likely need to update the costs of schools you are considering, your financial aid situation, your child’s school preferences, school location, and your investment performance. When you’re ready to start paying for school, withdrawals are federal income tax-free when used for qualified education expenses.

Setting Up and Using a 529 Savings Account

• The requirements to open a 529 savings account are simple. You must be a U.S. resident, at least 18-years old, and have a Social Security or tax ID number.
• 529 plan savings can cover a range of educational expenses, in addition to college tuition. You can use up to $10,000 from a 529 account each year per beneficiary on elementary, middle, or high school tuition. At the post-secondary level, money saved in a 529 plan account can be used for a variety of higher-education-related expenses: tuition and fees, room and board, books and supplies, and computers and related equipment.
• Money saved in a 529 plan may have only a small impact on financial aid eligibility.
• You don’t have to be related to the beneficiary on the account to open a 529 account for them. Friends or family members can open a 529 college savings account regardless of their income or relationship to the student—and can even name themselves as the student beneficiary on the account. Anyone can contribute and you can encourage donations to a college savings account as a birthday or holiday gift.

Reaping Tax Benefits

A 529 savings plan works much like a Roth 401(k) or Roth IRA by investing your after-tax contributions in mutual funds, ETFs (exchange-traded funds), and other similar investments. Your investment grows on a tax-deferred basis and can be withdrawn tax-free if the money is used to pay for qualified higher education expenses. Contributions are not deductible from federal income taxes. 

You may also qualify for a state tax benefit, depending on where you live. More than 30 states offer state income tax deductions and state tax credits for 529 plan contributions. 

Choosing a 529 Plan 

Nearly every state has at least one 529 plan available, but you’re not limited to using your home state’s plan. Each 529 plan offers investment portfolios tailored to the account owner’s risk tolerance and time horizon. Your account may go up or down in value based on the performance of the investment option you select. It’s important to consider your investment objectives and compare your options before you invest. 

Withdrawing from a 529 Plan 

You can use your education savings to pay for college costs at any eligible institution, including more than 6,000 U.S. colleges and universities and more than 400 international schools. 

Once you’re ready to start taking withdrawals from a 529 plan, most plans allow you to distribute the payments directly to the account holder, the beneficiary, or the school. Read “How to Pay Your Tuition Bill With a 529 Plan” to learn more. 

Remember, you will need to check with your own plan to learn more about how to take distributions. Depending on your circumstances, you may need to report contributions to or withdrawals from your 529 plan on your annual tax returns.

Dealing with Leftover Funds

If your child doesn’t go to college or gets a scholarship, you won’t lose the college fund you have accumulated. Generally, you will pay income tax and a penalty on the earnings portion of a non-qualified withdrawal, but there are some exceptions. The penalty is waived if:

• The beneficiary receives a tax-free scholarship
• The beneficiary attends a U.S. Military Academy
• The beneficiary dies or becomes disabled

The earnings portion of the withdrawal will be subject to federal income tax, and sometimes state income tax.

If you have leftover money in your 529 plan and you want to avoid paying taxes and a penalty on your earnings, you have a few options, including:

• Change the beneficiary to another qualifying family member
• Hold the funds in the account in case the beneficiary wants to attend school later
• Make yourself the beneficiary and further your own education
• Roll over the funds to a 529 ABLE account, a savings account specifically for people living with disabilities
• Since January 1, 2018, parents also have the option to take up to $10,000 in tax-free 529 withdrawals for K-12 tuition
• Since January 1, 2019, qualified distributions from a 529 plan can repay up to $10,000 in student loans per borrower for both the beneficiary and the beneficiary’s siblings

You can withdraw leftover money in a 529 plan for any reason. However, the earnings portion of a non-qualified withdrawal will be subject to taxes and a penalty, unless you qualify for one of the exceptions listed above. If you are contemplating a non-qualified distribution, be aware of the rules and possible tactics for reducing taxes owed.

InsureYouKnow.org

If you’re interested in setting up a 529 college savings plan, do your homework on the benefits, qualified uses for account balances, and the low impact on financial aid. File your findings and, once you start receiving account statements, keep track of your college saving account as it prospers.

Retirees Face the Rising Cost of Living

August 14, 2021

Have you noticed this year that your grocery bill has been rising and the price of gas is higher each time you fill up at the pump? You also may have been shocked by sticker prices on new and used cars and trucks resulting from inflation in recent months.  

Consumer Price Index

On July 11, 2021, the Labor Department reported its consumer price index (CPI) rose 5.4 percent in July from a year earlier, in line with June’s figure and matching the largest jump since August 2008. White House officials are cautiously optimistic that the current increase in prices will be transitory, citing a continued drop in forward prices for lumber and other goods that experienced sharp increases because of supply chain bottlenecks. Steel capacity also had risen substantially over the past few months, they said.

