Tag Archive for: healthcare

Financial Planning for Open Enrollment: A Guide to Making Smart Choices

/in , , /by

Open enrollment is your annual opportunity to review and select your employee benefits for the upcoming year. While it might seem like just another task on your to-do list, the choices you make now can have a significant impact on your health and finances. Don’t simply “roll over” last year’s elections without a review. A proactive approach will ensure your benefits align with your needs and goals. 

Analyzing Your Health Insurance Options

Start by assessing your current situation. Think about your health needs from the past year: how many doctor’s visits did you have? What were your prescription costs? Do you anticipate any major life changes, such as getting married or having a baby? These factors will help you choose the right plan.

Understanding Key Terms

Before diving into plan specifics, it’s crucial to understand a few key terms:

  • Premium: The fixed monthly cost you pay for your insurance plan.
  • Deductible: The amount you pay out of pocket before your insurance coverage begins.
  • Copay: A fixed amount you pay for a doctor’s visit or prescription after your deductible is met.
  • Coinsurance: A percentage of costs you pay for covered services after the deductible is met.
  • Out-of-Pocket Maximum: The maximum amount you will pay in a year before the plan covers 100% of costs.

Comparing Plan Types: PPO vs. HDHP

The two most common types of health plans are a Preferred Provider Organization (PPO) and a High-Deductible Health Plan (HDHP).

  • A PPO typically has a lower deductible but higher premiums. It also offers more flexibility for seeing out-of-network doctors. This type of plan is generally best for people who use a lot of medical services, as the costs are more predictable.
  • An HDHP has a higher deductible but lower premiums. While you’ll pay more upfront for care, this type of plan makes you eligible for a Health Savings Account (HSA). An HDHP is often a great choice for generally healthy individuals or those who can comfortably afford the higher upfront costs if a major health event were to occur.

To help with your decision, compare the total estimated annual cost of each plan. For example, calculate the premiums plus potential out-of-pocket costs for a year with no major health events versus a year with a major surgery. This simple exercise can reveal which plan offers the most financial sense for your situation.

Maximizing Your Tax-Advantaged Accounts

In addition to health insurance, open enrollment is your chance to enroll in or update contributions to valuable tax-advantaged accounts.

Flexible Spending Accounts (FSA)

An FSA allows you to use pre-tax dollars for qualified medical or dependent care expenses, which lowers your taxable income. The key rule to remember is “use it or lose it”—funds typically do not roll over from one year to the next. Carefully estimate your upcoming year’s expenses to avoid forfeiting any money.

Health Savings Accounts (HSA)

An HSA is a powerful financial tool with a triple tax advantage:

  1. Contributions are pre-tax.
  2. Funds grow tax-free.
  3. Withdrawals for qualified medical expenses are tax-free.

Unlike an FSA, an HSA is portable, meaning the account belongs to you even if you change jobs. This makes it an excellent long-term savings tool. After age 65, you can withdraw funds for any reason without penalty, although non-medical withdrawals are subject to income tax. Remember, an HSA is only available if you are enrolled in an HDHP.

Reviewing Other Important Benefits

Don’t stop at health insurance; open enrollment is the perfect time to review your other benefits.

Retirement Contributions

Check your retirement contributions to your 401(k) or 403(b). If your employer offers a matching contribution, be sure you’re contributing at least enough to get the full match—it’s free money! Consider increasing your contribution rate by at least 1% each year. Small, consistent increases can make a huge difference over time.

Life and Disability Insurance

  • Life Insurance: Review your coverage needs based on your dependents and debts. Your employer may provide basic coverage, but you might need supplemental, voluntary coverage to fully protect your loved ones.
  • Disability Insurance: This benefit protects your income if you are unable to work due to illness or injury. Review your short-term and long-term disability options to ensure your income is protected.

Final Steps and Action Plan

Making your benefit selections requires a few final steps to ensure you’re fully prepared.

