Money Crashers » Politics

How I Pay $85 A Month For My Health Insurance Policy

Erik Folgate — Thu, 10 Sep 2009 04:52:33 +0000

Health care is the big topic around the country right now. Politicians want to push a reform bill that many Americans don’t want. Americans want affordable health care, but they are weary about handing it over to the government. In high school and college, I never worried about health care. I was always under my mother’s health insurance policy, so I never worried about it. Then when I got married, my first “real” job paid for 80% of my health care premium, and the rest of it plus the premium for my wife to be added on was taken out of my paycheck every two weeks. I still paid around $240 a month for it, even with 80% of my premium being paid, so I know that health care policies can be very expensive.

When we moved to Orlando for my wife’s job, I was forced to quit my job, and it was very expensive for her to add me on her health insurance policy. So, I started shopping around and looking at my options. I knew about high-deductible plans with an HSA account, because I had researched them to write about on this blog, but I never had one in the past. Once I started getting quotes, I was really liking what I was hearing. In the past 9 months, I have relied on temp work, freelancing, and part-time positions to make an income. I don’t have a full-time job with benefits from an employer offering to pay for my health care plan.

The High Deductible Health Care Plan

For $85 a month, I have a full health care insurance policy with Assurant Health that pays 100% of my medical costs after I satisfy the $5,000 deductible. A $5,000 deductible for one person? That’s insane, right? Not for a young, healthy male that rarely needs medical attention. Plus, I have an endorsement attached to the policy for emergency medical care that waives the deductible if I break my leg or cut my finger off. Yes, $5,000 out-of-pocket is a lot of money, but it’s not much more when you factor in the cost of co-pay health care.

HMO/PPO health care plans

These plans are crap, and I would never have one unless my employer was paying for my premium. You’ll pay anywhere from $250 to $500 a month, plus you’ll be nickel and dimed by co-pays and many procedures only pay out 80% of the cost, and you are stuck the other 20 percent. Let’s say someone paid $400 a month for a health care premium, and they spent $250 in co-pays over the year. They would spend over $5,000 for health care that year, and that $4,800 in premium is gone no matter what. There’s a possibility that they would have spent less money paying cash if they were only paying for routine doctor’s visits and medication. I spend $1,020 a year in premium down the drain, and I run the risk of paying out an extra $5,000 if I need a large medical procedure or expensive medication, but I only incur that cost if it happens. The $5,000 from an HMO premium is down the drain no matter what.

The Health Savings Account

Additionally, I contribute $50 every two weeks to a Health Savings Account that has many advantages, and I can use this money towards any qualified medical expenses, including my deductible.

Tax Incentives: I am able to deduct up to $3,000 of HSA contributions from my 2009 taxable income. Also, money withdrawn from the account is tax-free and the interest it gains is tax-free.

The Money Never Goes Anywhere: Cafeteria Plans or Flexible Spending Accounts allow you to stash away pre-tax dollars for medical, dental, and vision expenses, but the money is taken from you if you don’t use it at the end of the year. When you contribute to an HSA, that money is always yours, and it always rolls over to the next calendar year if you don’t use it.

Debit Card: I have a debit card attached to my HSA account, so I can pay for doctor’s visits, prescriptins, over-the-counter medication, and other medical items when needed, and the debit card makes it very convenient. I would be very ticked off with it if I had to pay for something, fill out a form, fax it, and get reimbursed. That’s SO 20th century.

You Can Invest The Money: I have mine in a money market account that probably earns about .5% interest, but once you build up a good chunk of cash, you can start investing it in mutual funds with the broker that is affiliated with the bank that handles your account.

The Politics

I know the strong political debate behind health care, a single payer system, and the millions of Americans that don’t have health care. Please do not get the impression that I am saying that what works for me should work for everyone. Yes, I am a healthy, young male, so I received an ultra-premium rate, I understand that. But, I also know that many of the middle-class Americans that don’t have health care either choose not to pay for it, don’t want to take the time to do the research about affordable health care options, or they just don’t know much about high-deductible plans with HSA accounts. This is a great alternative for some people, so please check it out if you are in a similar situation as me. Related Posts:

How I Pay $85 A Month For My Health Insurance Policy is a post from: Money Crashers

Credit Card Regulations Bill Passed By Congress

Erik Folgate — Wed, 20 May 2009 19:47:09 +0000

The bill to regulate certain credit card policies has now passed through the Congress. Why is Congress regulating credit card companies? Because, they recongize the abusive consumer practices that credit cards perform each and every day, yet we still continue to use them. Here is an excerpt from the article from Fox News:

Meanwhile, the credit card portion is aimed at addressing consumer concerns.