The Federal Reserve has been keeping a close eye on inflation reports since it’s the central bank’s job to maximize employment and keep prices stable. Chairman Jerome Powell and other officials acknowledge the recent acceleration in prices but believe that the inflation is “transitory” and that prices won’t continue to increase at their current pace for too long.

As one of the most-cited inflation gauges, the CPI measures changes in how much American consumers pay for everyday goods and services including groceries, gasoline, clothes, restaurant meals, haircuts, concerts, and automobiles.

The CPI and other price measures have been on the rise in 2021 in large part because of a comeback in consumer spending and U.S. gross domestic product (GDP) as COVID restrictions eased.

Economic activity as measured by GDP rose at an annualized rate of 6.5 percent in the second quarter as Americans frequented restaurants, took summer vacations, and resumed other activities that COVID-19 had hindered.

Consumer Spending

Consumer spending, bolstered by the nationwide rollout of vaccines, jumped 11.8 percent during the three months ending June 30, the second-fastest rate since 1952.

At the same time, the pent-up demand for travel, retail, and restaurants has left many businesses scrambling to keep up and led to several setbacks on the supply side of the U.S. economy.

Employers who have struggled to find workers have hiked pay or offered signing bonuses to help fill the record 10.1 million job openings across the economy at the end of June. The leisure and hospitality sector, which includes restaurants, bars, and hotels, has one of the highest levels of job openings at more than 1.6 million.

But instead of absorbing higher labor and material costs, some businesses have begun to pass on the impact of higher wages to their consumers.

Inflation and Retirees

Higher prices take a significant toll on retirees. Social Security benefits rise only once a year. “Those with modest Social Security benefits are the ones who really have trouble,” reports Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League, a non-partisan advocacy group. “Other retirees have had to tap more of their savings than they had planned because the Social Security benefit didn’t keep up with 2021’s hot inflation,” she says.

Inflation could prompt largest Social Security cost-of-living adjustment in decades. Retirees could see a 6.1 percent  bump to their Social Security benefits in 2022. That would be the biggest increase since 1983, according to The Senior Citizens League, which calculated the figure.

The Social Security Administration typically announces the amount of the annual cost of living adjustment (COLA), if any, in October. The increase in benefits typically goes into effect in January.

You might not see all the increase in your benefit payment. If your Medicare Part B premiums are deducted from your Social Security (as is the case with 70 percent of Part B enrollees), a Medicare rate increase could offset all or part of the COLA.

The Social Security COLA for 2021 was 1.3 percent. For many retirees, that meant just $20 more per month. Over the years, the increases have led to a loss of buying power for seniors, according to research from The Senior Citizens League.

The amount your Social Security check will increase will be based on a combination of your underlying benefit and the Social Security COLA.  Assuming the Social Security COLA  is at the 6.1 percent level for 2022, and you are receiving the maximum Social Security benefit of $3,895, you would get an additional $237.60 per month. This would mean an increase of $2,851.14 per year. 

The jump in benefits will be a bit more modest for those receiving the average Social Security benefit in 2021. Social Security benefits averaged just $1,543 per month in 2021. Again, assuming a 6.1 percent Social Security COLA, you could see your retirement benefits increase by $94.12 per month. When living on a fixed income, an additional $1,129.48 can go a long way.

If you are still working, make sure you have other retirement income to help maintain your standard of living. Even at the maximum Social Security benefit, you will have a tough time keeping your standard of living on Social Security alone. Work with a trusted financial planner to help determine the optimal time to claim your Social Security  benefits and to set up a monthly payment schedule.

Currently, 69 million Americans are collecting Social Security benefits. So, a significant increase in the COLA to Social Security will be significant for the budgets of many retirees. Before the announcement is made in October, the Today show offers hints to help you save money at the grocery store, including keeping track of your grocery spending, taking inventory of what you already have and using it, and meal planning to reduce food waste and save on your food bill.

Smart shoppers will also watch for sales, comparison shop, and consider buying useful, non-perishable items in bulk and even making use of an extra freezer whenever possible. When it comes to saving money, cheap and healthy can go hand in hand.

InsureYouKnow.org

If you currently collect Social Security benefits or plan to in 2022, you can track at insureyouknow.org your monthly spending patterns, file copies of your Social Security and Medicare statements, as well as savings accounts you may have set up for vacations, rainy days, or emergency contingency plans.

The Call to Return to the Office

June 28, 2021

Has your employer notified you that the time has come for you to return to your office? Are you ready, hesitant, or determined to seek an alternative option to keep you at home, or at least closer to home if you also would face the return of a long daily commute?

