- quote -

My HSA (thru JP Morgan Chase) details:

no debit card fee (for transactions or having a card)
$1.85 account maintainance fee (monthly)
moving money into or out of HSA Investments ($0)
$1.67 per month Maintainace of investment account

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jIM wrote:
[...]
- quote -

In fact, it's not even found here.

Money goes in tax *deferred*, earnings grow tax *deferred*, and tax free
withdrawals only for medical expenses, no matter what age, are the key
points about an HSA. If you take the money (earnings *or*
contributions) out for other purposes, you will always pay income tax on
it, maybe a penalty too.

- quote -

HSA's are a great idea for young, healthy people, last I heard, but the
market is changing fast, or at least I hope so!

-Mark Bole

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On May 30, 2:11*pm, "HW \"Skip\" Weldon"
<skip5700removet...[at]hotmail.com> wrote:
- quote -

I am in month 6 of my HSA. It currently has enough in it to pay this
years medical expenses. This is my disclaimer.

Here is my understanding:
I have an HSA which earns interest and behaves as though it is money
market account. I need a chunk of the HSA in cash because I need to
cover immediate medical expenses (for example in 2008 I knew wife
would give birth to twins, so I knew most of money in HSA would be
spent). It does not make sense to invest that money in anything other
than cash.

I have an option to use brokerage within my HSA. That costs something
like $10/year. There might be transaction costs on top of this
depending on funds chosen.

I received the paperwork for the brokerage account when I enrolled,
but did not act on the paperwork because I know I needed cash in the
account for 2008. My understanding is YES I can invest the money in
anything (mutual funds, etfs, stocks) as I could through a broker, but
the fees for doing this suggest making a single lump sum investment as
the best choice.

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On May 30, 10:10*am, hh_onl...[at]mindspring.com wrote:
- quote -

If you are moving in two years much of the advice already given was
misguided (give general info, get a general answer; give specific
info, get a more specific answer).

Why are you moving? How much is the lump sum relative to
a) paying off current mortgage entirely?
b) putting a down payment on new house?

If the cash raised could represent a 50% down payment on new house, I
might keep it all in cash. If it could pay off current mortgage
entirely, I would consider that option (saves you 7%).

Give more information about housing situation for better advice.

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hh_online[at]mindspring.com wrote:

- quote -

Knowledge is power. If a no point, no closing loan is 5.5%, that's 1.5%
saved, $2500/yr. This is with no expense, just your time. Is that time
(my paperwork is easy to access, the real packets needed, 2 yrs
statements, taxes, income stubs, all at the ready) worth that money to
you? If there are none available and the costs are higher, then you need
to do some analysis. I'd keep the emergency money available, but see
little wrong with using the college money to pay down that 7% mortgage.
That's a guaranteed return and if you don't move the mortgage will still
end much sooner.
Joe

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hh_online[at]mindspring.com writes:

- quote -

I certainly wouldn't pay it down. If you're going to be
moving in less than 2 yrs, it's probably not worth
refinancing, either. If you may stay longer than that,
or even if you're pretty uncertain about that move,
talk to a mortgage guy about refinancing. You should
be able to save a decent bit by doing that.

But I absolutely would *not* tie up that cash in
paying off/down that house. You are young, you
have intermediate financial needs, and you can't
afford to pay it off completely (thus freeing up
monthly cash to re-build for intermediate needs).

Mortgage pre-payments, while potentially a good
move economically (ie. as compared to saving for
intermediate goals in something like a short-term
investment grade corporate fund) have serious
liquidity downsides - at best, to get back at that
money if you have other needs, you have to re-borrow
against the house either through a home equity line
(higher rate, floating rate, can be frozen) or by
another refi later on.

Again, consider other things coming up - car replacement,
kids college, etc. etc. - and consider them well -
before tying up you money in ways you can't easily
get at it.

(And, of course, this is all *after* you crank up
that emergency fund)


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On Fri, 30 May 2008 08:35:08 -0500, jIM <noreplysoccer[at]hotmail.comwrote:


- quote -

Do HSA accounts offer stock funds, or are they fixed accounts only?


-HW "Skip" Weldon
Columbia, SC

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- quote -

Joe and Jim,

Would you also recommend refi and paying down teh mortgage if there
was a possiblity that we would move within 2 years?

Thanks for the info on the HSA. I will research it.

