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Get the Most from Your HSA

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
August 19, 2022 5:30 pm

Get the Most from Your HSA

MoneyWise / Rob West and Steve Moore

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August 19, 2022 5:30 pm

Financial advisors will tell you that a health savings account is a great way to meet medical expenses.  But even if you’re eligible, an HSA may not be your best option. On today's MoneyWise Live, Rob West will explain some details about HSAs and help you decide if having one is a good fit for your financial situation. Then he’ll answer your questions on various financial topics. 

See omnystudio.com/listener for privacy information.

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Financial advisors will tell you that a health savings plan is a great way to meet medical expenses, and that's mostly true.

Hi, I'm Rob West. If you qualify for an HSA, you want to make the most of it, but they're not right for everyone. I'll talk about where they do the most good and where they'll have little impact on your budget. Then it's on to your calls at 800-525-7000.

800-525-7000. This is MoneyWise Live, biblical wisdom for your financial decisions. Okay, so there's no doubt that HSAs can help greatly to save on medical expenses and reduce your tax liability. Money goes into the account tax-deferred, and you can use it tax-free for qualified medical expenses.

That's if you qualify. To be eligible for an HSA, you must have a High Deductible Health Plan, or HDHP. That means in 2022, your deductible for medical expenses, the point where your plan kicks in, must be at least $1400 for an individual or $2800 for a family.

If that's you, you want to take full advantage. As I said, an HSA is a great way to accumulate tax-deferred savings for medical expenses. And get this, many financial advisors will tell you that it's also a terrific way to save for retirement for some folks. That's because at age 65, the penalty for using the money for non-medical reasons goes away, while money used for medical bills is still tax-deferred.

So they're a real win-win, but again, only for some people. If you withdraw money from a retirement account after age 59 and a half, you're taxed on it, but you don't pay a penalty. You can use the money for anything, but you do pay taxes on all of it, no matter what you use it for. With an HSA, after age 65, if you use the money for non-medical expenses, you're still taxed.

However, at that age, you'll probably have more medical expenses than you would earlier in life. When you use the HSA money to meet those medical expenses, it's tax-free. So in that sense, it's better than a conventional retirement plan.

It's a double-dip. Now, who's in that fortunate group? Well, these are folks who don't need to tap into their HSA funds all the time for short-term health care. They're in a position to stockpile that cash for retirement, in addition to other qualified plans, like a 401k. It's such a good deal that some advisors will actually tell those individuals to pay medical bills out of pocket, so they allow the money in their HSA to gain compound earnings for retirement.

This group typically has low medical expenses and rarely reaches their health plan deductible. They're usually young and have the opportunity to accumulate more money over a lifetime. So this group can maximize their HSA's potential by investing the money in mutual funds or stocks and not spending it. HSAs are not like flexible spending accounts, so the money keeps rolling over from year to year with compound earnings.

By the way, you can contribute to an HSA up to $3650 for an individual and $7300 for a family in 2022, plus an additional $1000 for people 55 or over. So that's great for folks in that group. Young, healthy, and able to contribute the max to their HSA for years and years. But they happen to be in the minority.

What about other folks? Well, most people who qualify for an HSA fall into a large middle group, and they still want to take full advantage of this opportunity. They're folks who have to tap into the account to meet their medical expenses. In fact, more than half of HSA owners exhaust their total balance every year.

But that's okay, and it's really what the HSA was designed for. They're able to take advantage of the tax savings. The money they put in and use for medical expenses is tax free.

So it's still a good deal, even if the account never builds retirement savings. Now, that still leaves one group who might be eligible for a health savings account. That is, they have a high deductible health plan, but they're still paying a lot out of pocket. For them, a health savings plan by itself won't be much help. What they really need is to get on a plan with lower deductibles. If that's you, it might mean paying more in premiums, but you can shop around for a plan that won't nickel and dime you to death after meeting the deductible. Now, no matter what your medical costs are, you can also think outside the box and contact our friends at Christian Healthcare Ministries.