Employees’ Reactions

With the coronavirus pandemic receding for everyone who has received the vaccine, some employers are pushing employees to get back to work in office buildings. But some people have moved during the pandemic; others have concerns about the virus and vaccine-hesitant colleagues; and working parents would have to quickly find childcare options for youngsters out of school for the summer.

According to Bloomberg News, a May survey by Morning Consult of 1,000 U.S. adults showed that 39 percent would consider quitting if their employers aren’t flexible about remote work. Some workers are leaving for new jobs, with better pay or remote-friendly working conditions. Others have decided to start their own businesses rather than collect a steady paycheck. Still others are quitting with no firm plans, confident they can get a better deal elsewhere as the economy rebounds from the pandemic recession. Some people are seeking happiness and are rethinking what work means to them, how they are valued, and how they spend and balance their time at work and home.

Increase in Resignations

All these factors are prompting a dramatic increase in resignations—a record 4 million people quit their jobs in April alone, according to the U.S. Bureau of Labor Statistics. More than 740,000 people who quit in April worked in the leisure and hospitality industry, which includes jobs in hotels, bars and restaurants, theme parks, and other entertainment venues. Many workers in these fields are burnt out after enduring conditions during the pandemic that may have put their personal health at risk.

At the same time, white-collar workers are feeling empowered too; resignations also are up in professional services. In March, about a quarter of all workers told Morning Consult they were considering switching employers.

Employers’ Reactions

Faced with mass resignations, employers are scrambling to keep their talented workforce on board. Some employers have announced plans to raise pay, be flexible, and make employees’ well-being and safety top priorities when they return to their companies’ offices. A compromise of allowing employees to choose to work remotely part of their workweek is being considered by concerned employers. With work teams composed of both in-office and remote employees, businesses will need to offer collaboration tools and innovative techniques so employees can continue to work together effectively, regardless of location. No one solution will work for every company, but a reintroduction to office life without a well-thought-out plan can be risky and dangerous.

Post-COVID-19 Working Conditions

Although some companies have decided to remain fully remote and have gone as far as selling their office buildings or not renewing lease agreements, other businesses want their entire staff to return to the office. Most organizations will be somewhere between a fully remote and a fully in-place workforce. Global Workplace Analytics, a research firm that specializes in remote work trends, predicts that 25–30 percent of U.S. employees will work from home multiple days per week by the end of 2021, up from 3.6 percent prior to the COVID-19 pandemic.

Hybrid Work Model

A hybrid work model is made up of both remote and in-office workers and gives employees the ability to choose how, where, and when they perform their job duties. This often includes office spaces designed with flexible work arrangements where employees come and go from the office based on preference and as project work dictates.

Several large enterprise companies have formally announced new policies designed to embrace a hybrid work model that gives employees the option to voluntarily return to the office or continue to work remotely for an indefinite period.

Returning to work after the COVID-19 pandemic will look different for every organization and will require a solution that works best for the safety and welfare of a specific group of employees.

Lifesize.com offers 10 Tips for Companies Returning to Work after COVID-19 under the following bullet points.

·      Embrace a hybrid work model

·      Implement a rotational work schedule

·      Take a phased approach

·      Restructure your offices

·      Create a sanitary workplace

·      Encourage good hygiene and self-isolation

·      Have a contingency plan

·      Get employee feedback

·      Review your communication tools

·      Maintain team-building efforts

Following the COVID-19 pandemic, employees and employers will face monumental work-related decisions that will affect the future of a productive workforce returning to physical offices, choosing a hybrid model of in-place and remote work, or abandoning the traditional workplace to seek alternative career options not bound to pre-pandemic conditions.

InsureYouKnow.org

If you are armed with a new contract from your employer that lists enhanced perks, including health and dental insurance benefits, an amended retirement package, remote work options, or a guaranteed raise, keep these records on file at InsureYouKnow.org. Also keep online your up-to-date resume if you are actively looking for a new work arrangement that meets your definition of a satisfying career choice.

Save with a Health Savings Account

April 27, 2021

A Health Savings Account (HSA) is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in an HSA to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs.

An HSA may receive contributions from an eligible individual or any other person, including an employer or a family member, on behalf of an eligible individual. Contributions, other than employer contributions, are deductible on the eligible individual’s tax return whether or not the individual itemizes deductions. Employer contributions aren’t included in taxable income and distributions from an HSA that are used to pay qualified medical expenses aren’t taxed.