The new restrictions would protect debt-ridden consumers from many of the surprise charges common in the industry, like over-the-limit fees and a charge to pay the bill by phone.

Some of the changes, including a requirement that cardholders receive 45-days’ notice before their rates are raised, are already on track to take effect in July 2010 under new regulations by the Federal Reserve.

But the legislation would put these changes into law and go further in restricting when and how banks charge people and who could get a card.

For example, the bill would require people under 21 to prove first that they can repay the money or that a parent or guardian is willing to pay off their debt if they default.

As banks scramble to make up for the lost revenue, cardholders who pay off their balance in full each month could also see annual fees become the norm and lucrative rewards programs canceled.

On the plus side for consumers, card holders who see their interest rate skyrocket because they have been late on a payment would get a chance at their older, lower rate if they pay their bill on time each month for six months.

Source: Fox News

I am about to sound like a complete pessimist, but that’s because I hate banks. These new regulations sound nice for the consumer, but banks will find a way to replace the revenue they will lose from the reduced interest rates. Going forward, it will be extremely tough to find a credit card without an annual fee and with perks such as reward points and cash back bonsuses. Basically, the government is going to make a bad financial product into a horrible financial product, because now you won’t even be able to get a gift card to chili’s or an extra $100 a year from paying all of your bills a credit card and pay it off immediately.

What are your thoughts on these new regulations? Will it improve credit cards or make them worse?

Look For The Make Work Pay Tax Credit In Your Paychecks

Erik Folgate — Sat, 04 Apr 2009 22:51:52 +0000

President Obama asked employers to start making adjustments to federal withholdings starting April 1st for the Make Work Pay Tax Credit. This was a stimulus-based tax credit that passed in the recent economic stimulus legislation passed in February. Last year’s stimulus plan sent lump-sum checks to individuals and couples with the hopes of these individuals putting the money back into the economy. This year’s plan will systematically distribute the tax credit in your paychecks.

Who Is Eligible?

Basically, anyone who has earned income. If you make less than $75,000 as a single filer or $150,000 as a married couple, you will receive the full amount. After that, there is a sliding scale of how much of the credit you will receive. The earned income amounts are based on your modified adjusted gross income, which is basically the same as your adjusted gross income. It adds back in income earned in foreign countries, Puerto Rico, or American Somoa.

If you are a very low income earner that does not qualify to pay any federal taxes, the credit is refundable, which means you would get the lump sum at the time you filed your 2009 taxes.

How Much Will I Receive?

It all depends on your marital status, how much you make, and the number of exemptions you claim on your W-4 form. Typically, individuals will get an extra $10 to $15 per week, and married couples who file jointly will see an extra $15 to $20 per paycheck. Single filers will receive up to $400 per year for the rest of 2009 and part of 2010, and married and filing jointly couples will receive up to $800.

Who Is Not Eligible?

Anyone who is claimed as a dependent on someone elses tax return is not eligible for the credit. Also, adults that received social security or veteran’s affairs benefits are not eligible for the benefits, but instead, you will receive a one-time $250 payment by sometime in late June of this year.

How Does Is It Work?

It modifies the tax withholdings tables, so employers will take less from your federal tax withholdings out of your paycheck. Again, low income earners who don’t have federal withholdings taken from their paychecks can claim the entire credit on their 2009 taxes when they file them in early 2010.

What Should I Watch Out For?

An article on Yahoo Finance courtesy of CNN Money has a good list of things to look out for:

The IRS has a calculator online that you can use to figure out how many allowances you should take if you’re eligible to receive the credit and don’t want to be overpaid — or to put it another way, don’t want to have too little tax withheld.

Those most likely to be overpaid are:

Anyone who holds more than one job. You will get paid the Making Work Pay Credit twice, up to $400 ($800 for a joint filer) from your first employer and up to $400 ($800 for a joint filer) from your second employer.

Joint filers whose spouses work. Each spouse will end up being paid the credit for married couples by each of their employers.

There’s a twist, too. Because of the way the withholding tables were set up, each working spouse may be paid up to $600 this year — instead of up to the $800, Mezistrano said.

In other words, the husband would receive $600 at his job and the wife $600 at her job, for a total of $1,200. Since they’re only entitled to $800 total as a couple, that means they would have to pay $400 back to the IRS — or see their refund reduced by that amount.

