Due to the 2016 presidential election, parts of the Affordable Care Act described below may change. The current rules will likely stay in place through 2017. We’ll provide updates as they occur.
When an employer provides health insurance, you receive tax advantages that you don’t get when purchasing health insurance on your own. All the premium costs – whether paid by the employer or employee – are excluded from taxable income (both income tax and FICA taxes).
By contrast, individual health insurance you purchase on your own is paid for with after-tax dollars. These payments don’t receive the same tax advantages, so purchasing $1 of health insurance on your own is more expensive than purchasing $1 of health insurance through your employer plan
To address this, the Affordable Care Act (ACA) created a tax credit for individuals who purchase health insurance through the ACA marketplace. The credit is available to taxpayers earning up to 400% of the poverty level in the current year. For a household of two, that limit is $64,080 in 2017. A taxpayer’s income for this calculation is adjusted gross income (AGI), plus tax-exempt interest and any Social Security that was excluded from taxable income. So a married couple with no kids who earn $50,000 in 2017 would qualify for a tax credit if they had to purchase their own health insurance.
Because tax credits aren’t calculated until the end of the year, you have to pay your health insurance premiums all year in order to get money back when you file your taxes after the end of the year. This is where subsidies come in. read more…
Before traveling, it’s a good idea to figure out what your health insurance covers in case you have to make an unplanned visit to the hospital. Also, if you rent a car while traveling, the rental agency will ask if you want to buy rental car insurance, so it’s good to know whether you need it. Understanding how and where your health and auto insurance extend when out of town is important, especially if you want to avoid being on the hook for a big bill. First things first, though – make sure you travel with your healthcare insurance card for you and your family members, and bring proof of auto coverage.
What different types of healthcare cover?
Emergency care – HMO, PPO, HDHP, Medicare and Medicare Advantage healthcare plans cover medical emergencies no matter where you are. Emergency care is defined as medical conditions that require rapid or advanced treatments, such as surgery in a hospital setting. When traveling abroad, you’re still covered for emergency care (except in the case of Medicare and Medicare Advantage), but you may have to pay up front. Your healthcare provider will reimburse you afterward.
Urgent Care – If you need urgent care, HMO, PPO, HDHP, Medicare and Medicare Advantage (in most cases) healthcare plans cover you no matter where you are. This is for an injury or illness that requires immediate attention but is not an emergency, such as a sprained ankle or a severe sore throat that needs to be treated outside your regular doctor’s office hours.
Non-emergency, routine care – This type of care covers everything else. Plans differ on their coverage for non-emergency, routine care.
- HMO – You have to contact your primary care doctor first and get a referral. There are limits on the coverage when you travel outside of your plan’s network and around the country. Your primary care physician will direct your care. By coordinating through your primary care physician, you ensure that the care you receive is covered by insurance.
- PPO – Make sure to select doctors and hospitals in your provider’s network to keep costs down. Insurers like Blue Cross have large networks across the country with many doctors and facilities.
- HDHP paired with an HSA – Like with a PPO, visit doctors and hospitals in your provider’s network to get the best rates and reduce out-of-pocket expenses.
- Medicare – When traveling in the U.S., you can get the care you need at no extra cost. Medicare (original Medicare) doesn’t cover healthcare when traveling outside the U.S. There are a few exceptions, though, such as if you live in the U.S. but a Canadian hospital is closer to your home. There are Medigap policies that can provide coverage when traveling internationally.
- Medicare Advantage – Like with the other health plans, you may be subject to higher out of pocket expenses for seeing out-of-network doctors. Also, you may need to obtain prior authorization before you’re treated. Since private healthcare carriers manage Medicare Advantage, your coverage depends on your plan when traveling outside the U.S.
When renting a car, you’ll be asked whether you want to buy insurance coverage for the vehicle. The daily rate may be reasonable, but you don’t want to pay extra for coverage that’s unnecessary.
- Comprehensive and liability – If you carry comprehensive and liability coverage on your personal car, this coverage extends to your rental car and should be adequate, unless you’re renting a car worth much more than your personal car. Any gaps not covered by your primary insurance coverage may be covered by your secondary insurance provider, such as your credit card. Keep in mind, though, that this coverage does not extend beyond the U.S., Canada, and in some cases, Mexico. If you’re traveling outside the U.S, your secondary coverage, such as your credit card, becomes your primary.
- Personal effects coverage – Your homeowner’s, renter’s or condo insurance covers personal items if they’re stolen out of your rental car.
- Personal accident insurance – If you have personal accident insurance, the coverage extends to your rental car in the event of a crash.