They have medical sharing plans that could save you a bundle while meeting your health care needs. All right. Your calls are next. 800-525-7000. We'll be back before you know it. Stick around. We're so glad you've joined us today on MoneyWise Live. I'm Rob West, your host. Taking your calls and questions with lines open. 800-525-7000. Gabby T. managing our phones today. She'd love to hear from you, and we'll get you on the air quickly. Again, 800-525-7000. We have several lines open. I'm thrilled you're here today, because each afternoon as we gather together this hour, we have the privilege of exploring what God's Word has to say about this area of money management.

Our goal? Well, to be found faithful as stewards of God's resources, as we think about the daily interactions that God has with us. Which there are plenty of them. But here's the ultimate reality, is that money issues are heart issues. Remember Jesus said, where your treasure is, there your heart will be also. So think about this. Your heart follows your money.

It's not the opposite. I've got a son going off to college, not too far off. My heart will be at that university as my money goes there. And that's true about everything we spend our money on, including our giving. And so if money tells a story, or the way we handle it tells a story of what's most important to us, how do we feel about the story that we're telling?

Do we want to make some changes? Well, it has to start on our knees saying, Lord, what would you have me to do with what you've entrusted to me? And then we go from there. Whatever your question is today, we'd love to help you explore it and see how we can help you move forward with that. 800-525-7000 is the number to call. Let's begin today in Cleveland, Ohio. Jeff, you're our first caller.

Go ahead, sir. Yes, thank you for taking my call. So I have not filed, I filed an extension for my taxes, so I have not filed them for 2021. And I was wondering if I can still contribute to a Roth IRA for 2021?

Yeah, unfortunately no, Jeff. In the same way that filing an extension does not delay your requirement to pay the taxes that you owe by the original deadline, it doesn't delay the contribution deadline for a retirement account like an IRA either. So it's only a delay or an extension on filing the paperwork. But if you don't pay anything you owe, you're going to pay interest on it and penalties.

And the same is true about the IRA. That deadline is up until you file or April 15th or whatever the filing deadline is for that year. Okay. All right. Well, thank you very much. All right. I appreciate it, Jeff. Thanks for calling. To Indiana, WMBI.

Michael, go right ahead, sir. Yes. I'm looking into I bonds.

I heard you talking about it the other day on the radio. And my understanding is that a husband and wife who have a living trust, and the other person, my wife teaches piano, so she has a schedule C business, so we can set up a treasury direct account for each one of us and invest up to the potential maximum there. And I'm wondering, does the interest on each of those separate ones all get reported in the same place on the 1040? Or is it handled differently somehow for the trust or the business?

Yeah. So you'll have those individually in your name. And you'll report the I bond interest when you redeem the bond.

That's the only time you have to report it. And you'll find the amount of interest received on your I bond in Box 3 of the IRS Form 1099-INT, which is for interest. You'll get one of those if you earn at least $10 in interest. And then you would report that on the 1040 or 1040A, whichever one you use on the appropriate line. If you use the 1040EZ, you report savings bond interest on, I think, Line 2. But regardless, you would report that on the appropriate line, depending upon which 1040 you use. And the amount that you get would be on that 1099.

If you were to get multiple 1099s, then you would obviously total that up as you file that return jointly. Do you have time for another question on difference? Sure. Go right ahead.

Okay. I have an annuity. And the value for the annuity, if I had it cashed out, and I wouldn't pay any penalty on that to them, is only probably about $20,000 to $30,000 less than for what they call the value for the annuity itself in terms of returning an annualized payment. But the annualized payment runs about $4,000 and something a year. And it would take over 20 years, 25 years maybe, to reach out that total amount. And I can actually, I think, do better in terms of potential life expectancy if I just cash out the annuity. And I'm wondering if that's something I should do. Yeah.

You know, I mean, there's several moving parts there. You just want to make sure you understand the implications from a tax standpoint and otherwise. But, you know, I would tend to agree. I think, you know, this is why I'm not a big fan of annuities. Often you can do better by investing, you know, not through an insurance product, but just with straight investments in a properly diversified portfolio. So I think you're putting your finger on something that's important here that, you know, given that the payout, the annuitization would take, you know, 25 years or so to get to what you could receive as a lump sum now. And you could take that and deploy it and perhaps, you know, do better over the long haul. Obviously, you're assuming the risk in that. But I tend to agree with you that I'd rather have control over my money and be able to direct it as I see fit and realize, you know, the full potential of the upside between, you know, now and, you know, whatever point the Lord calls you home in the future.

