HSAs OFFER HEALTH INSURANCE FOR PEOPLE WHO FEEL THEY DON'T NEED IT

Health insurance premiums are expensive; and without a chronic medical condition that requires frequent doctor visits, or regular medication, you may feel that your premiums are being wasted. Still, you know it’s important to have Health insurance in the event you are involved in an accident or become ill unexpectedly.

What Are My Options?

If you are experiencing this dilemma, your solution may be to open a Health Savings Account (HSA). These interest-bearing tax-free accounts can be opened by anyone who purchases a qualifying high-deductible insurance policy with an annual individual deductible of at least $1,100. Such high-deductible policies cost significantly less than traditional health insurance.

Premium savings can be contributed to an HSA to help cover the health plan’s deductible, as well as any other eligible medical expenses (e.g. dental and vision expenses) that may not be covered by the plan.

Other Incentives?

Contributions to the HSA are tax deductible and withdrawals are tax-free provided the money is used for IRS approved medical expenses.

The list of approved expenses is quite broad. Money from your HSA can be used to cover your insurance deductible and co-insurance, as well as out-of-pocket medical expenses, such as doctor visits, vision and dental care, and even long-term care insurance premiums. Even over-the-counter medications are considered an approved expense.

For 2007, you may contribute a maximum of $2,850 ($5,650 if covering your family) to your HSA. That money is available whenever you need to cover expenses your insurance doesn’t pay. While the money remains in your account, it accrues interest that grows without taxation.

Complete Control?

There is no limit on the amount of unused money in the HSA that can be carried over from year to year, and an HSA is yours to keep when you change jobs. However, if your new job doesn’t offer a qualifying high deductible insurance policy, you will not be able to make additional contributions to your HSA. But, you can continue to use the money that's already in your account. That money is yours to keep regardless of your insurance coverage.

A Convincing Conclusion

In fact, money accumulated in an HSA that is not used for medical care can be withdrawn for other uses after the account holder turns 65 without penalty. Ordinary income taxes would be owed on nonqualified distributions. If the account holder withdraws funds for other purposes before 65, a 10% penalty and ordinary income taxes would apply.

EMPTY NESTERS SHOULDN'T SAY GOOD BYE TO THEIR LIFE INSURANCE

The kids are all grown, and finally it’s just the two of you. Your life is changing, and you are making decisions about what pieces of your former lifestyle should remain the same and what should be altered. There are some items you will decide to let go, but make sure your existing Life insurance coverage isn’t one of them.

Why do you need insurance at this time in your life you ask? Here are 10 reasons:

1. To accomplish financial goals - If your children are financially dependent on you because they are still in college, Life insurance can help fund their education even if you aren’t around. Keep in mind that Social Security benefit payments for a surviving spouse and children cease when students finish high school.
2. To care for dependents – Life insurance will continue to provide for your parents and disabled adult children if you die before they do.
3. To buffer you from the Social Security “blackout period” - Social Security pays no benefits from the time the youngest child leaves high school until the surviving spouse applies for retirement benefits. This period is called the “blackout period,” and it can cause extreme financial hardship to the surviving spouse if there is no income stream. Life insurance provides much needed income.
4. To supplement reduced Social Security survivor’s benefits - If a spouse begins receiving Social Security survivor benefits earlier than the full-benefit age, their monthly benefit will be permanently reduced. In addition, because their spouse died early, salary increases that might have increased Social Security benefits were not applied to their record. A Life insurance policy can help make up for these losses.
5. To supplement lost retirement savings – If a spouse died before retirement, they didn’t earn salary increases that might have increased employer pension benefits and/or IRA contributions. A Life insurance policy can help make up for these losses too.
6. To meet commitments that were made at a time when there were two incomes - Financial commitments like mortgages or loans are based on the combined income of a two-paycheck couple. If each spouse has Life insurance the survivor can continue to meet those commitments.
7. To pay for unexpected expenses - Funeral and burial costs, final medical expenses, estate administration and estate taxes aren’t always anticipated. Life insurance prepares you for these costs no matter when they happen.
8. To create a financial emergency fund - If a family doesn’t have an emergency fund equivalent to at least six months of income, they could be extremely vulnerable if one of the wage earners dies. This lack of funds could also impact the family’s ability to obtain credit. Life insurance can be the family’s emergency fund.
9. To supplement lost income if a spouse dies after beginning Social Security benefits – Each spouse receives a check for his or her Social Security retirement benefits. The earner with the larger pre-retirement income gets a benefit based on that income. The spouse with the smaller or no pre-retirement income gets a benefit based on their own earnings, or half of their spouse’s Social Security benefit, whichever is greater. When one spouse dies, the larger retirement benefit continues, but the smaller one stops. Life insurance can make up for this income loss.
10. To provide for charitable causes - If you want to ensure your favorite charities get money after your death, you can designate some or all of your Life insurance benefits to this purpose.