High Deductible Health Plan

One way to manage your health care expenses is by enrolling in a High Deductible Health Plan (HDHP) in combination with opening an HSA. While you can use the funds in an HSA at any time to pay for qualified medical expenses, you may contribute to an HSA only if you have an HDHP—generally a health plan that only covers preventive services before the deductible. For plan year 2021, the minimum deductible is $1,400 for an individual and $2,800 for a family. (The term “minimum deductible” refers to the amount you pay for health care items and services before your plan starts to pay.) Maximum out-of-pocket costs (the most you’d have to pay if you need more health care items and services) are $7,000 for an individual and $14,000 for a family.

Contribution Limits in 2021

For calendar year 2021, the annual limitation on deductions for an individual with self-only coverage under an HDHP is $3,600. The annual limitation on deductions for an individual with family coverage under an HDHP is $7,200. The IRS announces annually the HSA contribution limit that applies each calendar year. You can review IRS Publication 969 each year to determine the current limit. 

HSA funds roll over year to year if you don’t spend them. An HSA may earn interest or other earnings, which are not taxable.

Some health insurance companies offer HSAs for their HDHPs. Check with your company to see if you are eligible. You also can open an HSA through some banks and other financial institutions. If you are interested in enrolling for healthcare coverage through the U.S. Department of Health and Human Services’ Health Insurance Marketplace®, you can check to see if specific plans are “HSA-eligible.”

It’s also important to note that there is an aggregate limit that applies to both your own contributions as well as any money your employer puts into your account. This is different from 401(k) rules, where an employer’s matching funds do not affect your ability to contribute to your account. If your employer puts $2,000 into your HSA and you have self-only coverage, you would be allowed to contribute only $1,600 before reaching the 2021 contribution limit. 

Catch-up Contributions

HSA account holders who are 55 and older are entitled to make an additional catch-up contribution valued at $1,000 on top of contribution caps. Because of the HSA catch-up contribution rules, in 2021 the self-only coverage limit is $4,600 and the family coverage limit is $8,200  

Catch-up contributions are intended to help older Americans who may incur outsized medical expenses, or who may not have saved enough for a secure retirement and want to boost their contributions to tax-advantaged accounts as they near the end of their careers. 

Older Americans may want to make catch-up contributions because healthcare costs tend to rise with age and because an HSA can be a valuable type of retirement savings account. HSAs work as a retirement savings plan because money can be withdrawn penalty-free for any purpose, not just medical expenses, after age 65. Once an HSA account holder turns 65, distributions not used for medical costs are taxed at their ordinary income tax rate, the same as distributions from a 401(k) or traditional IRA.                                  

HSA Funds and Taxes

Because HSA contributions can be made with pre-tax funds, you can deduct the amount you’ve contributed from your taxable income in the year you make the contribution.

The fact that HSA contributions are tax deductible means any money you contribute reduces the income you’re taxed on, which saves you money on the taxes you pay to the IRS. It also means your take-home pay declines by a smaller amount than what you actually contributed. 

For example, if you have $50,000 in taxable income and make a $3,600 deductible contribution to an HSA, you will be taxed on only $46,400 in income due to your contribution.

The specific amount you save due to your HSA contribution will depend both on how large your contribution is and on your tax rate. Those who are taxed at a higher rate and those who make larger contributions will realize more savings. 

Contributions are tax-deductible up to HSA annual limits, and money can be withdrawn tax-free to cover qualifying medical expenses.

Money in an HSA can be invested and can be withdrawn for any purpose after age 65 without penalty, although you’ll be taxed at your ordinary income tax rate for distributions not used for covered medical costs.

HSA Distributions

The IRS provides a comprehensive list of medical and dental expenses that qualify in Publication 502 and include the following categories:

• Prescription medications
• Nursing services
• Long-term care services
• Dental care
• Eye care, including eye exams, glasses, and contact lenses
• Psychiatric care
• Surgical expenses
• Fertility treatments
• Chiropractic care
• Medical equipment
• Hearing aids

Under the CARES Act, which passed in March 2020, you can now use your HSA funds to pay for a variety of over-the-counter (OTC) items without a prescription. The rules are retroactive to Jan. 1, 2020, so if you purchased these items with non-HSA funds, you can still submit your receipts for reimbursement. 

Telemedicine or remote healthcare can be covered by HSA plans at no charge, even if you haven’t met your deductible, through the end of 2021.