And still have your principle to boot, which you could tap into if you needed more money or, you know, pass that on as an inheritance or give it away when you pass away. All right. Thank you very much.

All right, Michael. God bless you, bud. We appreciate you calling. 800-525-7000 is the number to call.

Quickly to Brainerd, Minnesota. Craig, you're next on the program. Go ahead.

Hey there. I have a company who provided me with a very light legal service for a monthly fee. In this legal service, they allowed me to do a will.

So I did. I filled out all the paperwork and I actually brought it to the county and paid for it, registered it with the county. Is there anything else I need to do to make sure this is legit? And is there anything else I need to do as far as the will goes?

Yeah, it's a great question. You know, it's probably similar, Craig, to some of these online services that will allow you to create a will, very low cost. And if you have a real simple situation, it certainly can be effective. I think, you know, the other approach would be, which is what I would typically recommend for $300 to $500 to get an attorney to weigh in on it. And, you know, you could have them review it. They'll probably just say, listen, I'll just create one myself for that $300 to $500 and make sure that they, you know, can ask you several questions, understand what you're trying to accomplish, make sure that it's valid for your state and, you know, make sure you have what you're ultimately looking for. Does that mean there's something wrong with what you have just because it was provided free?

No, I don't think so. But I think this is one of those things where, as the last stewardship decision you make, it's worth having some competent counsel to look over it and make sure that, you know, it's not only valid, but it's addressed everything you want to do. Obviously, one mistake in a will could cost way more than the attorney's fee. So I think that would be the other alternative. But if you say, no, I'm comfortable with it, I've got a simple situation, I've got something in place, it's been filed, I'm good.

Apart from that, I'd probably have an attorney take a look at it and either just review it and give you an opinion or draft a new one that could be updated every couple of years or when your situation changes. I hope that's helpful to you, Craig. Thanks for your call today. We've got several lines open today. We'd love to hear from you. Just on the other side of this break, we'll be taking many more of your questions. The number to call is 800-525-7000. We'll be right back on MoneyWiseLive.

Don't go anywhere. Great to have you with us today on MoneyWiseLive, biblical wisdom for your financial decision. Hey, have you considered a gift to MoneyWise Media? We're listener supported as a nonprofit ministry. We do what we do on the air and in our app as a result of your generous support and beyond the giving to your local church. If you would consider a gift, we'd certainly be grateful. You can head to our website, MoneyWise.org. Just click the give button and you'll find a way to give online, over the phone or through the mail. Again, a gift to MoneyWise Media is tax deductible and we'd certainly be grateful for whatever you can do.

MoneyWise.org, just click give. Thanks in advance. Let's head back to the phones. Again, a few lines open, maybe two or three. 800-525-7000 is the number to call. To Cleveland, Ohio, Emmanuel, thank you for calling.

Go right ahead. Hi, thank you for taking my call. I have a student loan debt. It's not a loan debt, actually. I was supposed to accept a reward for my summer semester. And then, for some reason, I just forgot I did not accept the reward and then I have a debt of close to seven grand right now and then next semester resumes the 29th of this month and I have to pay that just so I can graduate in December. I just want to ask, is it the right thing for me to do to take out a private student loan at this time because if I say I should go into payment plan, it's going to ruin me before the end of the year. I don't want to touch my savings with my wife, so that's where I'm at right now.

I just want to know what's the best shot. Yes, so would you actually be refinancing a loan or this is a bill that's unpaid at this point? It's unpaid. Okay, so you're going to owe this amount by what point will you owe this? I already owe it. Okay, you already owe it now. It's due currently and you're wondering how you should go about paying it. Do you qualify for federal loans?

Yes, I do. Okay, and why are you thinking private over the federal loan options? Because the federal loan option will not make up for my summer classes anymore this time. It's late for summer classes. I already called the school and then they were like, I can't do that anymore. It's only going to apply for my fall semester.

I see. Yes, so nothing that's already been in the past, but you can use private student loans to pay in arrears? Is that right for expenses you've already incurred is what you're saying? Yeah, can I do that? Is it possible for me to do that?