  1. Check Beneficiaries: In case of a major life change like a marriage or divorce, update the beneficiaries on all your accounts (retirement, life insurance) to ensure your assets go to the right people.
  2. Gather Your Information: Have all your plan documents, a list of your regular doctors, and an estimate of last year’s medical expenses ready. This information will help you make a more accurate and informed choice.
  3. Make Your Choices and Submit: Be mindful of the deadline and submit your final selections on time.

By taking the time to review your options and make informed decisions, you can ensure your benefits package is working for you and your financial well-being. Be sure to reach out to your advisor to discuss any of these items in more detail.

Justin D. Rucci, CFP®

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Your 2024 Year-End Planning Guide

/in , , , /by

As the year winds down, the hustle and bustle of the season can leave little room for financial reflection. But taking some time to review your finances now can help you close out the year on a strong note—and get your new year off to a great start. 

Here are some key items to consider before December 31 rolls around:

Unstick Your Cash … and Put It to Work

We all try to make the best decisions we can around money, but we’re not perfect. Despite our best efforts, we can miss things from time to time. 

Consider the “flypaper effect.” Jason Zweig, of The Wall Street Journal, uses the term to describe how money has a tendency to stick where it lands, even when we had other ideas for where it should end up. For many, this can happen when rolling over their employer-sponsored 401(k) retirement account into a personal IRA. According to research from Vanguard, nearly a third of savers who transferred their 401(k) balances into IRAs in 2015 still had those funds sitting in cash seven years later. This inertia can be costly. Vanguard estimates that cash-heavy IRAs cost Americans $172 billion annually in missed growth opportunities. 

As the end of the year approaches, take some time to review all your accounts to make sure all your savings have landed where you wanted them. 

It’s also okay—and in fact, often wise—to keep some money in cash, such as an emergency fund. But even these accounts are worth a review. If cash in your emergency fund is just sitting in a basic, zero-interest checking account, consider placing it in a money market, high-yield savings, or similar FDIC-backed account. There, the money should remain safe and readily accessible, while still offering a bit of interest income—especially while interest rates are still relatively high. 

Stay Updated on Retirement Account Rules

Typically, any required minimum distributions (RMDs) from your own or an inherited retirement account are due by year-end—so there’s no time to waste if you’ve not yet made any RMDs due. However, there are new rules for 2024 that could delay, or even eliminate, the need to make an RMD. As always, we recommend consulting with a tax specialist before taking any tax-planning action.

  • Roth 401(k) changes: Starting in 2024, RMDs are no longer mandatory for Roth 401(k) accounts. This was already true of Roth IRAs. If you don’t need income from your Roth 401(k) this year, leave it alone and let your savings continue to grow tax-free for as long as you like.
  • New spousal IRA benefits: If a younger spouse with an IRA passes away, the surviving spouse can now delay RMDs until the deceased would have turned 73. This allows for more years of tax-deferred growth, which can make a big difference in retirement savings over time.
  • RMD age increasing: For younger investors looking ahead, the age for RMDs will rise to 75 in 2033, again providing more time for tax-deferred growth as well as more flexibility in withdrawal strategies.

Maximize Your Gifts to Charity with Higher QCD Limits

December is a peak time for charitable giving. It’s the holidays, after all, and giving offers a meaningful way to support causes you care about while potentially reducing your 2024 tax bill. 

If you have RMDs due, one way to participate in tax-wise year-end giving is to replace some or all of your RMDs with qualified charitable distributions (QCDs) from your IRA directly to charity. This year, you may give up to $105,000 in QCDs, according to the IRS. This in turn, can lower or eliminate your RMDs, which would otherwise have been taxed at ordinary income rates. Lowering your reportable income may also help you avoid being pushed into a higher income tax bracket or subject to other tax deduction phaseouts.

Important Date Reminders

Some best practices are perennial, including keeping an eye on important dates. Naturally, there are a number of deadlines associated with year-end. For those who are itemizing deductions, it’s the deadline for 2024 tax-deductible charitable contributions. It’s also the last day you can fund your 401(k). You can contribute up to $23,000 in a 401(k) this year, and next year that limit increases to $23,500. Catch-up contributions for 401(k)s for individuals aged 50 and older is $7,500 for 2024. It will remain that way in 2025, but there will also be a higher catch-up contribution limit of $11,250 for those aged 60 through 63. 

