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Heath Savings Accounts – Growing in Popularity

The popularity of Health Savings Accounts, HSAs, has soared over the past 10 years. Designed as a way to help people manage high-deductible health insurance plans, financial experts believe that the attractiveness of these accounts will only continue to grow.

HSA Qualifications

If you are currently enrolled in a high-deductible insurance plan (HDHP), you can qualify for a HSA. By the 2017 definition, the IRS defines a HDHP for an individual as a plan with an out-of-pocket maximum of $6,550 and a minimum deductible of $1,300. For a family, the out-of-pocket maximum is $13,000 and the minimum deductible is $2,600.

How does a HSA Work?

Most health insurance providers offer HSAs. But, if yours doesn’t, you can open an account at most financial institutions.

If you qualify, you can currently contribute up to $3,400 as an individual and $6,750 as a family. Adults over 55 can increase these amounts up to an additional $1,000. If your place of employment offers a HSA, you can set up automatic contributions directly from you payroll.

Using a debit card or checks for this account, you can use these funds for eligible medical expenses. These include deductibles, co-pays, coinsurance and many other qualified medical expenses not covered by your insurance plan. However, you may not pay your medical insurance premiums with HSA funds.

The balance of a HSA, unlike Flexible Spending Accounts, rolls over from year to year. Consequently, you never lose your savings, even if you leave your employer.

Once you’re over the age of 65 and enrolled in Medicare, you can no longer contribute to a HSA. However, you can still use the balance of your savings for out-of-pocket medical expenses. If you use the money for non-medical expenses, you will have to pay income tax on that amount…and a penalty if you’re under 65 years old.

Triple the Tax Benefits

Three tax benefits make HSAs especially appealing. HSA contributions are pre-tax/tax-deductible, just like an IRA. This means your contributions are made before your income is taxed. In addition, you don’t incur taxes on the account’s growth, either. And lastly, the money withdrawn to pay eligible medical expenses is also tax-free.

The Investment Potential of a HSA

HSAs can be invested in mutual funds, stocks and other investment vehicles to generate more money. Financial experts tout the HSA as one of the best tax-free investment accounts out there, especially for those investors that have already maxed out their 401(k) and IRA contributions. The HSA provides yet another place to save in a tax-advantaged way.

For more information and/or to open a Health Savings Account contact or stop by one of our banking locations today.





Jargon and Acronyms….They’re everywhere…LOL!

Jargon and Acronyms….They’re everywhere…LOL!

The use of jargon and acronyms has become pervasive in the English language.  Whether used by government (e.g. CIA, NATO, etc.), lawyers (e.g. adjudication, brief, etc.), IT specialists (e.g. SEO, SPAM, etc.) or the younger generation (e.g. TTYL, sick, etc.), today our language has become laden with these professionally, generationally and industry specific dialects.  With the advent of computerization and the internet specifically, the use of jargon and acronyms has increasingly become more widespread in our culture.  So customary, that this lingo has almost become a language of its own – a foreign language for many of us, oftentimes requiring translation.

The use of acronyms and jargon in the financial services industry is not new.  Our industry has always had its own language. Whether you are watching your favorite nightly financial news show or conversing with financial professionals, I’m sure you sometimes feel inundated and somewhat intimidated by our industry’s commonplace use of idioms.

Webster’s Dictionary defines jargon as the language, especially the vocabulary, peculiar to a particular trade, profession or group and acronym as a word formed from the initial letters or groups of letters of the words in the name or phrase.  In a nutshell, the use, most aptly today, the overuse of this language can be quite confusing and leaves many of us exclaiming, “WHAT???”

Although the list of our industry’s acronyms and jargon is fairly exhaustive, I thought I’d dedicate the balance of this article to a few of the most commonly used acronyms in our industry which tend to be the least understood by our customers.  I hope to shed some light and clear up any possible confusion concerning the following popularly used financial acronyms: APR, ARM, AGI, and PMI.

APR – Annual Percentage Rate – This is the annual rate of return made by investing or charged by borrowing, expressed in a single percentage number.  It represents the actual return on money invested or cost of funds when borrowed.  For example, if a credit card company charges 2% a month on your outstanding balance, the APR is 24% (2% x 12 months).  This number differs from APY (Annual Percentage Yield) which takes compound interest into account.

ARM – Adjustable Rate Mortgage – This differs from a fixed rate mortgage in that the interest you pay on the loan balance varies over the life of the loan based on a financial benchmark or index and an additional spread called a margin.  The initial rate is fixed for a period of time.  Then periodically, the interest rate is reset.  For example, if you had a 2/28 ARM, this is a 30 year mortgage, with a fixed rate for the first two years and a floating rate for the remaining 28 years.

AGI – Adjusted Gross Income – This is the “net income” figure used to determine your taxable income.  Your AGI is your gross income minus all allowable deductions (e.g. unreimbursed business expenses, medical expenses, contributions to a deductible retirement plan, etc.).  This net number is computed on page 1 of your federal tax return.

PMI – Private Mortgage Insurance – Many people confuse this insurance with homeowner’s insurance.  This mortgage specific policy is provided by a private mortgage insurer to protect lenders against loss if the borrower defaults on the loan.  Most lenders today require PMI on loans with a loan-to-value (LTV….yet another acronym!) that is more than 80% (a down payment less than 20%).  Although this allows the borrower to put less down, it typically requires an additional premium payment over and above the mortgage payment and possibly an additional monthly fee.

Although the use of jargon and acronyms is most likely not going away any time soon, we must be cautious not overuse them, especially when we are communicating with people outside of our trade or industry.  In our goal to provide excellent service to our customers, the management and staff of Intracoastal Bank make it a priority to always communicate with our customers clearly and concisely.  It doesn’t cost a thing ….just a little time and patience.  B4N! (Bye for Now)

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