Yeah, that's a good question. I would check with the private lenders. I suspect that you can, given that that's what it's for and that this amount is owed and it can be paid directly to the school. The downside of the private loans is typically you have a little higher interest rate. It's going to be driven by your credit worthiness and your income. But then also you don't have the flexible repayment options. But I certainly understand that you don't want to chew up all of your cash that you have available. So I would go that route.

You can look for the best private lenders online and find out where you might want to go. SoFi would be one and there's a number of them now. But I'd do a bit of research.

They're all rated differently. But I'd probably look there first, Emmanuel. I think the key would be to make sure you have a repayment plan that's going to allow you to get out from under this within 10 years.

Let's not string it out any longer than that. And then obviously as you have resources available through your job and so forth, I'd try to really prioritize getting that paid back just as quick as you can. But beyond that, I think this is certainly a good option to look at how you would get that covered. Moving forward, if you need to do additional borrowing, try to minimize that as much as possible.

But I'd probably look at the federal loan option in the future. All right. Thank you very much. You're very welcome. God bless you, my friend.

Orlando, Florida. Eugenia, thank you for calling. Go ahead.

Thank you for taking my call. My question is, I will be 66 this year and I didn't draw my Social Security at 62, but I'm wondering, should I start drawing that and take that income and put it in an hour? Because I don't have that much in my 401k. Are you still working? Yes, I'm working full time, yes. And I was going to work about another two years.

Yeah. Well, I think the key here is, you know, does it make sense to go ahead and take it if you don't need it and put it in that IRA versus just letting it continue to build up? See, if you don't need it, you can let this continue to grow until age 70. And that monthly benefit check, that Social Security benefit is going to grow by 8% a year. And that's a guaranteed 8%, which the stock market return is not going to be a guaranteed increase of any amount.

So I think that's the benefit there. And you're in a situation where if you're healthy, you have the ability to continue to work, Eugenia, and you don't need this money. I like the idea that you would let it continue to grow by 8% a year. Now, you're giving up the ability to collect that money month after month until you start collecting at some point in the future. And there's going to be a period of time where you're going to have to, you know, wait to make up what you've given up by not taking it earlier. So, for example, somebody who waits till age 70 to start taking Social Security at, you know, a rate, you know, probably 18% higher than they would have at 67 or 24% higher than they would at 67. It's going to take them about 11 years of benefits where they've made up what they didn't receive between 67 and 70 through that higher payout. But then from that point, for the rest of their lives, they get that higher check. So I kind of like that option a little better for you where you'd say, no, I'm not going to take it. I'm just going to let it grow by 8% a year.

And then by all means, when you retire or you need the money, that's this time to start collecting it. Does that make sense? Yes, it does. Thank you so much. All right, Eugenia, we appreciate your call today. God bless you.

800-525-7000 is the number to call. You know, folks, as we think about managing God's money, here's the key. We want to live within our means. We want to avoid debt. We want to have some margin.

Boy, margin is key. Something left over after the bills are paid. We want to set long-term goals, but we also want to give generously.

Even in difficult times, that's going to break the grip of money over your lives. Say much more to come just around the corner on MoneyWise Live. Stay with us. Great to have you with us today on MoneyWise Live as we apply God's wisdom to your financial decisions and choices.

Back to the phones we go to St. Louis, Missouri. Mary, thank you for your patience. You go right ahead. Hi. Hi, Mary.

Hi, I got a question. I am ex-military and I get a pension and I get a disability. I have put part of my 401k into gold and silver and transferred it over there, but I still have a balance of $30,000 plus in my 401k now that with my employer I have now. I have $25,000 in credit card debt and I was wondering if I should take the 401k balance and pay off my credit cards with that.

If that would be okay, that would be a good move. Yeah, I mean I'd love for you to get rid of that credit card debt, especially now, Mary. I mean those variable rates on credit cards are really climbing in light of what's going on with interest rates right now.

So you said, give me the rundown. You've got $25,000 in credit card debt and then what are the various assets that you have available? I have $35,000 in gold and silver. Okay, and that's inside of a retirement plan? Yeah, it was just switched over from the 401k to whatever gold asset thing. Okay, but is it in an IRA?