The following items also have been made HSA-eligible by the 2020 CARES Act:

• Acid reducers
• Acne treatment
• Allergy and sinus medications
• Anti-allergy medications
• Breathing strips
• Cough, cold, and flu medications
• Eye drops
• Feminine hygiene products
• Heartburn medications
• Insect repellant and anti-itch creams
• Laxatives
• Lip treatments for cold and canker sores
• Medicated shampoos and soaps
• Nasal sprays
• Pain relievers
• Skin creams and ointments
• Sleep aids
• Sunscreen and OTC remedies to treat the effects of sun exposure

The Bottom Line on HSAs

HSAs give you the opportunity to set aside money so you can pay for medical care with pre-tax dollars. But because you can invest and grow these funds as well as hold them in cash, HSAs offer much more than just a way to save on medical care. If used as a long-term investment vehicle, your HSA account could help you save on healthcare costs in retirement while reducing your tax bill in the meantime.

InsureYouKnow.org

During each calendar year, you can keep track of all your HSA contributions, expenses, and tax-accounting details at insureyouknow.org.

 

Before You Turn the Key to Your New Home

March 15, 2021

Are you in the market for a new home?

Before buying a home, you’ll need a down payment, the closing costs, and, if you are getting a loan from a mortgage lender, proof of homeowners insurance to protect the mortgage lender’s investment to cover the costs to repair or rebuild your home if it is damaged or destroyed by a fire, lightning, a tornado, theft, vandalism, or some other covered event.

When shopping for a homeowners policy, you are encouraged to get quotations from multiple insurance companies, including your current insurer from whom you may get a better deal. You should consider coverage for your house, your possessions, additional living expenses if you’re displaced, and legal concerns if a visitor is injured at your home. In this last scenario, you may be held responsible for related medical bills, legal costs, and potential court awards up to the maximum amount determined by your homeowners insurance policy.

Keep in mind, a typical homeowners policy does not include coverage for earthquakes or floods. Depending on the location of your home, your lender may require you to add riders for additional insurance coverage for natural disasters. If you have valuable possessions, including expensive jewelry, camera equipment, or a fine art collection that exceed the dollar limits of your homeowners policy, you may need to purchase extra coverage known as a Personal Articles Floater (PAF) for those items.

Provisions of a Homeowners Policy

Your homeowners insurance policy will have the following standard elements that define the costs the insurer will cover.

·      Damage to the Interior or Exterior of Your House

In the event of damage due to fire, hurricanes, lightning, vandalism, or other covered disasters, your insurer will compensate you so your house can be repaired or even completely rebuilt. As indicated above, destruction from floods or earthquakes, as well as poor home maintenance, are generally not covered and you may need separate riders if you want that type of protection. Freestanding garages, sheds or other structures on your property also may need to be covered separately using the same guidelines as for the main house. 

Clothing, furniture, appliances, and most of the other contents of your home are covered if they’re destroyed in an insured disaster.

·      Personal Liability for Damage or Injuries

Liability coverage protects you from lawsuits filed by others, including injuries experienced by visitors or caused by your pets. For example, if your dog attacks someone on or off your property, your insurer will cover medical expenses.                                                                                                   

·      Hotel or House Rental If Your Home Is Being Rebuilt or Repaired

If you need to vacate your home damaged by a covered event, a provision known as additional living expenses, will reimburse you for the rent, hotel room, restaurant meals, and other incidental costs you incur while waiting for your home to be repaired. Depending on the fine print of your policy, your expenses will be set by strict daily and total limits that you can expand if you’re willing to pay more in coverage. 

Different Types of Homeowners Insurance Coverage

There are essentially three levels of coverage.

·      Actual Cash Value

Actual cash value covers the cost of the house plus the value of your belongings after deducting depreciation (i.e., how much the items are currently worth, not how much you paid for them).

·      Replacement Cost

Replacement value policies cover the actual cash value of your home and possessions without the deduction for depreciation, so you would be able to repair or rebuild your home up to the original value.

·      Guaranteed (or extended) replacement cost/value

The most comprehensive, this inflation-buffer policy pays for whatever it costs to repair or rebuild your home—even if it’s more than your policy limit.

Comparison of Home Insurance Companies

When looking for an insurance carrier, consider the following tips.

·      Compare Statewide Costs and Insurers

When it comes to insurance, you want to make sure you are going with a provider that is legitimate and creditworthy. Your first step should be to visit your state’s Department of Insurance website to learn the rating for each home insurance company licensed to conduct business in your state, as well as any consumer complaints lodged against the insurance company. The site also should provide a typical average cost of home insurance in different counties and cities.

·      Review Each Company

Investigate home insurance companies you’re considering via their scores on the websites of the top credit agencies (such as A.M. Best, Moody’s, J.D. Power, Standard & Poor’s) and those of the National Association of Insurance Commissioners and Weiss Research. These sites track consumer complaints against the companies as well as general customer feedback, the processing of claims, and other data. In some instances, these websites also rate a home insurance company’s financial health to determine whether the company is able to pay out claims.

