Saving on Benefits | Funding an HSA | 529 to Roth IRA

Save Money on Benefits: Open enrollment season is here. Many of you are in the process of ensuring you have the right health plan for your family over the next year. It’s a bit of a necessary evil with the current healthcare system. A recent survey revealed that most people spend less than 30 minutes reviewing the information. With increased costs and coverage changes, it might be helpful to consider a few things:

• Call all of your medical providers to ensure they are still in network.
• Assess your circumstances—planning a wedding? Having a baby? Turning 65? Anticipating surgery? These life events can be effectively planned for from a healthcare perspective.
• Make the most of supplementary benefits. You can often purchase dental or vision care at a discount.

You know your needs best. Ensure that your choice serves you, not adding a financial burden to your family budget.

Using your HSA: In the same vein, consider the benefits of funding an HSA if that option is available. It’s a financially advantageous way to access pre-tax money for medical expenses. You could, for example, pay for a medical expense out of pocket now, but if you keep the receipt, reimburse yourself during retirement. There’s no requirement to access the reimbursement to yourself immediately. You can invest the money in an HSA, so it is compounding interest, and then withdraw the money without restrictions or tax implications when needed (assuming it’s for qualified expenses).

If you have a high-deductible health plan with the option of an HSA and would like to think through how to approach monthly investments into your HSA, please get in touch with us so we can help. We would be eager to help you think through the best way to structure your approach to this option.

Converting a 529 to a Roth IRA: As of this year, parents can now convert any remaining funds in a 529 into a Roth IRA for their child. There are many benefits to funding a 529 beyond paying for college—the funds can be used for elementary or high school private school costs, it can be used to pay for off-campus housing (this requires attention to some details), or books and supplies for school. With the recent passage of the Secure Act 2.0, up to $35,000 of unused money in a 529 plan can now be converted to a Roth IRA for the beneficiary. In a recent article from Forbes magazine, they used this hypothetical example:

• I have a 5-year-old daughter. I save $500/month in a 529 plan that is fully invested in the S&P 500. I earn a 7% annualized return over 13 years. This means that $78,000 of contributions will grow to $120,844.
• Hypothetically, after college, she has a $35,000 balance remaining in the 529.
• Roth IRAs allow for a $6500 yearly contribution, so it takes six years to move the funds.
• Let’s say they are 29 years old when the money is moved. Look what happens:

Remember, then, that this money is tax-free! If you are interested in considering this option for a current beneficiary or setting up a 529 for your child, contact us today. We are happy to help you get it set up.

It’s Not Always as Bad as It Seems: We are big proponents of reminding you that it’s not always as bad as it seems. Last week’s Market Matters mentioned how the headlines can often give a grim picture, leaving out many of the positives. In that vein, enjoy this cartoon …