Yes, on a gold IRA, I guess. Yep, and then what other assets do you have available? I do have some crypto. Okay, do you have any liquid savings? Probably about $1,000 in savings. Okay, all right, and then what are your income sources right now? Well, I have a full-time job and I am also getting my military retirement and disability. Very good, and when you look at all of those, do you have any margin left over at the end of the month after all the bills are played?

That's pretty close, but I have a little bit, like maybe $300 because I try to make extra payments on the cards so they would go down a little bit faster. Yeah, yeah. Well, I think that's the key. You know, I would rather you do a couple of things, I think, here. I mean, number one, you're over $59.5, so you're not going to have a penalty, so you could pull this money out and just wipe out the debt.

The challenge is that's going to leave you with very little for the future and it's all going to be taxable to you, so it'll be added to your taxable income for the year and could bump a portion of that up into a higher bracket. So that's number one. Number two is I'd really love for us to preserve that, and so the other way to approach these credit cards is through what's called debt management, where you'd work through a credit counseling agency. We use Christian credit counselors.

They're just wonderful. They've worked with thousands of our listeners and they help folks get out of debt on average 80% faster because what would happen is the cards would be closed. They'd be put into the debt management program. You'd pay one fixed monthly payment for repayment and the interest rates would be adjusted lower.

It will vary depending on the card, but they'll come significantly lower, which allows you to send the majority of what you're sending each month toward principal and not interest. And then you could let that 401k keep growing. I'd rather it not be all highly concentrated and precious metals, though. I think that's just going to be a little more volatile and not as good a long-term performance, historically speaking. I'd rather see you put that into a properly diversified stock and bond portfolio. And then the key is just to live well within your means. I'd love for you to take any margin that you have above the monthly payment to the debt management program and build up an emergency savings equal to three to six months expenses. So I'd try to get that thousand dollars up to, you know, whatever your expenses are times three or times six somewhere in there so that when you have to fall back on something for the unexpected, it's not taking on more credit card debt. You're able to cover that out of your savings and we break the cycle of the credit cards and get out of debt once and for all.

My fear is that not only would pulling from the 401k be expensive because you've got the tax on top of it, but it may result in a temporary solution that doesn't resolve the real underlying issue, which is we really need to dial back spending to free up more margin. And you might call me in six months and say, guess what, Rob, you know, the credit cards are back and maybe it's not twenty five thousand, maybe it's five or ten thousand. But I think we've got to break the cycle to the extent this is still an issue of living beyond your means. So that would be my preferred approach. Mary is to use the debt management, keep the 401k intact, get that rebalanced in terms of the investment strategy and then really focus in on building up the emergency fund.

But give me your thoughts. OK, now the the debt that I have is from trying to do a startup business. So I'm not so it wasn't just lifestyle spending. Sure.

Yeah. And the challenge with those are, as you probably have experienced and obviously I know nothing about what your startup business is, so I'm just talking generally here. But the challenge is it often takes more money and more time than we think to get a business up and running. And it can end up being kind of a money pit that we just sink more and more money into.

And if we don't have the financial kind of foundation to draw from to get that business started and do it in a way that's actually going to get it launched properly when we're trying to bandaid it together with with credit cards, that's can be a real challenge as well. Do you have reason to believe, you know, that is going to be successful in the near term? I think so, actually. And I've got a few sales already starting to come through. So it's it's you know, I don't expect it to go overnight, but it's it's growing.

Yeah. The challenge is just doesn't sound like you really have any way anything in the way of reserves. And that's just a little bit of a difficult spot to be in with your we've got a new business startup. So, you know, you're kind of right up to the edge there in terms of nothing to fall back on, especially if the 401k is gone. Now we really don't have anything. It really is only credit cards that we have as an option there. So I think I would go this approach, get on a monthly payment with Christian credit counselors dot org, take another look at that gold IRA and look at getting a different investment strategy there and just try to build up reserves as quickly as you can. So that, you know, if the business doesn't materialize as quickly as you think we've broken the cycle of having to get, you know, use credit cards to fill in the gaps. We'll certainly ask the Lord to give you some wisdom.

I know these are not easy conversations or decisions to make, but I'm confident you'll make the right one. And Mary, we appreciate your call today. A quick email. We receive emails all the time from our listeners. We're so thankful that we do. This one comes from Andrew.

He says, Rob, thank you for your valuable ministry. My wife and I both work full time and our house is paid off. I'm 60.