·      Look at Claims Response Data

Following a large loss, the burden of paying out-of-pocket to repair your home and waiting for reimbursement from your insurer could place you in a difficult financial position. A number of insurers are outsourcing core functions, including the handling of claims.

Before purchasing a policy, find out whether licensed adjusters or third-party call centers will be receiving and handling your claims calls. Look for a carrier with a proven track record of fair, timely settlements and make sure to understand your insurer’s stance on holdback provisions, which is when an insurance company holds back a portion of their payment until a homeowner can prove that they have started repairs.

·      Check on Current Policyholder Satisfaction

Ask any potential insurance agent for the company’s retention ratebased on the percentage of policyholders who renew each year. Many companies report retention rates between 80 percent and 90 percent. You can also find satisfaction information in annual reports, online reviews, and recommendations from friends and relatives you trust.

·      Get Multiple Quotations

Request quotations from multiple insurance companies, including any insurer with whom you already do business for insurance on your automobile, boat, or other property. As a loyal customer, you may be offered a better rate.

• Ask about Discounts for Seniors

Some companies provide a special discount for seniors or for people who work from home. The rationale is both these groups tend to be on-premises more often—leaving their houses less prone to burglary.

InsureYouKnow.org

After you’ve selected your new home, submitted your down payment and closing costs, and arranged for homeowners insurance, keep a record of all these transactions at InsureYouKnow.org. You’ll also be able to keep annual records of your property tax fees, homeowners insurance premiums, any claims you file, and corresponding payments to cover damages or thefts of your property.

The Long and Short of Disability Insurance

March 1, 2021

You may have never felt you needed to consider a disability insurance policy because you are young(ish), healthy, and don’t work in a business that exposes you to risky situations. Disability insurance is designed to cover a portion of your income if something happens to you like an injury or illness and you can’t work. Beginning in 2020, adverse effects of COVID-19 have been added to physical injuries, heart attacks, and cancer as major reasons to file claims for disability insurance.

COVID-19 symptoms can linger for months while the virus damages the lungs, heart, and brain, which increases the risk of long-term health problems. People who continue to experience symptoms after their initial recovery are described as “long haulers” and the condition has been called “post-COVID-19 syndrome” or “long COVID-19.”

Older people and people with many serious medical conditions are the most likely to experience lingering COVID-19 symptoms, but even young, otherwise healthy people can feel unwell for weeks to months after infection.

COVID-19 can make blood cells more likely to clump and form clots. Large clots can cause heart attacks and strokes, much of the heart damage caused by COVID-19 is believed to stem from very small clots that block tiny blood vessels in the heart muscle. Other parts of the body affected by blood clots include the lungs, legs, liver, and kidneys. COVID-19 also can weaken blood vessels and cause them to leak, which contributes to potentially long-lasting problems with the liver and kidneys.

People who have severe symptoms of COVID-19 often have to be treated in a hospital’s intensive care unit, with mechanical assistance such as ventilators to breathe. Simply surviving this experience can make a person more likely to later develop post-traumatic stress syndrome, depression, and anxiety.

Much is still unknown about how COVID-19 will affect people over time. Researchers recommend that doctors closely monitor people who have had COVID-19 to see how their organs are functioning after initial recovery.

Many large medical centers are opening specialized clinics to provide care for people who have persistent symptoms or related illnesses after they recover from COVID-19. Most people who have COVID-19 recover quickly. But the potentially long-lasting problems from COVID-19 make it even more important to reduce the spread of the disease by getting vaccinated, wearing masks, avoiding crowds, and frequently washing your hands.

Types of Disability Insurance

If you anticipate a need for disability insurance coverage or want to provide protection just in case an unforeseen injury or illness occurs, consider the two types of disability insurance: short term and long term. Both of them are designed to replace part of your regular income if you are unable to work. Even though they basically provide the same benefits, the following are differences and similarities for you to review.

Short-Term Disability Insurance (STDI)

• How much does it cover? About 60 to 70 percent of your salary.
• How long does it last? Usually 3 to 6 months, depending on the policy’s fine print.
• How much does it cost? About 1 to 3 percent of your annual income.
• How soon until you would receive your first payout? Around two weeks after your healthcare provider confirms your disability.
• Why would you get it? If your employer offers it at no cost to you.

Long-Term Disability Insurance (LTDI)

• How much does it cover? About 40 to 70 percent of your salary.
• How long does it last? Five years or longer if your disability continues.
• How much does it cost? About 1 to 3 percent of your annual income.
• How soon until you would receive your first payout? Usually around 3 to 6 months after your healthcare provider confirms your disability.
• Why would you get it? If you and dependents rely on your income and you don’t have sufficient savings to replace your regular salary long term.