HH

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- quote -

Two points-

1) I agree with Joe- at 7% mortgage rate, you have much savings to
your own bottom line by either paying this off early or refinancing.
There are real good rates right now on 15 yr fixed which are
significantly lower than the 7% rate you have now.

2) a Healthcare account (Flexible spending account) is not an HSA.
There is a huge difference. Flexible spending is a use it or lose it
proposition, meaning you only put in what you spend that given year.
An HSA carries money over year to year and also can grow like a 401k
with investments, interest and similar (all tax free).

The key point about an HSA is that money goes in tax free, the
interest and capital gains compound tax free, and health care expenses
from it are with drawn tax free. That triple threat (tax free
contributions, tax free growth, tax free withdraws) is not something
found in too many places.

Add to that when comparing an HSA to a 401k, you can access HSA money
at any time tax free for health care spending (there is no age to
start withdraws). You can contribute now and spend later, contribute
now and spend now and some employers even will contribute to this
account for you too (mine does).

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hh_online[at]mindspring.com;556041 Wrote:
- quote -




--
hoosieradvisor

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hh_online[at]mindspring.com wrote:

- quote -

Well, if you don't mind my jumping on this point, here's my view.
$170K, 7%, 30 yrs, the payment is about $1131
Don't know how far in you are, but if you paid it down to a $140,000
principal, a 5.75%, 15yr mortgage would be about $1163.

At 7%, I'd be looking to either refinance to something lower, or to make
extra principal payments regularly. In the last cycle, (March 04 to be
exact) I refinanced to 5.24%, 15 yr, with no points, no closing. Do your
research, if you find nothing, it just cost a bit of time, but if you
get a good deal, you can save $2K+ per yr in interest cost.

Joe

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- quote -


All,

Thank you for the input. I have found this newsgroup to be very
informative for the last few years. This thread is no exception.
Your time in responding is much appreciated.

Based on what has been said, I think I am going to bump up our
retiremnt savings (roth, 401K) to go from 13% of our income to 18%. I
will place 35K as an ermgency fund and use some of the rest to fund
2008s retirement accounts. I think the rest of will go into a taxable
account to cover intermediate expenses (future weddings for my young
daughters, future cars, paying down mortgage and home improvements).
I use vanguard for our roth accounts, and will probably use them for
my taxable account. Someone suggested a single mutual fund. What
about the "couch potato portfolio" style where there are 10 funds each
one accounting for 10% of the portfoilio. (ex
http://assetbuilder.com/Investing/inv_potato.aspx). What are your
thoughts on this?


BTW: Our home's mortgage rate is 7% and I have a medical spending
account through my employer.

Many thanks!
HH

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On May 28, 11:57*am, hh_onl...[at]mindspring.com wrote:
- quote -

I did not see what type of health plan you have (is it an HDHP/HSA?).
Consider using some of the funds to

a) increase Emergency fund to 6 months expenses
b) then fund 401k/HSA pre tax vehicles for 2008
c) consider a Roth IRA for 2008
d) consider a taxable account for retirement

b-c-d are really the same goal (retirement savings), with different
pros and cons for each. If HSA is available, I like that option the
best.

I would not pay down the mortgage if your rate is under 6%. If the
mortgage is over 7%, I would consider paying it off early as opposed
to some of the b-c-d options above.

I might consider a taxable investment as a mortgage paydown fund-
meaning if you have a 5.5% mortgage, look for a mutual fund which
typically returns around 6-7% per year before taxes, and invest any
money to pay down mortgage into that account. This improves your
liquidity for an emergency (beyond the emergency fund), and also helps
cash flow once you accumulate enough in this fund to pay down the
mortgage. This account could double as college savings for kids if
needed.

I have a taxable investment account, in addition to my IRAs, 401k and
HSA. I use the taxable account for any intermediate term (less than
15 year) expenses.

1) college for kids
2) new cars
3) early mortgage payoff payments
4) other less frequent expenses

If you think about less frequent expenses (new hot water heater, HVAC,
landscaping, home improvements) and look at what you would spend each
year on these, those could be monthly deposits to a liquid (taxable)
account which could help 1-3 above if the expenses do not occur when
expected.

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rick++ wrote:

- quote -

I think knowing what one's 401(k) match is, if any is most important. A
dollar for dollar match (or even 50/100 match) should take priority.
That 50 cents will pay the tax and penalty on the deposit should one
lose their job.

The other often ignored opportunity is to put the emergency money into a
Roth account (in MM or CDs). This meets your quick, cheap criteria, and
allows that if the OP is lucky for a time, his funds are growing tax
free (only the deposits are tax free withdrawals any time).

