Medical expenses are a major concern for many of us today. With the rising cost of healthcare coverage, more and more employers are cutting costs by providing insurance plans with high deductibles or eliminating healthcare coverage altogether. Whether you are covered by your employer or you choose to purchase your own coverage, a high-deductible health plan will have you paying large out-of-pocket expenses in order to maintain a low premium.

These plans require you to pay for medical expenses until the deductible is reached, which could cost you thousands of dollars. However, there is a smart saving option to help you pay for these expenses, and save money at the same time: a Health Savings Account (HSA).

Using your HSA to pay for qualified medical expenses is easy. You are allowed an unlimited number of tax-free payments or withdrawals to pay for qualified, out-of-pocket medical expenses as they occur. Oftentimes the bank will give you a debit card for you to use on all your health related spending.

As the owner of your account, you are responsible to report HSA activity by completing and filing Form 8889 with your federal tax return. As a result, you must hold on to your qualified health care expense receipts to ensure accurate tax filings.

You may not always use every dollar you contribute to your HSA. So, you may wonder, what happens to that left-over money?

An HSA is not a “use it or lose it” account. Any unsed funds that are contributed to your account stay in your account. They don’t expire and disappear like a Flexible Spending Account (FSA). Unused funds rollover into the next calendar year and can accumulate in this way year after year. And, you can continue to make your maximum annual contribution regardless of the dollar amount that has rolled over or accumulated.

After age 65, unused funds can be used for any purpose – not just qualified health care expenses. Continue reading…

Savings Account vs CD

You’re sitting on some cash and you’re wondering whether to put it in a CD or savings account. Given the current rate environment, there are some advantages and disadvantages to each option.

Should I put my money in a certificates of deposit?

Before you decide on a savings or CD, you’re going to want to ask yourself if you’re going to need the cash in the near future. Depositing your money into a CD will lock up your money for some time. Most CDs can be purchased in fixed terms such as 3 months, 6 months, 1 year, etc. Your money would be locked up for that time frame and in exchange you would get an interest rate typically higher than the savings rate, and that is guaranteed by the FDIC.

Most banks or brokerages will charge a penalty if you withdraw or cash out the CD prior to the end of the term. This will impact any interest earned as the fee would likely be greater than any interest earned. You need to make sure that you’re not going to need the money prior to the end of the term. Currently the highest CD rates are the long term CDs – anywhere from 2-10 year terms. These long term CDs have the best rates but you won’t be able to touch your money for the term of the CD, and if rates go up you will not be able to take advantage.

Should I put my money in a savings account?

Putting your money to work in a savings account can also generate a solid interest payment every month while maintaining liquidity with your money. In most times, you’ll get a rate that’s generally lower than a CD but without having to tie up your money. This would likely benefit those that want to earn a great interest savings rate but want to make sure to have immediate access to their cash.

You’re going to have to be careful because some banks do charge monthly fees and have account balance minimums that will impact interest earned. In addition, you’ll have easy access to your money which makes it harder to save if you don’t have self control.

In today’s rate environment, it makes the most sense to put your money in a high yield online savings account such as Ally Savings or WT Direct. Both of these online savings accounts provide high rates – Ally has no minimum balance while WT Direct has a $10,000 minimum balance. By using an online savings account, you can earn a decent interest rate while waiting for rates to improve.

A spousal IRA allows contributions to be made to into an account on their spouses behalf. They were created to allow stay at home parents to put away money for retirement even if they don’t earn any income. Normally you’re allowed to contribute $5,000 or 100% of your income to your IRA. However if you’re a stay at home mom or dad you don’t have an income, which is where the spousal IRA comes into play. The working spouse may put away money into their spouse’s IRA.

You can setup a spousal roth IRA or a traditional IRA. In order to qualify for a spousal IRA you need to file your taxes jointly with your spouse. All the rules that apply to a regular IRA apply to a spousal IRA. Instead of contributing a maximum of $5,000 to your own IRA you can contribute $5,000 to yours and $5,000 to your spouse’s for a total of $10,000 in contributions. You can also contribute an additional $1,000 for you or your spouse if either or both of you are over 50.

