HSA Case Study

One of the most asked questions that we hear from clients is “how much should I save now for future medical expenses?” While the answer to this question varies based on a number of lifestyle factors, the method for saving money that is earmarked for future medical expenses usually includes contributing to an HSA. A Health Savings Account (HSA) is a very useful tool for putting aside money that is designated to covering future healthcare costs for yourself and your family. Essentially, an HSA is an account that you can contribute pre-tax dollars to for qualified medical expenses both now and in the future. These expenses can include prescriptions, doctor’s office visits, dental treatments, even surgical procedures, and more. In 2021, you can contribute $3,600 for yourself or $7,200 for your family. To be eligible to contribute, you need to be enrolled in a high-deductible health plan, not be covered by a spouse’s health plan, and not currently enrolled in Medicare. The real beauty of the HSA, is that your contributions can be invested in the stock market, just like an IRA or brokerage account. The HSA also has three major tax advantages over a traditional savings account.

  • Contributions to an HSA are tax-deductible.
  • Your invested dollars can grow tax-free, meaning no capital gains taxes on your profits and…
  • Withdrawn funds are income tax-free, so long as they are used for qualified medical expenses

After the age of 65, you can use your HSA money to supplement your retirement income. At this point, the HSA will act like an IRA in that you can withdraw the funds (even for non-medical expenses) without incurring any tax penalties. However, you will still need to pay income tax on the distribution, just like an IRA. We generally recommend keeping a small amount of money in an HSA to help alleviate any unexpected medical expenses. Many banks and online financial institutions allow you to setup an HSA. Give us a call if you would like to learn more about how an HSA can be beneficial to your overall financial plan.

 

 

 

The Pitti Group Wealth Management is not a legal or tax advisor. Be sure to consult your own tax advisor and investment professional before taking any action that may involve tax consequences.

Power of Attorney Case Study

As financial advisors, one of our main priorities is seeing that our clients have a sound estate planning strategy in place that makes sense for their family. A critical component of an effective strategy can be having a power of attorney named, in case you become incapacitated or incompetent. 

If you become mentally or physically compromised for a period of time, and do not have a power of attorney, no one will be able to manage your financial or legal affairs. We recently encountered a situation just like this with a client becoming ill and unable to make decisions for themselves. His significant other relied on him and a portion of his income to maintain their daily life. Luckily in this situation, the significant other was named as his legal power of attorney and was able to manage his affairs and pay the necessary bills on time. It could have been a very unfortunate and unpleasant experience for both of them if our client had never named a power of attorney. 

Establishing a power of attorney helps ensure that your loved one can handle your financial affairs for any length of time needed. If you need to update or create a power of attorney, please reach out to your attorney. You may also be able to create one online using a website like LegalZoom. We would be happy to discuss this further with you and refer you to an estate attorney if you don’t have one.

The Pitti Group Wealth Management is not a legal or tax advisor. Be sure to consult your own tax advisor and investment professional before taking any action that may involve tax consequences. This case study is hypothetical and for discussion purposes only. It is not intended to represent any specific return, yield or investment. Individual experiences referenced above may not reflect the future experience of any one client. The planning process discussed may not be suitable for your personal situation, even if it is similar to the example presented. Past performance is no guarantee of future results. Investing involves risk including the possible loss of principal.

Charitable Contributions Case Study

Colleen, who’s 73 years old and is accustomed to donating to her favorite charity – She would normally write a check for $20,000 a year to the charity.  We informed her she could take money directly from her IRA and give it to the charity from the IRA and it would qualify as satisfying her Required Minimum Distribution.   Instead of paying tax on $20,000, then writing a check to the charity which in her case was no longer tax deductible, she saved thousands of dollars in taxes on $20,000 and the charity still receives their money.   If you or someone you know is over the age of 70 ½ and charitably inclined, have them speak to us to see if they qualify to make a Qualified Charitable Distribution from their IRA.