You may be fortunate to have an employer who offers disability income protection insurance. If not, you can elect it during open enrollment or you may want to choose additional disability insurance to supplement what your employer provides. Ideally, you would have a three-month cash reserve to cover you before your payments go into effect. If not, the short-term disability protection, which typically starts after 14 days, would pay until the long-term disability is in place. It is important to understand how your policy defines disability which may not match your definition or need. Usually, workplace policies have a narrower definition of disability than private policies do. Depending upon your occupation, through a private policy you may be able to elect more favorable terms. Your financial advisor or life insurance agent can help you to find a policy that’s right for you.

In the United States, individuals can obtain disability insurance from the government through the Social Security Administration (SSA). To qualify for government-sponsored disability insurance, an applicant must prove that his disability is so severe that it prevents him from engaging in any type of meaningful work at all. SSA also requires applicants to demonstrate that their disability is expected to last for at least 12 months, or that it is expected to result in death.

You may find it helpful to consult an attorney when applying for a claim, regardless of your diagnosis. Qualifying for Social Security disability benefits is determined by your medical eligibility and how severely your condition affects your ability to work—an attorney can help explain the process and represent you if your case goes to court.

By contrast, some private plans only require the applicant to demonstrate that he can no longer continue in the same line of work in which he was previously engaged. If you take out your own policy, it will stay with you whenever you change jobs. But it’s cheaper if you can buy it through your employer that may offer it when you come on board, or you can talk to your HR staff about setting it up later.

STDI replaces a portion of your paycheck for a short period of time—three to six months. Most people get STDI through their employer. You can get an individual policy through some private insurers, but these plans are usually expensive. An alternative to an STDI policy is to save 3 to 6 months of expenses in an emergency fund that you can draw upon if you get sick or injured and have to take time off work for a few months.

Long-term disability insurance (LTDI) provides coverage if you’re out of work for a longer period of time—years or even decades. It, too, is sometimes offered by employers, but even if the benefit is provided, it might not be adequate. Employees often take out individual or a supplemental LTDI policy if the benefit isn’t provided by employers.

When applying for either an STDI or an LTDI policy, make sure you find out answers to the following questions from your insurer:

• What is covered under my policy?
• Does my disability qualify me for coverage?
• When and how do I make a claim?
• What do I do if a claim is denied?

Limits of Disability Insurance

Disability insurance is only designed to replace a portion of your income—it doesn’t cover extra expenses like your medical bills and long-term care costs.

According to Mason Finance, “Most disability policies come with several built-in exclusions in order to protect the insurer from claims submitted as a result of disabilities sustained from what it considers to be ‘high-risk’ activities, such as skydiving, mountain climbing, flying in experimental aircraft, or other such activities. Your insurer may also exclude any preexisting conditions that you have when you apply for coverage.”

While pregnancy isn’t usually covered by long-term policies, complications that extend beyond pregnancy, for example, if your doctor orders you to refrain from working to recuperate from a C-section, you might qualify for benefits—but only if you had a long-term policy in place before you got pregnant. 

Short-term policies do cover birth as a disability, but you might be waiting a long six-to-eight weeks for your first payout. 

InsureYouKnow.org

If you decide to apply for disability insurance, you can track your policy, payments, and any claims you submit at InsureYouKnow.org.

Driving (or Not) with Auto Insurance

February 15, 2021

Although you may not be driving as much during the COVID-19 pandemic as you did in previous years, you still need to have auto insurance if you own a vehicle. The following tips may help you establish or review your auto insurance policy as you dream about taking road trips while your motionless car is parked in your driveway.

Visit Your Auto Insurer Online

Before the pandemic, you may have felt comfortable visiting your auto insurer’s office to apply for or review your auto insurance policy, or to file a claim for a car accident, vandalism, car theft, hail, fire, floods, falling objects, and collisions with animals. During the COVID-19 pandemic, however, claims are processed virtually. You can use your insurer’s mobile app or website and go through the entire claims process from the comfort of your own home.

In the event of an accident, you may be able to upload photos of your car’s damage that your insurer can use to estimate a repair and then send you a payment quickly.

Get Insurance Before You Buy a Car

Shop for car insurance before you buy a car so you can drive your new car off the dealer’s lot. There are four basic kinds of car insurance coverage: property damage liability, bodily injury liability, collision, and comprehensive. Review each one of these types of coverages carefully and decide which ones fit your needs. You might also want to consider getting protection in the event of an accident caused by an uninsured or underinsured driver.