Unlike a joint account where all money is kept in one account IRAs are separate accounts. If a married couple gets divorced then each partner takes their own IRA account. If you do get divorced you can’t take a tax deduction on spousal IRA contributions the year you get divorced.

Just like with regular IRAs you can receive IRA disbursements at the age of 59 ½. Creating an IRA for your non-working spouse is important to ensure an enjoyable retirement for the both of you. A financial consultant or retirement planner can give you more information if you want to learn more about spousal IRAs.

What is a soft credit pull?

A soft credit pull will not affect your credit at all and they will not be visible to other people who are pulling your credit. You’ll want to try to make sure that applications for savings accounts or certificates of deposits do not require a hard credit pull because that can hurt your overall credit score.

These “soft pulls” typically occur when applying for a new job, new apartment, etc. You may also make these soft pulls yourself which should give you an accurate calculation of your current credit standing. One thing to be aware of is that these pulls can be generated by credit card companies whom issue you “pre-approved” credit cards.

Always be wary of anyone giving you credit history forms to fill out and be sure they give you an exact response as to what type of credit check will be conducted. In most cases, you’ll want to try to avoid hard credit pulls whenever possible.

What is a Hard Credit Pull?

A hard credit pull usually occurs when you are seeking some form of credit. These pulls are visible to other people who want to look at your credit. A common red flag is someone with many recent credit check requests, which suggests that they might be overextending their credit.

As a result, every time you have a “hard pull” on your credit history you will take (at least) a minor ding to your overall credit score. It’s hard to predict the EXACT affect both of these examinations (hard and soft pull) have on your overall score, however realizing the difference between the two should give you some insight.

A hard pull should only occur when you give express written consent for it to happen. This type of credit pull will have a (slight) negative effect on your overall score. These usually occur when you are seeking some form of credit (think – insurance, loan app, new credit card, etc). Records of these inquiries will remain with you for 1 or 2 years and should be used primarily when obtaining new lines of credit. Sometimes companies may require these reports be pulled before you purchase a certain product or service (satellite television, utility companies, etc).

Unlike a hard credit pull, a soft credit pull will not affect your credit score.

A bond is defined as an interest-bearing certificate issued by a government or business, promising to pay the holder a specified sum on a specified date.

Common wisdom says bonds are a safe haven from stock market turmoil. Does that mean you should buy bonds if that turmoil comes from recession or inflation?

Complicating the situation is the fact that there is no one-size-fits-all-situations bond. The Treasury Department issues bonds, so do corporations, municipalities and banks. There are short-term bonds and long-term bonds; bonds with pristine credit ratings and junk bonds.

Remember, while bonds may protect you in hard economic times from the deep dives that stocks sometimes take, there is no guarantee you won’t lose money. With bonds, you can get hurt while standing on the sidelines.

Stability versus volatility
It’s a given that most people, especially as they near retirement and need to reduce volatility in their portfolio, should have a smattering of bonds for stability and to provide fixed-income.

The ratio of bonds to equities and cash depends on your needs and your risk tolerance. We won’t specifically address allocation in this article, but we will try to provide some guidance for when it’s appropriate to load up a bit more on your bond allocation.

Cash, U.S. bonds and foreign bonds
There are 3 different types of bonds.

The first is “short money,” comprised mainly of money markets and, occasionally, short-term CDs; assets that mature in less than two years. Second is U.S. bonds, and the third is foreign bonds.

Short money has probably been the riskiest investment over the past couple of years. The dollar has dropped in value and its buying power has dropped tremendously. By proxy, the second riskiest investment is U.S. bonds. They’ve appreciated some in the recent market downturn, they’ve paid a little bit better interest rate, but in terms of purchasing power, they’ve been one of the worst investments in the last two years.

