Author: Holly Donaldson

This author has written 421 articles

Reminders Before You Click “Renew” on Insurance and Benefits

Reminders before you click "renew" at enrollment time. When it comes to employer, private health, and Medicare benefits, it's easy to click "renew last year's choices" and move on. However, it can be worth the extra time to look closely at all options, and how they might have changed. Consider this amusing statistic: "Research shows employees only spend 17 minutes electing their benefits, while Netflix users spend an average of 18 minutes deciding what to watch," according to Kiplinger's. What kind of areas produce tricky choices? Health Insurance - Under 65 and over 65 Long term care insurance - if you can get it Long term disability insurance Life insurance Employer Stock Options and Restricted Stock Employer Retirement Plan Matching Employee Assistance Programs - (which sometimes cover financial planning fees :)) Under 65: Health Insurance If you are under 65, check for HSA (Health Savings Account) eligibility on your policy. Contributing to a family HSA can save roughly $2000/year in taxes (depending on your marginal tax bracket). Plus, if you are relatively healthy and do not use the HSA, your earnings grow tax-free until retirement. Click here [https://www.hollydonaldsonfinancialplanner.com/hsas-over-iras/] for the reasons why HSA’s beat IRA’s as retirement accounts. HSA eligibility, unlike IRA eligibility, is not dependent upon having earned income. The last year you can contribute to an HSA is the year before you turn 65. 65 or Over: Medicare If you are 65 or over, your first opportunity to enroll begins 3 months before you turn 65 and continues until 3 months after, unless you are still employed. Sign up for Part B at the first opportunity (after leaving your employer), otherwise your premiums can increase 8% – 10% per year, permanently. Enrollment for existing Medicare beneficiaries runs from October 15 - December 7. If you are on prescriptions, the formulary - the list of drugs that Part D covers - might have changed. Make sure your prescriptions will still be covered. Stories abound of huge jumps in co-pays after January 1. At www.medicare.gov, you can input your prescriptions and the site will advise you which Part D plan covers the meds you need. Long-Term Care Insurance Group long-term care offerings through employers are becoming a benefit of the past. Private policies can be bought with better coverage, but premiums are increasing. If you have access to a group policy, strongly consider enrollment. Most group policies are portable if you leave the employer, or if the employer stops offering it. Also consider shopping existing group coverage against a private policy. Long-Term Disability This tends to be the most overlooked benefit. We are all more likely to be disabled than to die. Most employers provide short-term disability for 90 days. Long-term disability coverage, if offered, varies from 40% to 80% of compensation until age 65. Some employers provide the opportunity to purchase supplemental coverage; others don’t. Most employees I speak with are either not sure whether they have enrolled in this coverage, or how much they have. Additionally, check whether…

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“Do I Need a Trust?” 7 Considerations

“Do I need a trust?” 7 considerations: Although it’s a legal question, it’s frequently asked of financial advisors. What do they say?  “Hey, I’m not an attorney,” is one possible—but maybe not the most helpful—answer.  “Hey, I’m not an attorney, but I can play one,” may be polite, but inadvisable.  “That’s interesting you bring that up. I’m curious how you heard about trusts.” This reply seems a little better. It keeps the focus on the questioner, and it’s pretty safe legally.  Pros and Cons of Trusts  Answers people may give for curiosity about trusts range from, “I dunno,” to citations of articles, websites, conversations with friends, family members, or even an estate planning attorney. All of the mixed messages about them can get pretty confusing.  For some people, trusts are a mysterious-yet-evil domain of the ultra-rich. This belief isn’t surprising. When was the last time you saw positive media coverage of a trust? It typically pops up when a billionaire’s “trust fund baby” is arrested.  There are dozens of kinds of trusts. For this post, “trust” means a revocable living trust. They tend to be the most common and relevant.  Trusts aren’t for everyone. They are costly to set up. Some people have difficulty implementing and maintaining them. They are powerful. Scary powerful, sometimes. Rather than answering, “Do I need a trust?” directly, I prefer to think of a few reasons why you might, and others why you might not. 7 Reasons You Might Want a Trust 1. If you own property in more than one state or country, you might want a trust. Trusts avoid probate—if drafted, executed, and implemented properly. Property in two states/countries means probate in two states/countries. In many states, probate attorneys charge a percentage of the probated asset value. Dollars spent now on a trust could seem small compared to the dollars spent on lawyers and court fees in two places later. 2. If you are concerned about a grown child’s ability to handle money, you might want a trust. A child gets the money with no strings attached if left through a joint account, will, payable-on-death (POD) designation, or beneficiary designation. Trusts let you build strings. One common example is to pay one-third of principal at age 30, one-third at age 35, and the remainder at age 40. As your family ages and changes, you can revise trust provisions like these. Revocable living trusts are amendable. 3. If you have a concern about a child’s current marriage, you might want a trust. Trusts can be written so that inherited assets can be protected in a divorce. Assets inherited other ways, especially if commingled with other marital assets, can be harder to protect. 4. If you have a concern about a child’s future marriage, you might want a trust. Trust provisions can be written for future spouses, too. 5. If you aren’t as concerned about dying so much as living a long time with chronic illness or dementia, you might want a trust. What happens…

