Scariest Financial Things

Halloween can be pretty scary — but not as scary as Open Enrollment for health coverage!  Enrolling for healthcare (Flexible Spending/FSA, Dental, Health Savings Accounts/HSAs, or Medicare, among others) can scare the living daylights out of even the smartest, strongest person.  We are presently in or near the “Open Enrollment for Healthcare” season.


By the way, another item, taxes, may be the next scariest topic, or even scarier. (Quick piece of trivia — taxes are the topic on which I receive more comments than any!).

Regarding enrollment in a health plan, even Richard Thaler (the behavioral economist who recently won the Nobel Prize in economics, featured in my last week’s edition) sounded in.  Apparently, it is extremely typical for people — from sophisticated business owners all the way to novice employees — to panic when it comes time to hit the “Enroll” button for healthcare.  In the case of healthcare enrollment, you are literally about to commit to spending thousands of dollars per year (often over $1,000 per month for families) on an entirely necessary item, but hitting the “Enroll” button is something that people put off, sometimes even missing the deadline.  Don’t miss the deadline

A couple of pieces of advice for making healthcare enrollment easier:

  • Check your latest pay stub (can be accessed online) for the totals you have spent year-to-date on healthcare premiums
  • Estimate how much you spent out-of-pocket last year on healthcare services (doesn’t need to be to the penny)
  • Keep a folder of statements of medical expenses, categorized by provider (physicals, annual appointments, etc.)
  • Know how much your deductible is or could be
  • Consider a Health Savings Account (IF your company offers it and IF you and your family are relatively healthy)

As for taxes*, in my recent edition, “On Taxes, Healthcare & Trump” I received several questions and comments related to the proposed tax plans (plans– plural) being circulated in Washington, DC.  I consulted with a handful of excellent CPAs and essentially their answer is, “we don’t know”.  Here are several of my guesses*:

  • One thing that seems somewhat likely to happen is the corporate tax rate may be lower than it is today. Good for business-owners.
  • Another item that seems to be at the top of the President’s list is to lower the top Federal tax bracket for individuals and joint filers.
  • State & Local taxes are on the table for a deduction elimination (the wealthy members of Congress are probably opposed to this).
  • The mortgage interest deduction will probably not go away…but is on the table.
  • If you think you may lose some deductions next year, then it may be better to put off charitable giving until next year to preserve deductions for next year — because I have not heard hardly any chatter on the charitable deduction going away.

However, to plan now, based on these proposals, is not entirely reliable.* Especially in 401k and IRA-land, the motivations and proposals are too diverse.  There is a concept called “Roth-ification” that means that Roth IRAs and Roth 401ks would be more the standard than the tax-deductible vehicles today.  To end the tax deduction for the $18,000 (or $24,000 for those over 50) 401k contribution or the $5,500 IRA contribution may remove the incentive to save for retirement — which could be a negative for a nation that saves too little already.  Talk about scary.

Please call me about any of these items and share the healthcare enrollment section with your kids or young people you know.

*Consult your tax adviser on ALL tax-related matters.


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