It’s September and in the benefits world, this is known as AE or Annual Enrollment. To roll with the theme, today, we will talk about health insurance and how to choose what’s right for you. If you have multiple plans to choose from, putting some thought into potentially changing your health insurance for 2018 is time well spent. When I got my job at Cal State, I was presented with 12 health plans to choose from. No one needs 12 options, I promise you. But I take these things seriously, so 10 hours later, I was still choosing my plan. How do you make your choice?
The major plans are HMOs, PPOs and HDHPs. How is that for acronyms? What is the difference? Pretty much what doctor you can see and how/how much you pay for it. Here is a great primer video to get you the basics if you are not 100% sure how the types of plans differ: https://www.youtube.com/watch?v=coSyGQI28eM
This is not easy stuff so here are my top 5 things to think about when you are selecting your employer health insurance for the upcoming year.Read More
Many of us are opposed to being in debt. I am no exception. Despite any logical argument I can frame for others, on some instinctual level, I do not like debt. And yet, I am going to try to convince you today to think twice before pre-paying your cheap debt.
Recently, I went through 2 months of training on debt. More than ever, I know that paying off cheap debt is a financial suicide. Let’s walk through some numbers and make it more scientific.
Here is the deal: you can pay off your mortgage, student loans, etc. and be free or you can continue making payments but be better off a few years down the road. Let me quantify this. Imagine you have a $400k mortgage with 20 years to go, a $20k car loan with 5 years to go and about $20k in student loans with 10 years to go…. your total monthly payment is about $3k. Let’s say your mortgage is at 4.25%, your car is at 1% and your student loans, at 4% (all realistic given our current interest rate environment). Let’s also imagine that you have an extra $200 per month to do whatever you want with. Here are 3 scenarios, see which one you prefer:Read More
A few of my friends who just had or are about to have babies are asking me about 529 plans and whether it is worth opening one. Like everything else in financial planning, it depends, but this would be a great time to discuss what 529 plans are and when it makes sense to open them.
What is this thing?
A 529 account is a savings account designed for higher education. That’s it. It’s that simple. You put some money in, the money grows, and your child uses it years down the road to go to college. You often hear the words “tax exempt” or “tax advantage” but make sure you are clear exactly what that really means. A 529 does not work like a 401(k). Your current taxes will NOT go down if you contribute to it. However, as long as you take the money for what the IRS defines as qualified education expenses, all the interest that has been accumulated will be tax free. This is a great advantage.
A 529 is a general blanket term that may refer to a savings plan or a prepaid tuition plan. Above, I am referring to the “savings” plan. Some states have a program where you prepay the tuition and your child can go to any in-state school for free. That is NOT what I am referring to in this post. Here is a good guide the state of FL put for us about the differences. If your state offers both, think about your baby and where he or she will be years down the road before making this choice: http://www.myfloridaprepaid.com/learning-center/savings-vs-prepaid-plans/
Is a 529 plan worth it?
So let’s get back to the 529 savings plan that lets you use the money anywhere you want. When young parents ask me what’s better, a 529 plan or a savings account, the answer will always depend on “what exactly do you need this money for?” Obviously no one knows; your baby was born 5 days ago but if you are the type of family where going to college is not a choice and the money will indeed be used for college, a 529 opened at birth wins. Why is that?Read More
It’s been a while and today I am back with a pretty technical topic but it is a topic that can make a big difference in your returns. The topic of the day is Tax Loss Harvesting. In its basic definition, this consists of selling an investment (like stocks/ETFs/ Mutual Funds) at a loss. Why? So you can use the loss to offset a gain in some other investment. While you sell you loser investment, you also buy something very similar. This way, you maintain your desired asset allocation while paying less in taxes. Remember that portfolio of 80% stock and 20% bonds we originally established? That’s your allocation.
By now, you are probably thinking: “Why in the world would you torture me with such a boring topic?” Here are a few reasons. #1: It is a really good way to pick up extra returns = make more money (read on for more on this one). #2: It is 2016 and there is no excuse not to do it. And #3: It will take 10 minutes to read this and you will learn something new that might help you make more money in the future. The younger you are when you start doing this and the higher your tax bracket is, the better your life will be as a result. Read More
Should you be Skeptical of Some (Many) Financial Advisers? Yes you Should, and Here is Why.
Sometimes, you get an article across your desk that is so biased, you can’t pretend like it doesn’t exist. I read such an article earlier this week and I feel I owe it to the uninformed public seeking genuine financial advice to make a few comments about it. So today’s lesson is about how to become an informed consumer of financial products without getting a distorted view. I don’t know the financial advisor spotlighted in the article, nor do I know the reporter who wrote the article. For that matter, I didn’t know where Suwanee, GA was until last Thursday (I did Google that one). This is certainly not a personal attack but when people put themselves out there, well… then I can use this as a teaching moment. This type of financial advice happens every day in Anytown, America. This could easily happen to you.
I am a financial adviser. I do understand the industry and its faults. Overall, it is a pretty misunderstood industry when it comes to consumers. What concerns me in this article though, is a number of statements that are not quite what they seem to be. Reading this article, I got the impression there are tons of insurance salesmen just waiting to take care of you for free. And that is simply, not true.
To understand where I’m coming from, please see the original article first: http://suwaneemagazine.com/financial-fitness/ and then read my comments. Here it goes; let this be an educational opportunity. Keep reading, the last point is by far the best and most misleading. Read More