Foreign bonds do the best during a recession and during inflation. During a recession, the bond category as a whole will do well, but during inflationary times, the U.S. dollar is dropping in value. Your foreign bonds are going to get both the good return you get in a bond portfolio during a recession and an extra kick because the value of the U.S. dollar is dropping.

When the dollar drops, your foreign bonds are going up in value because they’re invested in foreign currencies, which aren’t being devalued as much as the dollar. When you invest in foreign bonds in this mode, you want to invest in unhedged foreign bonds.

At the end of August, bank hacker Ehud Tenenbaum was photographed leaving court, having pleaded guilty to a single count of bank-card fraud. Tenenbaum, who is Iraeli by birth, had been arrested in Canada last year for allegedly stealing roughly $1.5 million in a bank hacking scheme. But before Canadian authorities could prosecute him, he was extradited back to the United States. Now he pleads guilty to having played a major role in a sophisticated computer-hacking scheme that officials believe scored $10 million from US banks.

However, Tenenbaum actually first made headlines a decade ago when he was arrested at the age of 19. Using the hacker handle “The Analyzer”, Tenenbaum was arrested with several other Israelis and two California teens in one of the first high-profile hacker cases that made international news.

Worryingly, news of The Analyzer’s arrest last month only scratches the surface of the level of computer-hacking schemes across the US in recent years, sparking real concern over the state of financial services security in protecting both its assets and its customers.

In January, for instance, at the World Economic Forum in Davos, Switzerland, experts warned how the threat of cybercrime is rising sharply, fuelling demand for a new system to tackle well organized gangs of cybercriminals. In fact, reports from the Forum suggest that online theft alone costs somewhere in the region of $1 trillion a year, with the number of attacks far outpacing the number of people and businesses who understand how to properly protect themselves.

The opportunity to convert an existing regular IRA to a Roth IRA may be the single biggest upside to the stock market’s extended slide. The younger you are and the more aggressive your investment strategy, the more likely it is that a conversion to a Roth IRA will make sense for you.

You may already be aware of the key difference between a regular IRA and a Roth IRA. At a very high level, a regular IRA provides for tax-deferred growth whereas a Roth IRA gives you tax-free growth. All else equal, we’d all prefer tax-free growth, of course. Here’s everything you need to know about Roth Conversions

Contributions to a Roth IRA are limited and are not deductible

Trouble is, income limitations prevent everyone from being eligible to contribute to a Roth IRA. During 2009, if you’re single and make more than $120,000 ($176,000 combined with your spouse, if you’re married), you can’t contribute a dollar to a Roth IRA. Furthermore, those who can make a Roth IRA contribution can’t deduct it – that’s your key upfront sacrifice for the many future years of tax-free growth.

A Roth Conversion allows everyone access to a Roth IRA

Let’s first define what a Roth conversion is: the transformation of your retirement account from tax-deferred to tax-free status. You effectively move money from an existing regular IRA or former employer’s 401k account into your Roth IRA. The cost to do this conversion is the payment of regular income tax on virtually the entire amount you convert.  (You’ll pay tax on 100% of the converted amount unless you previously made non-deductible contributions).

Roth Conversion restrictions are going away

Through the end of 2009, conversions are only available to those people who earn less than $100,000 and have filing statuses other than married, filing separately. However, both of those restrictions are eliminated at the end of the year. As a result, anyone who wishes to contribute to a Roth IRA but whose income level is too high can make a 2009 contribution to his/her regular IRA and simply convert part of their account in 2010.

Why converting your Roth IRA could make sense today

If you’re confident your 2009 adjusted gross income will be less than $100,000, you don’t have to wait until 2010 to convert.  Furthermore, you can take advantage of market downturn, as I referenced earlier.  Here’s a simple example:

Say you invest in stock and you accumulated 300 shares of Johnson & Johnson stock (JNJ) over the years. If you converted your shares during April of 2008, when JNJ was trading at about $67 per share, you’d have converted $20,100 of stock. Assuming you were in the 25% tax bracket, you would have owed about $5,000 in taxes on the conversion.