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Read more about the article Good Retirement Planning Involves More than Money

Good Retirement Planning Involves More than Money

The best retirement plans start with a plan for a fulfilling life first, then match up the plan with money decisions. That's why good planners ask, what's the money for? For most, it's not to support boredom, stagnation and decline. If you define what an ideal retirement means first for you, then your retirement plan and your retirement life have far better chances of success.

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What is This Tax Form Arriving in May?

What is this tax form arriving in May? You just gathered all your forms two months ago and now a new one arrives after the deadline. What gives? Do you have to call your accountant again? Hold the calls. You may remember reporting to your accountant (or TurboTax) that you made some contributions to a Health Savings Account (HSA) or Individual Retirement Account (IRA). Perhaps you made them last year, or perhaps you made them before this year's deadline and had them count for last year. Or, you took money out of these accounts, or are getting ready to start your required minimum distributions (RMDs). These are reasons why you are receiving Form 5498. What's Form 5498 for? One purpose of the Form 5498 is for the financial institution that holds your account (called a “custodian”) to verify to the IRS that you did indeed make the contribution that you claim you did on your tax return. Since everyone usually has until the tax filing deadline to make contributions, the IRS gives custodians until May 31 to send Form 5498 to account holders. 2. Another is to verify distributions. If you are over the age for required minimum distributions (RMDs), Form 5498 also tells the IRS what your RMD will be for the current year. The RMD is determined by the account balance on December 31 of the previous year. What you need to do: Check that what's reported on the form matches up with what actually happened and also with what you actually reported on your return. Check Form 5498 For Errors Seriously, make sure it’s correct. Mistakes are common. In 2018, my husband and I both received erroneous 5498’s for our Health Savings Accounts (HSAs). Mine showed $0 contributions for 2017 and his showed 2 years’ worth. What the....? So we called the bank, got the records straight, and had them send corrected 5498s to the IRS. Why go to the trouble? If your 5498 contribution or distribution differs from what you reported on your 1040, at some point it could get noticed. One fantastic sunny day after skipping down to your mailbox, you may find inside a skinny white envelope with “Internal Revenue Service” in the return address. Fantastic day ruined. More than likely, all the letter will say is, “Hey, we noticed your 5498 doesn’t match your 1040. Whassup?” But still. It will be in IRS-Speak and look and sound and feel serious, with a deadline for giving them an answer. Save yourself the trouble of having to answer (or pay your accountant to answer for you) and do a quick check now. It only takes a few minutes. Does your contribution amount for last year look correct? Did you take any HSA or IRA distributions, and if so, do those look correct? (If not, make sure the distributions say $0.) Does the reported year-end account balance look accurate? Is your SSN correct? How about your name, including your middle initial? If anything looks amiss, contact…

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Ain’t Money Funny, Honey? 4 Conversation Ideas

Ain't money funny, honey? Sometimes, not so much. As Valentine’s Day came and went, a couple struggled with questions about consumerism, the meaning behind gifts, and how money affected their relationship. Whether it was financial inequality, overspending, or miserliness, humor was hard to find when they were surrounded by hearts-and-happiness messages. What can couples do to have a better relationship with money? Communicate. Money can be an emotional topic, so skillful discussion is the goal. Following are 4 ideas to get there. Before you try one, it's a good idea to plan a special fun reward or celebration at the end. The more you practice, the easier the conversations will get. You may find your differences become predictable, manageable, and even laughable. Monthly Money Date For monthly money dates, quickies are best! These are for checking the dashboard indicators in your household finances. Your first date will discuss what you both think those indicators should be. Is it your bank account balances? Mortgage or debt balances? Investment allocations? Cash flow (income less expenses)? Try to design a financial dashboard with your agreed-upon top two or three items. For each date, discuss how those are going and what the future looks like. In total, limit the date conversations to about 15 minutes. If you find a sticking point, schedule a day and time to tackle that point on its own. Build in fun and humor by focusing on your progress, positive wins, and gratitude. For the big ideas and thorny issues, make a separate date to discuss those using one of the following 3 formats. (Then move on to the "real" date part!) 48-Hour Relationship Conference No you don't have to talk about money for 2 days. What a buzzkill! Instead, in a Relationship Conference, each partner takes a turn being a pure listener to the other partner’s issues. Being the listener in a relationship conference means saying nothing while your partner talks. You can decide on the timeframe, but make it somewhere between 15 and 45 minutes. You can take notes. After the first partner shares, take a break from discussing anything money-related for 24 to 48 hours. Allow thoughts and feelings to arise. Then reverse roles. This will be the first partner's turn to simply listen. Then wait again for whatever timeframe you decide - 24 to 48 hours. Finally, take turns to summarize what feelings and issues came up. Make sure you give space for listening to each partner's perspective, checking in to make sure you heard them well. Remember to have an activity planned in advance to celebrate your ability to tackle a tough topic. Take Turns Active Listening Another option is to take turns all in one setting being the active listener. Active listening means being fully present to your partner’s issues and emotions without bringing up your own responses or emotions. (Tip: This is really hard for most people who have never done it before.) You do this by: repeating back what you heard, checking…