You’re going to need proof of insurance when you buy a car before you can take it home with you. Follow these steps to get insurance:

• Have a make, model, and year in mind. In the process of car shopping, you’ve most likely identified the types of cars you’re interested in buying. An insurance agent can give you quotations for a few models, so you can budget accordingly.
• Compare quotations from multiple car insurance companies. An independent insurance agent or online car insurance comparison site is an efficient way to price shop. Rates vary considerably among insurers, so you will want more than one or two quotations.
• Understand what coverage types you’ll need. Most states require you to carry car liability insurance. Also, if you’re taking out a car loan or lease, your lender or leasing agent will most likely require collision and comprehensive insurance.
• Ask your insurance agent to set up a policy. If you have the car picked out and know the vehicle identification number (VIN), you can have your policy ready to go before you arrive at the dealership. If you don’t have the VIN yet, ask if the agent can set up a policy with the information you have, like the drivers in your household and the address where you’ll keep the vehicle. Once you decide on the car, call the agent with the VIN to complete the purchase of the car insurance policy.
• Ask about bundling. Some insurance companies offer discounts to protect all your property with one insurer. Multiple-policy discounts can apply to combinations of home, auto, and life, and even motorcycle insurance.

Look into Pay-Per-Mile Insurance

If the pandemic has drastically altered your driving behavior since you aren’t commuting to work or going on road trips, you might want to look into an alternative car insurance model like pay-per-mile insurance.

In this plan, you’ll get charged a base rate per month plus a per-mile rate. Your monthly bill will depend on how much you drive. For example, if you drive 600 miles in a month at a $29 base rate and a $0.05 per-mile rate, your bill for that month would be $59. But, if you do return to commuting to your office you could end up paying more per month than with a traditional car insurance policy.

Reconsider Dropping Optional Coverage

If you have an older car and you’re considering dropping collision and comprehensive insurance to save on your insurance policy, Forbes Advisor recommends that you reconsider. Dropping coverage could leave you with a significant coverage gap. But you don’t have to drop both. It may be better financially to drop collision insurance but keep comprehensive insurance, which pays for repairs, such as ones caused by hail or falling tree branches that don’t involve your own driving.

Check on Auto Policy for Delivery Job

If you’ve taken on a delivery job and use your car for deliveries from a restaurant, grocery store, or other business, check with your car insurer to see if you need a commercial auto policy. If you’re involved in an accident while working, your personal auto policy may not cover your claim and you could be held responsible for repair bills and medical expenses.

Cover Your Teenage Driver

If you have a teen who’s driving, you’re going to pay a premium rate for his car insurance. Adding an inexperienced teen driver to your insurance will add an average of about $1,700 annually to your car insurance bill, based on Forbes Advisor’s research.

But there are ways to reduce anxiety about teen driving. By being a good driver role model, you can spend time driving with your teen and instill safe driving habits, including not using a phone while driving. If your teenager keeps accidents and violations off his driving record, the result will be substantially cheaper rates.

Protect Senior Driver’s Rates

If you are a senior driver with a perfect driving record, with no accidents or claims, you might wonder why your car insurance rates have increased. You might be in excellent health for someone your age and you might feel that your insurer is discriminating based on how old you are. However, insurance companies are legally allowed to charge any premium they want based on your driving record or age. Even if your reflexes are sharper than many other drivers of your age or drivers who are younger, your insurer will place you in the senior driver’s category along with other senior drivers whose reflexes are not as sharp as yours.

The following methods can help senior drivers save money on car insurance:

• Change your driving status. If you are retired, then changing your driving status to pleasure or leisure can help you save money. This status covers all of your daily routines that are non-work related. Drivers who are placed in this category will be seen as a lower-risk by their insurers and they will pay less on their insurance rates.
• Ask for a senior discount. Many insurance companies offer a discount to seniors who take a defensive driving course. These courses are not expensive and you can can stream them online at home. They can help you refresh your driving skills and knowledge and teach you how age-related diseases and medication can affect driving.
• Drop a driver from your policy. There are some states where not all the licensed drivers from a household are required to have car insurance. In order to reduce your policy rates, you can exclude anyone from your policy who no longer drives. Usually, those persons are older spouses or parents. Also, you can change the primary driver from your policy to someone from the household who is younger, but only if that person is the one who is driving the most.
• Improve your car’s safety. Another method used by drivers of any age to save on car insurance is to install safety devices on the vehicle. You can lower your premiums if you install safety systems like rearview cameras, lane drift, parking assist, and collision warning systems.
• Shop around. Maybe the best option you can have to lower your insurance rates is to shop around and compare different car insurance quotations. Insurance companies have different premiums for different groups of people. Compare insurance quotations to find an insurance rate and coverage to your advantage.

InsureYouKnow.org

At InsureYouKnow.org, file copies of your proof of insurance, policy documents, and any car insurance claims or correspondence you file with your auto insurance carrier.