Anyone who receives income from a rental property or investment, such as interest and dividends. Your employer only knows about the income you earn at the company. If you receive other income that increases your modified adjusted gross income — or even pushes you past the income limits for the credit — you may end up owing the IRS some or all of the credit you received in your paycheck.

Anyone who started receiving their credit at the end of Febuary or anytime in March. The withholding tables are structured so that payments starting in April will add up to $400 for single filers and $800 for joint filers by year end. If payments start sooner than that a tax filer may actually receive a bit more than he’s due by Dec. 31.

Conversely, if your employer doesn’t start your payments until the end of April or in May — there’s no penalty if an employer doesn’t meet the April 1 deadline — you may end up getting a little less of a credit than you’re entitled to, in which case you can claim the rest when you file your 2009 tax return.

As many of you know, I am not a big fan of these “economic stimulus” plans. I don’t believe in spending our way out of a recession. If the government would start spending less money than they take in, the economy would be better off in the long-run. The biggest problem is that the government is spending someone else’s money, OUR money. It’s not coming out of their own pockets, so they don’t mind spending more and more money in an effort to restore the economy. Personally, if they are going to hand out money, I would rather receive it in a lump sum like we did last year. Then, I have more control over the money, and I can allocate it as I see fit. I doubt that I will notice an extra $50 spread out over two paychecks per month.

Will this extra money help you?
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Look For The Make Work Pay Tax Credit In Your Paychecks is a post from: Money Crashers

What Do You Think About Obama’s Plan To Reduce Charitable Giving Tax Deductions?

Erik Folgate — Wed, 11 Mar 2009 18:23:51 +0000

When President Obama announced his budget plan, one of his tax proposals was glossed over by the media, and I wanted to get your opinion about it.

Starting in 2011, President Obama plans to reduce the charitable giving tax deduction from 100% to 28% of your charitable contribution for families who earn over $250,000 in adjusted gross income. Right now, if you give $100 to your local charity, you can deduct $100 from your adjusted gross income, which determines how much tax you owe on your annual federal taxes. Obama has coined families making more than $250,000 per year as “wealthy”, so he is imposing a reduction in this tax deduction to 28 percent. For families that this applies to, they will only be able to deduct $28 per $100 they give to charity on their taxes.

PROS

This will help discourage wealthy people from avoiding taxes by setting up bogus charities to give to and receive a large tax deduction.
It will increase tax revenue for the government

CONS

It could discourage wealthy people from giving generously to charities and other non-profit organizations.
It’s really a tax increase without calling it a tax increase.
Charities and non-profits could see a reduction in revenue, thus causing them to scale down their operations and goals.

I have always been a strong advocate for giving generously to others, whether it’s your money or your time. One of my core beliefs about being financially responsible and accumulating wealth is to set yourself up to be a generous giver. I don’t like the fact that charities and religious organizations could suffer from this and the fact that wealthy people are being penalized for giving. I understand that there many wealthy people that manipulate in order to pay less taxes, but it seems to me that a watchdog agency for charitable contributions would be more beneficial than a reduction of the tax deduction.

What’s your take?

Will Obama’s Housing Rescue Plan Work?

Erik Folgate — Thu, 05 Mar 2009 03:14:39 +0000

Obama is making an effort to rekindle the housing market, and here is a good article outlining his propose plan.

I think the housing market is the key to jumpstarting our economy again. Everyone is focusing on the financial services and auto industry, but I think the real estate industry is the key to an economic recovery. I don’t like the idea of bailing out people, not because I don’t have a heart, but because buying a home is a risk. Failure is not always such a bad thing. Anyway, we are going to bail them out, and we’ll see how Americans respond to this gift.

Who will ths plan help?

For the most part, it will help those who have already defaulted on their loans. Lenders will have the ability to restructure the loan by reducing the interest rate and possibly the principal amount. They will try to reduce your loan payment to 31% of your household income. Obama says that this plan will weed out helping those who could never afford owning a home in the first place, because they will not restructure a loan that offers no plausible way to make the payment affordable based on the borrower’s income.

The mortgage must have originated before Jan. 1, 2009, and the unpaid principal can amount to no more than $729,750 for a single family home (more for a home with two-to-four units). Borrowers with other debt, such as car loans and credit cards, exceeding 55% of their incomes, may still qualify for a modification, but they’ll be required to accept debt counseling in a HUD-certified program.

Obama also claims there will be relief for some people that are unable to refinance their home, because they are upside down on their mortgage. I think this will be the minority of people that get relief from this package, because they will allow a refinance up to 105% of the value of the home. I know that many people are about 10% to 15% upside down on their homes, so I am not sure how many people this will help.