IRAs and health savings accounts allow you to make 2024 contributions up until April 15, 2025. You’ve got a little bit of time, but the sooner you invest, the quicker you can put your money to work and take advantage of the power of compounding returns.

Rest and Recharge

While financial planning is essential, don’t overlook the importance of self-care. Amid the year-end flurry, a good night’s sleep might be one of the best investments you can make in your overall well-being, especially during the holidays. In fact, research suggests that better sleep health can reduce loneliness, spark stronger social connections, and foster positive emotional experiences.

And if it’s not better sleep, please take some time for yourself, whether it’s curling up with a good book, having dinner with friends, or taking a long walk with the dog. After all, one of the most important reasons we put so much effort into financial well-being is so we can build a more fulfilling life for ourselves and the ones we love. 

Wondering how else you can wind down 2024 and prepare for a fruitful 2025? Reach out and let’s talk.

Justin D. Rucci, CFP®

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

3 Financial Best Practices for Year-End 2023

/in , , /by

Scan the financial headlines these days, and you’ll see plenty of potential action items vying for your year-end attention. Some may be particular to 2023. Others are timeless traditions. Here are our three favorite items worth tending to as 2024 approaches… plus a thoughtful reflection on how to make the most of the remaining year.  

1. Bolster Your Cash Reserves

With some high yield savings options currently offering ~5%+ annual interest rates, your fallow cash is finally able to earn a nice little bit while it sits. Sweet! Two thoughts here: 

Mind Where You’ve Stashed Your Cash: If your cash savings is still sitting in low- or no-interest accounts, consider taking advantage of the attractive rates available in other options. If you’re unsure where to start, we can help you figure out whether a high yield savings account, a CD, or treasury bonds may make sense for you. Your cash savings typically includes money you intend to spend within the next year or two, as well as your emergency, “rainy day” reserves.

Put Your Cash in Context: While current rates across many accounts are appealing, don’t let this distract you from your greater investment goals. Even at today’s higher rates, your cash reserves are eventually expected to lose their spending power in the face of inflation. Today’s rates don’t eliminate this issue … remember, inflation is also on the high side, so that 5% isn’t as amazing as it may seem. Once you have your cash stashed in those high-interest savings accounts, you’re likely better off allocating your remaining assets into your investment portfolio—and leaving the dollars there for pursuing your long game.  

2. Polish Your Portfolio

While we don’t advocate using your investment reserves to chase money market rates, there are still plenty of other actions you can take to maintain a tidy portfolio mix. For this, it’s prudent to perform an annual review of how your investments are growing. Year-end is as good a milestone as any for this activity. For example, you can: 

Rebalance: In 2023, year-to-date stock returns may warrant rebalancing back to plan, especially if you can do so within your tax-sheltered accounts. If you are an existing Warren Street client, this is already being handled on your behalf.

Relocate: With your annual earnings coming into focus, you may wish to shift some of your investments from taxable to tax-sheltered accounts, such as traditional or Roth IRAs, HSAs, and 529 College Savings Plans. For many of these, you have until next April 15, 2024 to make your 2023 contributions. But you don’t have to wait if the assets are available today, and it otherwise makes tax-wise sense. 

Redirect: Year-end can also be a great time to redirect excess wealth toward personal or charitable giving. Whether directly or through a Donor Advised Fund, you can donate highly appreciated investments out of your taxable accounts and into worthy causes. You stand to reduce current and future taxes, and your recipients get to put the assets to work right away. 

