Health Savings Accounts (HSAs) are one of the best savings vehicles allowed in the U.S. You get a tax deduction when you contribute money. The money grows tax free. When used for a qualified medical expense, that money comes out tax free. What’s not to like? Well, if you want to get picky, I don’t like the rules for passing this money to a non-spouse.

HSAs are relatively new. Most people haven’t seen them passed to a spouse, let alone a non-spouse. Your spouse can inherit your HSA and maintain the same tax treatment. As long as the money is used for medical expenses, it comes out tax-free.

Do you know what happens when an HSA is left to a non-spouse? All the money is taxed to the beneficiary in the year of the original owner’s death. There are ways to get around this. If you are “super funding” your HSA and investing it for growth, keep track of your expenses. Your beneficiary can submit those medical expenses up to one year after your death.

To be honest, submitting years’ worth of medical expenses to withdraw the funds tax free is asking a lot of a beneficiary. There’s enough paperwork and strategy around settling estates without adding this responsibility.

Perhaps a better approach would be to collect your HSA reimbursements in your 80s and consider it a win. Don’t go for the absolute maximum tax-free growth and risk missing out on the tax-free withdrawals.

About the Author: John O’Connor

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2022. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.

The updated 2023 contribution limits have been out for a while, but I’ll still throw them out there to make sure you didn’t miss them. They increase the maximum contributions annually to keep up with inflation…and there was a lot of inflation last year. In 2023 you can now save:

• $22,500 in your traditional or Roth 401k ($30,000 if you are age 50 or older)
• $6,500 in an IRA ($7,500 if you are age 50 or older) – this may not be tax deductible if your company has a 401k.
• $3,850 in your HSA ($7,750 if you are married) – you need to be in a high deductible health plan.

If you max out all of those, you’re a super saver! Way to go!

About the Author: John O’Connor

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2022. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.

As a parent with two young children, I’m constantly reminding myself to be flexible. Just yesterday, as I was walking my four-year old into preschool, she stopped to pick up salt on the sidewalk. I was in a hurry to drop her off and get to work, but she wanted to know why someone put salt there, why salt helps melt ice, why she should leave it outside, etc. We had a much better experience when I adjusted my plans and answered a few questions that lasted at most two minutes. She appreciated my flexibility.

Likewise, I appreciate the flexibility that the newly passed SECURE 2.0 bill is adding into 529 plans. Up until now, 529 plans could only be used on education costs. If you had leftover funds, you faced a penalty to withdraw your money or you could transfer it to another family member for education.

Now instead of having to give your college fund to your step-brother, you can save it for your own retirement. Starting next year, up to $35,000 of 529 plan funds can be rolled into a Roth IRA for the beneficiary. The account must have been open for 15 years, and you are subject to the normal Roth IRA contribution rules.

This change eliminates the main drawback to saving in 529 plans. You don’t have to worry about getting the savings exactly right. Having a little bit left over after college is paid for isn’t a problem.

Before I know it, preschool drop off will have changed into college drop off. I’ll have too much time on my hands and have some big tuition bills to pay. I’d better keep saving in my girls’ 529 plans, knowing there’s no downside to over saving a little.

There’s much more included in that massive bill. Let me know if you’d like a review of how it will affect your family.

About the Author: John O’Connor

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2022. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.

Here is an actual Wall Street Journal headline that popped up on my phone last week, “Almost Half of Stock Pickers Beat the Market in Early 2022 Selloff.” The subheading went on to exclaim that this was their best performance in 13 years.

Let me get this straight. 49% of U.S. large cap stock pickers achieved their goal by beating the S&P 500 Index over the first six months of 2022. That means 51% failed. And this is the best they’ve done collectively in over a decade. What is there to celebrate here? Was the bar really so low that more than half failing is considered a success?

Before you tell me that’s too short of a time period, the long-term numbers are consistently worse. You can see why we don’t overpay for traditional stock picking. I rest my case.

About the Author: John O’Connor

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2022. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.

I’ve seen an uptick in fraud attempts lately. Let me give you a few recent examples:

Someone called my father-in-law claiming he’d won Publishers Clearing House. They said he couldn’t tell anyone or he’d lose his prize. He just needed to send them some money to cover the taxes. He called me to confirm his suspicions that it was fraudulent. – thwarted

Someone posing as Geek Squad called a client and gained access to their home computer.

Someone posing as Amazon called a client and gained access to their home computer.

Someone posing as the tax authorities called a client and demanded payment of back taxes. – thwarted

I can’t even list the number of bogus emails that come at everyone regularly. Our team also had loved ones and friends who experienced a catfish fraud (online phony love interest asking for money), a fraudulent kidnapping ransom request, a fraudulent bail money request, and a fraudulent request from a hockey coach asking for help buying gift cards. Some were thwarted. Some weren’t.

What can you do to protect yourself?

• Don’t answer calls from numbers you don’t recognize. If it’s important, they’ll leave a message.
  • If it’s a message from the IRS, delete it. The real IRS sends letters if there’s an issue. They won’t call you. Heck, they don’t even have enough representatives to answer their phones.
• Don’t click on links from emails you weren’t expecting. If it’s a legitimate issue, they’ll reach out again.
• If you do want to verify something suspicious, open a new web browser to access your account the way you always do. From there find a trustworthy phone number to call. That will ensure that you don’t accidentally call a phony number or click on a malicious link. – Need help with this step? Ask me.
• Most of all, slow down and take your time. If you’re being rushed to do something, that should be a red flag that something is wrong.

The fraudsters are not going away. In fact, they continue to get better. I’ve seen some of my brightest clients get fooled. Don’t be embarrassed if it happens to you. Reach out to us. We can help lock down your accounts and look for suspicious activity.

About the Author: John O’Connor

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2022. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.