Credit cards can provide secondary rental insurance. The car must be rented with a credit card under your name and you must decline full coverage from the rental car company for this coverage to be in effect. If you don’t have personal auto insurance, your secondary credit card coverage becomes your primary. In this case, consider buying the rental car insurance if they offer liability protection because credit cards don’t provide liability insurance.
Here’s what the following credit cards cover:
- VISA offers rental car coverage on all of its credit cards.
- Mastercard offers rental car coverage only with their Gold, Platinum, World and World Elite credit cards.
- American Express offers premium coverage for a small fee, and has options for increased coverage.
- Discover’s coverage is limited to a few cards (Escape, Motiva, Open Road, and More), and only covers collision costs.
For more information, see Rental Car Insurance: Which Credit Cards Have You Covered.
Your credit card is typically your secondary coverage. However, when traveling abroad, it becomes your primary because most personal auto policies don’t extend coverage beyond the U.S. and Canada. Check with your credit card provider to see if they offer coverage in the country you’re traveling to. If they do, find out what the coverage is, and ask if they charge something to upgrade the coverage, such as a daily rate or flat fee. If your credit card company doesn’t provide coverage in the country you’re traveling to and your personal auto insurance doesn’t extend, then it’s a good idea to buy the insurance the rental car company offers.
The experience of traveling can be a great way to live life to its fullest. However, being aware of what coverage you have and how it extends to the place you’re visiting is important because it can save you money, and more importantly, many headaches.
For some, a car is simply something that gets you from point A to point B, and there’s no reason to get the newest or most luxurious car. The challenge of holding onto a car for 10 plus years, though, is that you reach a point where you need to either continue putting money into the car for repairs, or look to buy a new car. Today’s cars are built to run 150,000 to 200,000 miles or more, but repairs and maintenance start to creep up when you pass the 100,000-mile mark. Considering that the average age of cars on the road now is about 11.4 years, many car owners are in this situation.
According to Edmunds, if the cost of repairing the car is greater than either its value, or one year’s worth of new car payments, then it’s time for a new car. If the repair is half the value of your car, though, then it makes sense to do the repair.
To find your car’s value, start by finding your car’s year, make, and model on Kelley Blue Book, Edmunds or NADA Guides. Evaluate how long the repair can extend the life of your car. Don’t forget to check for recalls on your vehicle to avoid paying for repairs that the dealership will repair for free.
Reasons to consider a new car read more…
When it comes to saving for your family’s college education, a 529 plan is one of the best savings vehicles out there. Its high allowable contributions, tax-free growth and withdrawal for education expenses, as well as the control the owner can exercise over the account without it being included in their estate, make this a unique investment. The more common type of 529 plan is a state sponsored offering that includes a number of different mutual funds to invest in stocks and bonds. With this type of 529 plan, you have the opportunity to receive excess investment returns and growth of principal; however, there’s also the risk of losing money, like with any other stock or bond investment.
With the Private College 529 Plan, families can prepay tuition that can be used up to 30 years later at today’s tuition rates. The tuition certificates can be redeemed at one of the nearly 300 participating private colleges. These include schools like Stanford, Seattle Pacific University and Pacific Lutheran University, and the list keeps growing every year. The difference between the Private College 529 Plan and state prepaid tuition plans like the Washington Guaranteed Education Tuition (GET) program is that it has far more participating schools, and it’s not tied to a state’s budget or operations. The program can spread investment risk across all of the participating schools throughout the country.
How does it work?
Similar to prepaid tuition programs, you’re buying tuition certificates or units that are guaranteed for up to 30 years after the purchase date at all participating private colleges at the time of purchase. You don’t need to select a private school to attend up front, but you can choose five sample colleges to determine your child’s progress toward covering the tuition cost at those schools. Unlike traditional 529 plans that can pay all costs for college, this plan can only be used to pay for tuition and fees and any other required fees for enrollment.
Tuition certificates must be held for at least 36 months before they can be redeemed to pay for tuition. So if you buy a certificate when your child is a high school senior and they’ll be attending a private college the following fall, they’ll have to wait until their senior year of college to redeem the certificate for a full academic year. read more…
You might want to open a new credit card to receive a bonus for signing up, or reduce the number of credit cards in your wallet with an annual fee, but opening and closing credit card accounts can impact your credit score. The question is, just how much does it impact your credit score, and is it worth sweating?
Most banks and credit lenders use FICO, which is the most common type of credit score. FICO scores range from 300 to 850. The score is based on the credit files of the three national bureaus – Experian, Equifax and TransUnion – with the following breakdown:
- Payment history 35%
- Amounts owed 30%
- Length of credit history 15%
- New credit 10%
- Types of credit used 10%
Payment history (35%)
This makes up the largest component of your score, which makes sense because your payment history demonstrates your ability to make payments on time. Even if you cancel a credit card, the payment history on that card will stay on your credit report for 10 years after the day it was closed. Positive credit data, created by otherwise using the card for purchases and making payments, stays on your account indefinitely.