In April 2009, JNJ was trading at about $51 per share. If you converted the stock then, you would have converting $15,300. If you were in the same 25% tax bracket, you’d owe just over $3,800 in tax, not $5,000, for a permanent tax savings of $1,200. In either conversion, you retain ownership in the long-term potential price appreciate of JNJ, yet in the latter case you’ve successfully timed the market from a tax perspective.

It’s certainly possible that stock prices could go lower from here and that a further delayed conversion could be even more lucrative from a tax perspective.  Nonetheless, a conversion could make more sense for you today than at any time previously.

Take advantage of your youth

The big upside of voluntarily paying taxes (since you don’t have to convert), is the tax-free appreciation of your converted investments.  The longer the amount of time you have until you plan on taking your money out (ideally retirement), the greater the odds that a Roth IRA conversion will make sense.

In addition, the better your investment performance between now and retirement, the greater the upside of converting to a Roth IRA. Still, it makes sense to run the numbers.  Importantly, it seldom makes sense to convert to a Roth IRA if you don’t have the money available to pay the tax on conversion.   Using money from your IRA to pay the tax almost never makes financial sense.

Keep in mind that it’s not an all-or-nothing proposition. If you want to convert your retirement account but just don’t have the funds set aside to pay all the taxes, consider converting some of your account.  You can always do some more next year.

Are you facing foreclosure? A home foreclosure can severely damage your credit score, and it stays on your record for 7 years. Your credit score plays a key role in your financial life, from everything to buying homes and cars to applying for jobs and apartments. Foreclosures should be your last resort. Here are some tips to help prevent foreclosures:

• Lender negotiation: If there is a reasonable expectation that you will be able to resume making regular mortgage payments within a relatively short time frame, the lender may be willing to work with you to establish a payment plan to bring the loan current. “Especially in today’s market, this is a greater possibility,” says Housser. “Many individuals are having trouble due to an unexpected job loss, medical expenses, divorce or other personal trauma. If the situation has some resolution so that the regular payments may be able to be met again, it is worth it to call the lender.”

• Refinancing: It may be possible to refinance a mortgage for a lower interest rate and/or lower monthly payment. But if you have already had late payments on a mortgage, the interest rate offered may be too high to lower your monthly payment. Housser recommends using online rate comparison sites and calculators to determine the “real costs of refinancing.”

• Forbearance agreement: For a temporary hardship, the lender might grant you a forbearance agreement to lower – or eliminate – payments for a limited time.

• Short sale: In a short sale, the lender accepts less than the mortgage debt when the property value has declined. “A short sale will prevent foreclosure,” says White. “However, if it takes place after foreclosure was initiated, the foreclosure and the related delinquency in payments will be reflected on the credit report.” The only way to protect the credit score fully is to maintain monthly payments until the house is sold.

Continue reading…

Are you trying to learn how to refinance your car loan? Have you found a better auto loan interest rate? Follow these simple steps to refinance your auto loan and get a lower rate along with a lower monthly payment!

Find a Better Loan Rate

You can browse websites, local banks, credit unions, etc. There are several online sources to help you find the lowest auto loan rates.

Determine if You Qualify

Once you’ve found the lowest rate, you can apply online or directly at the branch to see if you qualify for the rate. You’ll usually have to supply your credit information and they will run a credit check. Your credit score may take a hit if you run too many credit checks, so it’s important to keep that in mind.

Pay any Fees

Usually there are fees that must be paid, including lien holder fees, prepayment fees, re-registration fees, and more. These must all be paid before a lender will refinance your loan.

Pay off Your Current Loan

When you refinance your car, the lending company will give you a check for the remaining balance of your original loan. This allows you to pay off your first loan and effectively transfer your debt to the new company.

Transfer your Car Title to the New Lender

After your car has been refinanced, the title will be transferred to the new owner, at a (hopefully) lower interest rate.