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“Do I Need a Trust?” 7 Reasons Maybe

“Do I need a trust?” Although it’s a legal question, it’s frequently asked of financial advisors. What do they say?  “Hey, I’m not an attorney,” is one possible—but maybe not the most helpful—answer.  “Hey, I’m not an attorney, but I can play one,” may be polite, but inadvisable.  “That’s interesting you bring that up. I’m curious how you heard about trusts.” This reply seems a little better. It keeps the focus on the questioner, and it’s pretty safe legally.  Pros and Cons of Trusts  Answers people may give for curiosity about trusts range from, “I dunno,” to citations of articles, websites, conversations with friends, family members, or even an estate planning attorney. All of the mixed messages about them can get pretty confusing.  For some people, trusts are a mysterious-yet-evil domain of the ultra-rich. This belief isn’t surprising. When was the last time you saw positive media coverage of a trust? It typically pops up when a billionaire’s “trust fund baby” is arrested.  There are dozens of kinds of trusts. For this post, “trust” means a revocable living trust. They tend to be the most common and relevant.  Trusts aren’t for everyone. They are costly to set up. Some people have difficulty implementing and maintaining them. They are powerful. Scary powerful, sometimes. Rather than answering, “Do I need a trust?” directly, I prefer to channel comedian Jeff Foxworthy’s famous phrase, “You might be a redneck if …” (anyone under 40 may have to look him up). It seems to help people discover for themselves whether a trust might be useful. 7 Reasons You Might Want a Trust 1. If you own property in more than one state or country, you might want a trust. Trusts avoid probate—if drafted, executed, and implemented properly. Property in two states/countries means probate in two states/countries. In many states, probate attorneys charge a percentage of the probated asset value. Dollars spent now on a trust could seem small compared to the dollars spent on lawyers and court fees in two places later. 2. If you are concerned about a grown child’s ability to handle money, you might want a trust. A child gets the money with no strings attached if left through a joint account, will, payable-on-death (POD) designation, or beneficiary designation. Trusts let you build strings. One common example is to pay one-third of principal at age 30, one-third at age 35, and the remainder at age 40. As your family ages and changes, you can revise trust provisions like these. Revocable living trusts are amendable. 3. If you have a concern about a child’s current marriage, you might want a trust. Trusts can be written so that inherited assets can be protected in a divorce. Assets inherited other ways, especially if commingled with other marital assets, can be harder to protect. 4. If you have a concern about a child’s future marriage, you might want a trust. Trust provisions can be written for future spouses, too. 5. If you aren’t as concerned about…

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Fall Benefits Reminders Before You Click “Renew”