Joe

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joetaxpayer <joetaxpayer[at]nospam.com> writes:

- quote -

Smart move - get that retirement money working!

- quote -

Unless it's significantly above current rates, probably
not worth messing with.

And I wouldn't be in a rush to pay off that house.

Meanwhile, other mid-to-long term savings goals need
to be discussed. We always talk about retirement,
sometimes talk about college, but rarely talk about,
say, building up fund for purchasing one's next car.

To the OP - we need to talk about your goals before
we can really address the question fully. The only
thing I'd say we can suggest almost without hesitation
is that you beef up that emergency fund. $2k is nowhere
near enough, as you said. Build that up to about $30k
and the question of what to do with the remaining $45k
can be addressed.



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You are weak on emergency money.
Thats money to obtain with minor penalty in a week or two
and last you for several months.
Retirement and college accounts arent emergency funds
beacuse they have penalties, taxes, and may time to extract funds.
Loans and credit cards arent emergency funds due to interest costs.

Consider an after-tax investment fund - maybe a balanced fund.
You should conisder it as a n investment with an intermediate
term horizon. If you are expecting an "emergency" every year,
then that expense should really be part of the annual budget.

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On May 28, 11:57*am, hh_onl...[at]mindspring.com wrote:
[snip] My question is, what's the best thing to do
- quote -

bucks. Your grasp on matching earnings and savings with needs seems
very practical, sound, without debilitating concerns about fractional
decimal places. But, from what you say and your description, I'd say
your problems are just beginning (lucky you!). As you continue to earn
and save over the years you'll be more frequently faced with the
perennial investment decision, "What's the best thing to do with this
money?"

The amounts will be higher both in dollars and in proportion to your
lifetime totals. Most that I've seen in this forum will accept that
returns from sound investments in the stock market are amongst the
highest of various defined, normal, asset classes. You already have
some experience with stocks (e.g. the lot you sold). I'd buy and read
a couple of books on analyzing companies, with a view to investing in
the stock market, and put at least some of your 35k left over after
the emergency fund back into a stock market investment. If you are
confident the company you left will continue to prosper, that might
one place to invest 10k-20k. You didn't mention what your retirement
account is in.

Other than the above, even though it is hard to predict what your
salaries and wants may be thirty years from now, run a spreadsheet or
two using assumptions of around a 7% average annualized return and see
what your resources will look like under different assumptions. You
must be able to "ballpark" numbers - just to get a sketch. That should
give you at least some notion of your investment needs, and as you
refine your spreadsheets over the years, you'll be familiar with them
ten years from now and can get better projections.

Hope that adds something you find useful.

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hh_online[at]mindspring.com wrote:

- quote -

You both able to contribute to a 401(k)? This year limit (for the
contributions withheld from your pay) is $15,500 per person. Another
$5,000 can go into an IRA. (You are most likely in the 25% bracket and
pre tax investing is the way to go)
I'd be inclined to increase the retirement savings, maybe not to the
$41K combined max, but higher that the current $16K or so you are
putting in.
Since that would take place over time, I'd start (or increase) the 529
account(s) for the kids, and keep the $75K in MM or CDs and draw down on
it as you make those other investments.
What is the mortgage rate? How much time left? If the rate is high
enough to make a refinance sound, I'd take advantage of the lower 15yr
(vs 30yr) rate, maybe using some of the cash to pay down principal. But
that decision needs more analysis.

Joe

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After a job change and required company stock sale, I am going to have
around $75K after taxes. My question is, what's the best thing to do
with this money?

Our current situation:
1) ages 35 and 33.
2) 120K family income.
3) 5K monthly expenses
4) 3 children ages 2 to 16 years.
5) no debt besides our 170K 30-year fixed rate mortgage.
6) 13% of our income goes into retirement accounts (150K total in
various accounts)
7) funding college accounts for the kiddos.
8) only 2K in our emergency fund

My first thought is to drop it all into our MMA and use it as our
fully funded emrgency fund. However, it's more than the 6 months of
expenses (5K expenses X 6 months = 30K) rule that I often read about.
Would it be a better choice to have a 30K emergency fund and use the
other 35K in a non-retirement account, pay down our mortgage, fund up
the college accounts or hide it under the mattress ?? MMA rates
don't look that great right now, so I'd like suggestions.

Regards,
HH

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