 

 

 
The Pitti Group Wealth Management is not a legal or tax advisor. Be sure to consult your own tax advisor and investment professional before taking any action that may involve tax consequences. This case study is hypothetical and for discussion purposes only. It is not intended to represent any specific return, yield or investment. Individual experiences referenced above may not reflect the future experience of any one client. The planning process discussed may not be suitable for your personal situation, even if it is similar to the example presented. Past performance is no guarantee of future results. Investing involves risk including the possible loss of principal.

Rollover Case Study

One of the many pleasures of being a financial advisor is having the opportunity to assist our clients’ family members with their financial needs. We recently had a client mention to us that his son recently got a new job and wasn’t sure what to do with his old employer-sponsored retirement plan. Since our client’s son was out of state, we were able to connect virtually with him and thoroughly reviewed all of his options with him. We informed him that he essentially had 4 options to choose from. 

1. Roll over your assets into an Individual Retirement Account (IRA) 

2. Leave assets in your former QRP, if plan allows

3. Move assets to your new/existing Qualified Retirement Plan, if plan allows

4. Take a lump-sum distribution and pay the associated taxes.

Each of these options has advantages and disadvantages and the one that is best depends on your individual circumstances. You should consider features such as investment options, fees and expenses, and services offered.  Our team can help educate you regarding your choices so you can decide which one makes the most sense for your specific situation. Before you make a decision, read the information provided in this piece to become more informed and speak with your current retirement plan administrator, and tax professional before taking any action.
 
Ultimately, he decided it was advantageous to him to rollover the money into an IRA that we established.

If you, a friend, or a family member have recently changed jobs and are considering what to do with an old 401k or 403b plan, please feel free to contact us. We would be happy to offer some guidance!


These case studies are hypothetical and for discussion purposes only. They not intended to represent any specific return, yield or investment. Individual experiences referenced above may not reflect the future experience of any one client. The planning process discussed may not be suitable for your personal situation, even if it is similar to the example presented. Past performance is no guarantee of future results. Investing involves risk including the possible loss of principal.

Beneficiary Case Study

As financial advisors, we often assist our clients with managing the assets of loved ones that have recently passed away. We want to share a particular case with you that we believe highlights the importance of working with your advisor to ensure that your estate is in good order. Jill lost her brother a few months back unexpectedly. He was divorced and did not have any children. Jill was the sole inheritor of his assets, based on his will, and also the executor of his estate. Unfortunately, her brother never updated his beneficiaries on his investment accounts since his previous marriage had ended a few years back. He had a Roth IRA that was left to his ex-wife and a traditional IRA that did not have any beneficiaries named. In most cases, an IRA will pass to the estate if no beneficiaries are named and there is no spouse or children in the picture.

It is very important to remember that a beneficiary designation on an investment account like an IRA will ALWAYS trump what is written in a will. So even though Jill was the sole inheritor of her brother’s investment accounts according to his will, she was not named as the beneficiary on the accounts. Ultimately, his Roth IRA was transferred to his ex-wife and his IRA was liquidated and dispersed to his estate. Because Jill is the executor of the estate, she will eventually inherit the IRA monies once the estate has settled all of its debts. The unfortunate circumstance is however, that there will be a hefty income tax levied against the estate. This is because the estate income tax bracket is generally higher than an individual’s income tax bracket.  Had he updated his beneficiaries after his divorce, Jill would have inherited both accounts, tax-free, and without them going through the lengthy probate process.

We offer this case as an example of why it is so important to disclose everything to your advisor so that they can ensure that your assets pass to your loved ones as they’re intended to.

If you would like to learn more about estate planning essentials, feel free to contact us! 

 

 

 
The Pitti Group Wealth Management is not a legal or tax advisor. Be sure to consult your own tax advisor and investment professional before taking any action that may involve tax consequences. This case study is hypothetical and for discussion purposes only. It is not intended to represent any specific return, yield or investment. Individual experiences referenced above may not reflect the future experience of any one client. The planning process discussed may not be suitable for your personal situation, even if it is similar to the example presented. Past performance is no guarantee of future results. Investing involves risk including the possible loss of principal.