Who is not eligible?

If your house value has dropped more than 5%, you are out of luck.

How Do You Get Help?

Start calling your lender. Explain to them that you want help restructuring your mortgage and go from there. If they give you a hard time, refer to Obama’s plan and explain that you qualify for help.

Is there a catch to all of this?

Kind of. The restructured loan payment amount will only last for about 5 years, and then the loan will revert back to the original loan terms after that.

The reduced payment would stay the same for five years and then gradually revert back to the conforming loan rates in place at the time of the modification, increasing by no more than 1% a year.

I hope this works, because if more people start making their payments and confidence is restored in the housing market, we will see the financial services industry and the real estate industry make a rebound over the next 12 to 18 months. Related Posts:

Will Obama’s Housing Rescue Plan Work? is a post from: Money Crashers

The House Passes Obama’s Massive Economic Stimulus Recovery Plan

Erik Folgate — Thu, 29 Jan 2009 03:44:58 +0000

To read the whole story about the house of representatives passing the stimulus bill, CLICK HERE.

This bill is chalked full of spending that has nothing to do with stimulating the economy. Philosophically, I disagree with spending and building infrastructure to stimulate an economy. I think cutting taxes stimulates an economy better, because it puts more money into the hands of businesses and individuals. When businesses have more money, they have more room to expand and create jobs.

Next, the bill will go to the Senate, and they will banter back and forth for a little while about it. Democrats have enough votes to get this thing passed without any Republicans voting for it, so all of the hoopla and debate is trivial. I really hope this works for the sake of the country, but my gut tells me that it won’t work based on common sense. It’s not different than someone with a financial crisis and $100,000 in debt decides to borrow 1 million dollars to get out of the mess. Would you do that? Then, why is our government doing it?

What’s your take? Related Posts:

The House Passes Obama’s Massive Economic Stimulus Recovery Plan is a post from: Money Crashers

Obama Tries To Scare Us Into Another Stimulus Plan

Erik Folgate — Thu, 08 Jan 2009 22:18:16 +0000

Obama spoke of doom and gloom today after giving his strongest charge for nearly a $1 trillion dollar spending bill.

When you listen to him, it’s obvious that he’s trying to gain support from the American people by scaring us into believing that we need to spend more money to fix a problem. As a money crasher reader, do not take after the government when it comes to your personal finances. If you are going through financial problems, do not try to spend your way out of it. The smart thing to do is cut spending, save money, and do anything and everything you can to increase your monthly income.

This spending plan and so-called stimulus plan will put us into so much debt that we will be paying it back for decades. It will increase the size of the government and slowly take away our freedoms and liberties. My position on on this is not anti-Democrat. Republicans were spending like crazy for the past 8 years that they were in control, and I hated what they were doing as well. It’s sick, and the government needs to be stopped. We’re the only ones that can stop them from spending our hard-earned money. Call your local Congressman or Congresswoman to express your disgust in the proposed spending plan. Related Posts:

Obama Tries To Scare Us Into Another Stimulus Plan is a post from: Money Crashers

Obama Gives A Speech About His Proposed Economic Stimulus Plan for 2009

Erik Folgate — Sat, 03 Jan 2009 23:26:45 +0000

Obama is labeling the proposed plan as an “American Recovery and Reinvestment Plan”, and he wants it passed as soon as possible. The price tag could be $775 billion, and once again, politicians think the only way to get out of this economic slump is to spend more money. This philosophy was practiced by Bush and now Obama. Here is the speech he gave and released on radio and on YouTube.

What are your thoughts?Related Posts:

Obama Gives A Speech About His Proposed Economic Stimulus Plan for 2009 is a post from: Money Crashers

Information About A Possible 2009 Economic Stimulus Plan

Erik Folgate — Tue, 09 Dec 2008 14:26:28 +0000

During the presidential election, Barack Obama spoke about proposing an economic stimulus plan for 2009. Originally, Obama and Congress wanted to get a stimulus plan passed during his lame duck period, but Congress is no longer in session until the beginning of the new year, so it looks like that isn’t happening. The Democrats wanted to get two stimulus packages passed, one by the end of this year, and then another one in the beginning of 2009. Now, it looks like they will push for one comprehensive stimulus plan in January or February of 2009.

When Did Democrats Start Talking About A Stimulus Plan?

Last summer, Obama saw high gas and energy prices, and he and his staff devised a plan to stimulate the economy. Part of his stimulus plan would have given up to $1,000 per family as an energy tax credit to offset the high gas prices families were paying. He planned to pay for the stimulus plan by implementing a windfall profits tax against oil companies. Now that gas prices are at about a $1.75 per gallon on a national average, I assume that he will revise the name of the tax credit and where he gets the money from.