She's 62. I have no dependents except for my wife. Do I need life insurance?

And I would say not necessarily, Andrew. Your wife may be able to support herself while she's working. But the question is, would her income and then the assets you've built up be enough if your income was taken out of the mix? If not, then there's probably a place for maybe a 10-year term policy between ages 60 and 70, as long as you're on track to build up those assets. So then when you drop that at age 70, it's no longer necessary and she can depend upon your investment assets to cover her needs for the rest of her life if the Lord were to call you home. So I think that's the key.

If you already have the assets and she's not depending on your income, then I think you can drop it right away. Much more to come on MoneyWise Live. We'll be right back.

Stay with us. Thanks for taking my call. I'm 78 years old and I've had a Medicare Supplement insurance plan for years and years. And I'm considering taking the Medicare Advantage. They are telling me I don't have to pay anything for it and I'll just be some co-pays where I've been paying $280 a month for the other. I do not use my insurance very much.

So I'm just wondering, is it a too-good-to-be-true situation or is it something that I should pursue? Yeah, it is something to look at and the key was what you said there at the end. You don't use it very much. If you're generally in good health, an Advantage plan may be best where the supplement may be cheaper in the long run as if you go to the doctor a lot. The reason is an Advantage plan will cost less than a Medicare Supplement.

They replace Parts A and B and most include Part D for prescription drugs. And they have zero premiums beyond what you pay for Medicare out of your Social Security benefit. They do, however, have co-pays and out-of-pocket costs. Whereas the supplement plans work with the original Medicare Parts A and B and don't have the out-of-pocket costs you can have with an Advantage plan. So I think from that standpoint, because you're in good health, the Advantage plan may make sense because you have zero premiums.

Well, that sounds really – that almost sounded too-good-to-be-true because I don't go to the doctor much and at this point don't have dental or eye or ear or any of that. And this is supposed to cover at least part of that. Yes, yes. It's worth looking into. I'd probably talk to somebody who really specializes in this just to make sure you've thought it all through. But generally speaking, I think what you're hearing is correct and I think in your situation this would probably make a lot of sense for you.

So I'd definitely take a look at it. Linda, we appreciate your call today. God bless you.

Clearwater, Minnesota. Deanne, thanks for calling. Go right ahead. Hi. Good afternoon. How are you doing today?

Doing very well. Thank you for calling. We appreciate your call today. Awesome. So my question for you is – If you'll turn down your radio just a bit.

Oh, I did. I'm sorry. Okay. No, you're fine.

Go right ahead. Switched over. No problem. Okay. So my question for you is my parents got divorced when I was a young child and I have two older brothers and like a menagerie of stepbrothers, half-brothers, yada, yada. Anyways, my dad passed away and he was married, but I don't believe he had a will. So do his assets automatically go to his current wife?

Yeah. Well, if you die without a will, you would receive what's considered an intestate share. So the intestate just means there is no will. And so the question would be how the probate court is going to decide who gets what. So for instance, it would go to living children and the size of each child's share depends upon how many children there are, whether or not they're married and whether your spouse is also a parent and so forth.

Or whether your spouse is also their parent and whether your spouse has children from another relationship. So as you said, it does get complicated given how many people are involved here. If it's a stepmom you're talking about, she would inherit the first 225,000 of the intestate property plus half of the balance and then your dad's descendants, which would be you and your siblings would inherit everything else.

But again, it does get kind of complicated there. Have you all been in touch with the probate court with regard to how all this is going to be administered? Well, the other caveat to this is he died probably eight years ago and we were never contacted by a probate court by any lawyers or anything. And I'm sitting thinking about this and I guess getting more bitter over time, not better, and just wondering was it handled appropriately on her end? Did she consider the entire family in this process? She never has any other time, so I doubt that she did in this case.

Yeah, yeah. Well, obviously it would be something worth looking into. Maybe there was a will.

I mean, I think that's the other option here. But if there wasn't, the court would normally step in and make those decisions. So it sounds like a little bit more digging is probably in order just to find out exactly what was in place and what decisions were made and why.

You could seek your own counsel that perhaps could help you navigate this, because obviously this is foreign territory and it sounds like a pretty complicated situation. So I think if you're wanting to explore it a bit more, I would probably find an attorney that could work with you to do a little bit more digging into exactly what went on and why assets were distributed the way that they were. Right, and then I guess finding out what the time frame is.