3. Minimize Your Taxes

Speaking of taxes, there are always plenty of ways to manage your current and lifetime tax burdens—especially as your financial numbers and various tax-related deadlines come into focus toward year-end. For example:

RMDs and QCDs: Retirees and IRA inheritors should continue making any obligatory Required Minimum Distributions (RMDs) out of their IRAs and similar tax-sheltered accounts. With the 2022 Secure Act 2.0, the penalty for missing an RMD will no longer exceed 25% of any underpayment, rather than the former 50%. But even 25% is a painful penalty if you miss the December 31 deadline. If you’re charitably inclined, you may prefer to make a year-end Qualified Charitable Distribution (QCD), to offset or potentially eliminate your RMD burden. 

Harvesting Losses … and Gains: Depending on market conditions and your own portfolio, there may still be opportunities to perform some tax-loss harvesting in 2023, to offset current or future taxable gains from your account. As long as long-term capital gains rates remain in the relatively low range of 0%–20%, tax-gain harvesting might be of interest as well. Work with your tax-planning team to determine what makes sense for you. If you are an existing Warren Street client, we will automatically tax loss harvest for you.

How else can we help you tend to your 2023 plans and till the soil for 2024? Please be in touch for additional ideas and best-practice advice. 

Cary Facer

Partner Emeritus, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Five Financial Best Practices for Year-End 2022

/in , , , /by

To say the least, there has been plenty of political, financial, and economic action this year — from rising interest rates to elevated inflation to ongoing market turmoil. 

How will all the excitement translate into annual performance in our investment portfolios? The answer remains to be seen. But, while we wait to find out, here are five action items worth tending to before 2022 is a wrap. 

  1. Revisit Your Cash Reserves

Where is your cash stashed these days? After years of offering essentially zero interest in money markets, savings accounts, and similar platforms, some banks are now offering higher interest rates to savers. 

Shop around: If you have significant cash saved up, now may be a good time to compare rates on cash accounts. We can help if you need guidance exploring the options.

  1. Put Your Money to Work

If you’re sitting on more cash than you need in your emergency reserve, you may be able to put it to even better use under current conditions. Consider the following:

Lighten your debt load: Carrying high-interest debt is a threat to your financial well-being, especially in times of rising rates. Consider paying off credit card balances or other debts. Avoid accruing new debt during the holiday season. 

Invest: Reach out to your lead advisor to determine what your opportunities are to put some cash to work in the markets.

  1. Make Some Smooth Tax-Planning Moves 

Another way to save more money is to pay less in taxes. Here are a couple of year-end ideas: 

It’s still harvest season: Market downturns often present opportunities to engage in tax-loss harvesting by selling taxable shares at a loss, and promptly reinvesting the proceeds in a similar (but not identical) fund. You can then use the losses to offset taxable gains, without significantly altering your investment mix. If you have a non-retirement brokerage account with us, we’ve already been doing this on your behalf.

Maximize tax opportunities: Make sure you are taking advantage of your 401(k) and other tax-deferred investment opportunities. With only a few paychecks left in 2022,  you’ll want to make sure your contributions are optimized.

  1. Check Up on Your Healthcare Coverage 

As year-end approaches, make sure you and your family have made the most of your healthcare coverage. Take a moment to examine all your benefits. For example, if you have a Health Savings Account (HSA), have you funded it for the year? If you have a Flexible Spending Account (FSA), have you spent any balance you cannot carry forward? If you’ve already met your annual deductible, are there additional covered expenses worth incurring before the meter resets in 2023? If you’re eligible for free annual wellness exams or other benefits, have you used them?   

  1. Get Set for 2023 

Why wait for 2023 to start anew? Year-end can be an ideal time to take stock of where you stand and consider what you’d like to achieve in the year ahead.  

Audit your household interests: What has changed, and what hasn’t? Have you shifted careers or decided to retire? Added new hobbies or encountered personal setbacks? How might these and other significant life events alter your ideal investment allocations, cash-flow requirements, insurance coverage, or estate plan?

How Can We Help?

How else can we help you wrap 2022 and position you and your loved ones for the year ahead? 

Whether it’s helping you manage your investment portfolio, optimizing your tax planning, considering your cash reserves, weighing insurance offerings, or assessing any other components that contribute to your financial well-being, we stand ready to assist — today, and through the years ahead. 

Cary Facer

Partner Emeritus, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.