If you’re just making minimum payments, it still counts as paying your credit card as contractually agreed, so that alone doesn’t hurt your credit score. If you find yourself forgetting to make payments, though, consider adding calendar reminders.
Amounts owed (30%)
Also known as debt burden, this category measures how much you’ve charged in relation to your overall available credit. This can be called your credit utilization rate, and it’s best to keep it lower than 20% of overall limit. Credit bureaus use three other metrics in addition to the credit utilization rate, including the number of accounts with balances, the amount owed across different types of accounts and the amount paid down on installment loans.
Canceling a credit card that has a high limit can hurt your credit score because it impacts your utilization rate. One way to remedy this is to ask for a higher credit limit to make up for the overall decrease on a remaining credit card. Be careful not to close credit cards before a big purchase like a home or a car, because you want your credit score to be as high as possible to get the most favorable interest rate and terms available.
Having a credit utilization rate of over 30% can hurt your credit score. If you’re just making minimum required payments, it’s likely that you’re also using more than 30% of your available credit, and the balance keeps increasing due to interest building up rather than being paid down.
Length of history (15%)
As your credit history ages, it can have a positive impact on your credit score. The two metrics tracked include average age of accounts and the age of your oldest account. It can be said that the oldest credit cards are the best credit cards for your credit score. This also takes into account how long other types of credit (auto, student, mortgage, etc.) have been established.
Closing a credit card may reduce the average age of accounts. Opening a new credit card will also reduce your average age of accounts, which hurts your score. The ideal age of credit card accounts is eight years or older.
New credit (10%)
Recent searches (also called hard inquiries) into your credit history, such as when you apply for a new credit card, can hurt your credit score. Hard inquiries also occur when a lender is evaluating whether to extend credit to you for an auto loan, student loan, business loan, personal loan or mortgage. Keep these inquiries to a minimum.
A soft inquiry, which occurs when opening a new brokerage account or part of a new employer’s background check, does not impact your credit score.
Types of credit used (10%)
This includes installment (auto loan), revolving (credit card), consumer finance (high interest rate, short-term loans like from Payday loans) and mortgages. Having a mix of different types of credit helps your score. This is based on the number and mix of accounts. If a loan is paid off recently, it will eventually be removed from your history.
The creators of the FICO score have an online credit score estimator you can use. Lastly, if you’re looking for a new credit card or you want to better understand the benefits of your existing credit cards, visit NerdWallet for comparison information.
Disability insurance helps protect you by providing income in the event of a disability. This insurance is particularly important because people are much more likely to become disabled than they are to die, which would be covered by life insurance. In fact, according to the Disability Insurance Resource Center, a 32-year-old is 6.5 times more likely to suffer a serious disability lasting 90 days or longer than to die.
In a previous post, we looked at a program designed to help young professionals, and even some students, protect their future earning ability in the event of a disability. There are two other disability benefits that individuals should consider, depending on their specific needs.
Student Loan Protection Rider
Student loan debt now totals $1.2 trillion, and the total student loan debt in the country is now greater than the total credit card debt. Not surprisingly, student loans are now the largest financial concern for many people. One reason for concern is that it’s almost impossible to get rid of student loans in the event of a financial hardship. For recent graduates with significant student loans, these can become an even greater burden in the event of disability.
The student loan protection rider can be added onto a disability insurance policy. With this rider, if the insured becomes disabled, the insurer will pay $500 to $2,000 per month for the student loan payments. Payments are made directly to the loan provider so that the beneficiary will not be over-insured. The rider has the flexibility to be dropped when student loans are paid off and it’s no longer needed.
The student loan protection rider is generally an inexpensive addition to a supplemental disability insurance policy. As medical students and other professionals increasingly graduate with over $100,000 in student loans, this rider can be a significant benefit for young professionals.
Retirement Protection Rider
With the loss of income that results from a serious disability, an individual also loses the ability to save for retirement. The retirement protection rider can be added onto a supplemental disability insurance policy like the student loan protection rider.
With this plan, after a client has been disabled for 180 days, the monthly benefit will be given to a fund where it’s invested as the client or advisor allocates. The benefit received from the insurer is non-taxable income because it’s a disability benefit purchased with after-tax dollars, but any income later earned by the investments would be subject to income tax.
The riders described above are more appropriate for some people than for others. Merriman does not sell insurance, but it’s important that we work with our clients to develop comprehensive financial plans. We are proud to work with our clients and their family members to identify what may be appropriate based on their specific needs and circumstances.