Is there a statute of limitations on this? Yeah, so what would happen is to start the probate process, a petition would be filed for letters of administration, and that would let the court know they have to appoint an administrator to distribute the assets of the estate, and then that process begins from there. So this should all be able to be explored and understood as to why decisions were made that they were, but I certainly I think would behoove you to look into it and see exactly what went on there. Sorry that I know this is complicated, and relationally it can create some challenges here for sure among family members. So we'll ask the Lord to give you some wisdom, Deanna, as you navigate this. We appreciate your call today. To Kalamazoo, Michigan, Diane, thank you for calling. Go right ahead.

Hi, thanks for taking my call. My question is concerning my husband's RMD. He's 72 this year, ready to take the first draw. We'd like to give some to charity and some to ourselves to reinvest. We want to divide it into two different entities. I don't know if there's a possibility, or does this have to be done in only one distribution? Yeah, no, it can be taken in one lump sum or spread throughout the year. It just has to be distributed.

The total amount of the required minimum has to be distributed by the due date. Now, the portion that you want to go, Diane, to charity, you ought to do through what's called a qualified charitable distribution, where you don't recognize the distribution first and then give it away. It actually goes directly from the retirement account to the ministry or charity, and that's credited toward the RMD, but it's not added to your adjusted gross income. So that would be beneficial for you from a tax standpoint and for the ministry because they get the full amount, and whatever portion you send would go against your RMD for the year, and then you'd just have to be sure to take the rest of it that you want for yourself.

Okay, okay. So it can be divided then. We just are going to see our tax man, not our tax man, our financial advisor, and he said that he didn't think it would be able to be divided, that we would have to take it all at one time and then just hopefully get a tax credit when our taxes are done.

But I just thought it could be divided. Yeah, absolutely. The key is just that it gets out by that deadline, the full amount. It doesn't have to be done all at once, that's for sure. So hopefully that helps you, and I think that qualified charitable distribution could be a great tool for you as you think about this. So I would certainly check that out.

You'll want to talk to the custodian of your IRA to get that done. But we appreciate your call today, Diane. God bless you. Let's head to Florida, actually. Milan, thank you for calling. You're next on the program. Go right ahead. Yes, thank you for taking my call. Okay, so I'm a single mother.

My son has ASD. Right now, I'm currently living with a friend. I'm renting a room from her, and I feel like it's time for me to get my own place. I currently was a homeowner.

I sold two years ago. My son, like I said, he has ASD, and he's more on the behavioral side, so he hits my roommate's kids, he buys my roommate's kids, et cetera. So I feel like it's time for me to get my own apartment. So in Florida, the average good price for an apartment is like $2,000. So I was thinking about lowering my deductions as far as my 401K. Right now, I'm contributing 18%. My company matches 100% up to $500 a year. So I was thinking about doing that so my paycheck can be at least $2,000 every two weeks so I can be able to afford an apartment. Or is that a good way to go? Or should my dependents right now, I put zero?

Or should I put like one or two? How do I increase my pay? Yeah, so what you're talking about with regard to the dependents and so forth, the deductions, would have to do with how much tax is withheld. And the key there is to make sure to fill out the IRS form, follow their formula so you have the right amount of taxes withheld. The goal being that you don't owe anything at the end of the year, but that you're not getting a big refund either.

With regard to the 401K, that has nothing to do with that form. You just tell your employer how much you want withheld. And so you'll just go back to your employer and say, listen, I want less taken out. You tell them exactly what percent of your check you want taken out. And you could take it from 18% way down.

And I think you're right. Now is the time not to be thinking about saving for the future, even though that's important. Now is the time to be getting enough into your check so you can live and get your apartment and build your budget in such a way that allows you to provide for you and your son.

So I'd go talk to your HR department, have them reduce the amount being withheld for your 401K. Thank you so much for calling today. MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Thank you to Amy, Dan, and Gabby T, as well as Jim. Thank you for being here as well. We'll see you on Monday. Bye bye.
Whisper: medium.en / 2023-03-06 21:35:35 / 2023-03-06 21:51:58 / 16

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