You put 5950 per family into this account each year lower your health insurance

You put 5950 per family into this account each year

This preview shows page 228 - 230 out of 263 pages.

You put $5,950 per family into this account each year, lower your health insurance costs, and use the money to pay your much higher deductible. If you stay healthy, whatever you don’t use up each year you keep in the account and invest. An HSA gives you a chance to squirrel away a bunch more pretax dollars and incentivizes you to stay healthy and away from doctors. And you can invest it just like a self-directed IRA. One caveat: An HSA can only be established in combination with an HSA-eligible high-deductible health plan. If you have your own health insurance apart from your employer, you’re probably eligible. They are typically offered through financial institutions, including banks and credit unions. I set mine up with my local bank. If you don’t know whether you qualify, just call your bank and speak with someone who can help you make that determination. If you’re eligible, your bank’s rep can also help you set one up. BERKIES FOR EDUCATIONAL PURPOSES There are two of these available today: the 529 Plan and the Coverdell. The 529 Berky This is a savings plan for college education, but you can’t actually self- direct the money you put into it. These 529s are all sponsored by states, state agencies, or educational institutions, and every single one of them limits you to mutual funds or CDs or guaranteed-return investments. Every single plan. But the 529 does have a use. If you feel you must set
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aside dollars for educational expenses, then consider a 529 and crank up the rest of your Berky returns by making them self-directed. (By the way, if you haven’t looked at what a public college education will cost in about fifteen years, I hope you’re sitting down. Figure about $100,000. And if your kids can get there, the Ivy League will be about $100,000 each year .) Some of the benefits of a 529 include: You pay no taxes on the account’s earnings. You— not your kid—has control of or access to the account. If your kid doesn’t go to college, you can roll the account over to another family member. Anyone can contribute to the account. There are no income limitations that might make you ineligible for an account. Most states have no age limit for when the money has to be used. If your kid gets a scholarship, any unused money can be withdrawn without paying any penalty (just the tax). Because the 529 plan is a state-sponsored investment program, the state sets up the plan with an asset-management company of its choice, and you open the account with that asset-management company according to the state’s predetermined plan features. You won’t deal directly with the state, but rather with the asset-management/investment company. Bonus: Most states don’t require residency in order to participate, so shop around different states for the best deal. For more about these plans, go to the SEC’s site at sec.gov/investor/pubs/intro529.htm. From there, you’ll find links to sites that help you shop for different plans and find one right for you.
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