February 13, 2012
Two of my favorite financial products are Series I U.S. Savings Bonds and Health Savings Accounts. Savings Bonds have been around a long time. Today I love the Series I bond for its nice rate in a low rate world, 3.06% for six months. I also like that interest is tax deferred and the rate is inflation adjusted every six months. These attributes make Series I Savings Bonds a wonderful emergency fund cash stash.
Starting in January 2012, U.S. Savings Bonds are sold electronically via www.treasurydirect.gov. Also starting in January, the limit on electronic purchases per person per year went up to $10,000 from $5,000.
Health Savings Accounts are a newer tool and must be associated with a High Deductible Health Plan. People with a high deductible health plan who open a Health Savings Account have a tool to pay for medical expenses with pre-tax dollars even if they don’t qualify for the 7.5% limit on Schedule A. This makes an HSA a great opportunity for taxpayers, especially those in the Alternative Minimum Tax zone. In 2012, the deductible limits are $3,100 for an individual and $6,250 for a family.
Things get better with an HSA – if it’s not used, it stays and becomes a secondary savings account earmarked for medical expenses. In retirement, an HSA instead of taxable IRA withdrawals can pay for medical expenses.
High Deductible Health Plans are not for everyone, and the rules governing management of a Health Savings Account are exacting. An HSA, however, offers useful tax savings and retirement planning opportunities especially for upper bracket taxpayers.
In 2012 many savers are worried about low interest rates on their savings accounts. U.S. Series I Savings Bonds and Health Savings Account are two tools that offer ways to maximize cash savings when used appropriately.