Here are some more proposals Obama has made while on the campaign trail:

Suspending penalties and income tax on early withdrawals from IRA and 401(k) accounts.
Offering a temporary tax credit of $3,000 to companies for each new full-time employee hired in the United States.
Extending unemployment benefits by a period of 13 weeks and temporarily suspending income taxes on those benefits.
Requiring a 90-day moratorium on foreclosures for homeowners.

The most likely economic stimulus plan that Obama will try to pass as the new president is called a “make work pay” tax credit that will give $500 per person or $1,000 per family, which will provide a partial tax credit from social security tax. The second proposal which could be part of one big plan would be an extension of the earned income. This would provide more tax relief to lower income workers.

Do we need another economic stimulus plan?

I really don’t know how the government thinks that handing out all of this money is going to get us back to a good position. It’s the most backwards thinking I have ever seen. They’ve already pumped in $150 Billion this summer, $700 billion to financial institutions, probably another $15 billion to auto makers, and now more billions of dollars in the beginning of the year. If you want to stimulate the economy, let free markets run the course. The government has meddled so much in the free market that after it’s all said and done, it won’t be a free market. The government will have a stake in every private industry, because every private industry wants a handout. We don’t need handouts, we need education and personal growth. Going through tough times builds character and teaches us lessons. The only way for this economy to flourish again is for individuals to take control of their finances by eliminating unsecured debt, saving for emergencies, and increasing their income. The government will not bail us out of an economic crisis. Only we will bail ourselves out of an economic crisis.
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Information About A Possible 2009 Economic Stimulus Plan is a post from: Money Crashers

Highlights of President-Elect Barack Obama’s Tax Plan

Erik Folgate — Thu, 06 Nov 2008 21:48:39 +0000

Congratulations to Barack Obama for winning the office of the most important and powerful person in the world. He wasn’t who I voted for, but it is truly a historic time to be alive to see the first African-American president of the United States. I know that one issue many are concerned about when it comes to Obama is his tax plan. Here is a good snapshot from Kiplinger’s magazine about what he plans to do with taxes.

Tax-Plan Highlights

Income Tax
Maintain current tax rates of 10% to 28% for most Americans. Reinstate top tax rates of 36% and 39.6% on joint income of more than $250,000 ($200,000 for individuals).

Capital Gains/Dividends
Maintain maximum rate of 15% for most taxpayers. Boost top rate to 20% for investors with income of more than $250,000. Under current law, taxpayers in the two lowest income-tax brackets pay zero capital gains in 2008, 2009 and 2010. Eliminate capital-gains taxes on start-ups and small businesses to encourage innovation.

Retirement Accounts
Suspend mandatory distributions for those 70 and older. Permit taxpayers to withdraw up to $10,000 from retirement accounts penalty-free; withdrawals would still be subject to income taxes.

New Tax Cuts
Tax credit of up $1,000 to offset Social Security taxes for low-wage earners. Eliminate income tax for seniors making less than $50,000. Double the tax credit for college expenses to $4,000. Create a 10% mortgage tax credit for those who don’t itemize. Provide a $1,000 rebate funded by a windfall-profits tax on oil companies to offset high energy costs.

AMT
Maintain current exemption and index to inflation.

Estate Tax
Set exclusion at $3.5 million per person ($7 million per couple); keep rate at 45%.

Social Security
Maintain current wage base of $106,800, indexed for inflation. Impose additional tax of 2% to 4% paid by employers and employees on earnings exceeding $250,000 — but delay implementation for at least ten years.

Corporate Tax
Keep top rate at 35%; close corporate loopholes.

I am a little concerned that his plan to raise taxes on people making over $250k a year is that it will affect small business owners. Also, I am conceld rned that he might raise taxes on corporations, which would force them to pass that tax increase on to the consumer. But, he does have a good plan to help senior citizens and protect lower income earners, which will give them a chance to improve their financial status. However, remember that a $1,000 handout does nothing for you if you don’t use it wisely. If you continue to consume rather than invest and pay off debt, you will never get ahead with your finances. We need to remember that a new president won’t solve all of our problems. If you want to get ahead with your finances, it starts with you. Take the personal responsibility to make yourself a better person and better your financial life. Obama won’t make you wealthy, only you can make you wealthy.Related Posts:

Highlights of President-Elect Barack Obama’s Tax Plan is a post from: Money Crashers