Fall benefits reminders before you click "renew." When it comes to employer, private health, and Medicare benefits, it's easy to click "renew last year's choices" and move on. However, it can be worth the extra time to look closely at all options, and how they might have changed. Consider this amusing statistic: "Research shows employees only spend 17 minutes electing their benefits, while Netflix users spend an average of 18 minutes deciding what to watch," according to Kiplinger's: http://bit.ly/Kiplingers-Benefits. What kind of areas produce tricky choices? Health Insurance - Under 65 and over 65 Long term care insurance - if you can get it Long term disability insurance Life insurance Employer Stock Options and Restricted Stock Employer Retirement Plan Matching Employee Assistance Programs - (which sometimes cover financial planning fees :)) Under 65: Health Insurance If you are under 65, check for HSA (Health Savings Account) eligibility on your policy. Contributing to a family HSA can save roughly $2000/year in taxes (depending on your marginal tax bracket). Plus, if you are relatively healthy and do not use the HSA, your earnings grow tax-free until retirement. Click here [https://www.hollydonaldsonfinancialplanner.com/hsas-over-iras/] for the reasons why HSA’s beat IRA’s as retirement accounts. HSA eligibility, unlike IRA eligibility, is not dependent upon having earned income. The last year you can contribute to an HSA is the year before you turn 65. 65 or Over: Medicare If you are 65 or over, your first opportunity to enroll begins 3 months before you turn 65 and continues until 3 months after, unless you are still employed. Sign up for Part B at the first opportunity (after leaving your employer), otherwise your premiums can increase 8% – 10% per year, permanently. Enrollment for existing Medicare beneficiaries runs from October 15 - December 7. If you are on prescriptions, the formulary - the list of drugs that Part D covers - might have changed. Make sure your prescriptions will still be covered. Stories abound of huge jumps in co-pays after January 1. At www.medicare.gov, you can input your prescriptions and the site will advise you which Part D plan covers the meds you need. Long-Term Care Insurance Group long-term care offerings through employers are becoming a benefit of the past. Private policies can be bought with better coverage, but premiums are increasing. If you are at least 40 and have access to a group policy, strongly consider enrollment. Most group policies are portable if you leave the employer, or if the employer stops offering it. Also consider shopping existing group coverage against a private policy. Long-Term Disability This tends to be the most overlooked benefit. We are all more likely to be disabled than to die. Most employers provide short-term disability for 90 days. Long-term disability coverage, if offered, varies from 40% to 80% of compensation until age 65. Some employers provide the opportunity to purchase supplemental coverage; others don’t. Most employees I speak with are either not sure whether they have enrolled in this coverage, or how much…

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A new chapter in Gainesville

My husband and I have just relocated to Gainesville, FL, and we’re loving its shady streets, vibrant birdlife, and welcoming community. We’ve joined the Buy Nothing and Alachua Audubon groups, explored native flora with UF’s IFAS extension, and even attended a lively local book event. I look forward to connecting—how have you smoothed your own move?

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Read more about the article 3 Myths About Retirement Life: There’s More Than Money at Stake

3 Myths About Retirement Life: There’s More Than Money at Stake

The best retirement plans start with a plan for a fulfilling life first, then match up the plan with money decisions. That's why good planners ask, what's the money for? For most, it's not to support boredom, stagnation and decline. If you define what an ideal retirement means first for you, then your retirement plan and your retirement life have far better chances of success.

Continue Reading3 Myths About Retirement Life: There’s More Than Money at Stake

What is this IRS Form 5498 Arriving in May?

What is this IRS Form 5498 arriving in May? You just gathered all your forms two months ago and now a new one arrives after the deadline. What gives? Do you have to call your accountant again? Hold the calls. You may remember reporting to your accountant (or TurboTax) that you made some contributions to a Health Savings Account (HSA) or Individual Retirement Account (IRA). Perhaps you made them last year, or perhaps you made them before this year's deadline and had them count for last year. Or, you took money out of these accounts, or are getting ready to start your required minimum distributions (RMDs). These are reasons why you are receiving the form. What's Form 5498 for? One purpose of the Form 5498 is for the financial institution that holds your account (called a “custodian”) to verify to the IRS that you did indeed make the contribution that you claim you did on your tax return. Since everyone usually has until the tax filing deadline to make contributions, the IRS gives custodians until May 31 to send Form 5498 to account holders. Another is to verify distributions. If you are over the age for required minimum distributions (RMDs), Form 5498 also tells the IRS what your RMD will be for the current year. The RMD is determined by the account balance on the final day of the previous year (December 31, 2023 for 2024). What you need to do with the form is check that what's reported on the form matches up with what actually happened and also with what you actually reported on your return. Check Form 5498 For Errors Seriously, make sure it’s correct. Mistakes are common. In 2018, my husband and I both received erroneous 5498’s for our Health Savings Accounts (HSAs). Mine showed $0 contributions for 2017 and his showed 2 years’ worth. What the....? So we called the bank, got the records straight, and had them send corrected 5498s to the IRS. Why go to the trouble? If your 5498 contribution or distribution differs from what you reported on your 1040, at some point it could get noticed. One fantastic sunny day after skipping down to your mailbox, you may find inside a skinny white envelope with “Internal Revenue Service” in the return address. Fantastic day ruined. More than likely, all the letter will say is, “Hey, we noticed your 5498 doesn’t match your 1040. Whassup?” But still. It will be in IRS-Speak and look and sound and feel serious, with a deadline for giving them an answer. Save yourself the trouble of having to answer (or pay your accountant to answer for you) and do a quick check now. It only takes a few minutes. Does your contribution amount for last year look correct? Did you take any HSA or IRA distributions, and if so, do those look correct? (If not, make sure the distributions say $0.) Does the reported year-end account balance look accurate? Is your SSN correct? How about your…

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