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Tag: Wealth Management

Putting a Price Tag on Your Health

We constantly hear how important it is to maintain a healthy lifestyle. That is not always easy, especially in the face of temptation or the easy option of procrastination. For some, the monetary benefits of maintaining a healthy lifestyle may provide an incentive.

 

Being healthy not only makes you feel good, it may also help you financially. For example, a recent Johns Hopkins Bloomberg School of Public Health study determined that a 40-year-old who simply moves from being obese to overweight could save an average of $18,262 in health care costs over the rest of his or her lifetime. If that person maintains a healthy weight, the average potential savings increase to $31,447.[i]

 

If you’re wondering how your health habits might be affecting your bottom line, consider the following:

Regular preventative care can help reduce potential healthcare costs. Even minor illnesses can lead to missed work, missed opportunities, and potentially lost wages. Serious illnesses often involve major costs like hospital stays, medical equipment, and doctor’s fees. Preventative dentistry may help you reduce dental costs as well.

 

In a way, staying healthy helps our potential to save for retirement. If your health declines to the point where you cannot work, that hurts your income and your ability to contribute to retirement accounts. The threat is real: the Social Security Administration notes that a quarter of us will become disabled at some point during our working years.[ii]

 

Higher weight seems to be a factor in overall health care costs for many. Ask the Centers for Disease Control and Prevention; they note that per-year health care expenses are about 41% higher ($4,870) for an obese individual than for a person of normal weight ($3,400). The biggest factor in this difference: prescription drug costs.[iii]

 

Some habits that lead to poor health can be expensive in themselves. Smoking is the classic example. A pack of cigarettes costs anywhere from $5-14, which means ballpark expenses of $2,000-5,000 or more a year in expenses for a pack-a-day smoker. Smokers also pay higher premiums for health, disability, and life insurance.[iv]

 

By focusing on your health, eliminating harmful habits, and employing preventative care, you may be able to improve your self-confidence and quality of life. You may also be able to reduce expenses, enjoy more of your money, and boost your overall financial health.

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.bankrate.com/banking/savings/healthier-lifestyle-can-save-you-money/

[ii] https://www.cnbc.com/2018/11/11/protect-yourself-from-a-career-derailment-that-trips-up-1-in-4-workers.html

[iii] https://abcnews.go.com/Health/Healthday/story?id=8184975&page=1

[iv] https://money.usnews.com/money/personal-finance/family-finance/articles/the-real-cost-of-smoking

Traditional vs. Roth IRAs

IRAs can be an important tool in your retirement savings belt, and whichever you choose to open could have a significant impact on how those accounts might grow.

 

IRAs, or Individual Retirement Accounts, are tax-advantaged accounts used to help save money for retirement. There are two different types of IRAs: traditional and Roth. Traditional IRAs, created in 1974, are owned by roughly 35.1 million U.S. households. Roth IRAs, created as part of the Taxpayer Relief Act in 1997, are owned by nearly 24.9 million households.[i]

 

Both kinds of IRAs share many similarities, and yet, each is quite different. Let’s take a closer look.

 

Up to certain limits, traditional IRAs allow individuals to make tax-deductible contributions into the retirement account. Distributions from traditional IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. For individuals covered by a retirement plan at work, the deduction for a traditional IRA in 2019 has been phased out for incomes between $103,000 and $123,000 for married couples filing jointly and between $64,000 and $74,000 for single filers.[ii],[iii]

 

Also, within certain limits, individuals can make contributions to a Roth IRA with after-tax dollars. To qualify for a tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Like a traditional IRA, contributions to a Roth IRA are limited based on income. For 2019, contributions to a Roth IRA are phased out between $193,000 and $203,000 for married couples filing jointly and between $122,000 and $137,000 for single filers.2,3

 

In addition to contribution and distribution rules, there are limits on how much can be contributed to either IRA. In fact, these limits apply to any combination of IRAs; that is, workers cannot put more than $6,000 per year into their Roth and traditional IRAs combined. So, if a worker contributed $3,500 in a given year into a traditional IRA, contributions to a Roth IRA would be limited to $2,500 in that same year.[i]

 

Individuals who reach age 50 or older by the end of the tax year can qualify for annual “catch-up” contributions of up to $1,000. So, for these IRA owners, the 2019 IRA contribution limit is $7,000.4

 

If you meet the income requirements, both traditional and Roth IRAs can play a part in your retirement plans. And once you’ve figured out which will work better for you, only one task remains: opening an account.

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits

[i] https://www.ici.org/pdf/per23-10.pdf

[ii] https://www.marketwatch.com/story/gearing-up-for-retirement-make-sure-you-understand-your-tax-obligations-2018-06-14

[iii] https://money.usnews.com/money/retirement/articles/new-401-k-and-ira-limits

Which is Better: Renting or Owning?

You’re moving. You’ve found greener pastures, and are looking forward—a little excitedly, a little nervously—to your new surroundings. You’ll be asking a lot of questions during this time. One of the biggest is, where will you live? To be a little more specific, should you rent or buy?

Here are some questions to ask yourself as you’re weighing your options:[i]

  • Can you afford to buy a house right now? How much money do you have saved?
  • How long do you plan on staying in the area?
  • Are you looking to settle down or do you want the flexibility to travel or move frequently?
  • Are you handy? Are you inclined or willing to do home repairs or renovations?
  • What are your goals involving your career and your family?

What are the advantages of renting? What are the benefits of owning? Let’s explore both sides.

Here are reasons why renting is good:[ii]

  • As a renter, you may have fewer maintenance costs and repair bills. If something that is part of the rental property breaks, it may be the landlord’s responsibility to fix it.
  • You may have access to amenities, such as swimming pools or fitness centers, that may cost homeowners bundles.
  • The taxman doesn’t cometh. You won’t get a property tax bill.
  • A tough housing market may spell bad news for homeowners, but renters are mostly immune to shifts in the real estate market.
  • You can jump ship relatively quickly as a renter and move elsewhere. You’re responsible for selling your home if you want to downsize or move. If you’re not committed to living in one spot for at least three years, renting may be your best choice.[iii]
  • If you fall into dire financial straits, you’re not saddled with a hefty mortgage.
  • As a renter, you don’t have homeowner’s insurance, you have renter’s insurance that is usually relatively inexpensive.
  • Apartment renters usually have lower utility costs.

Here are reasons why owning a home is good:[iv]

  • Owning a home is generally a good investment. If you own your home for many years, it may increase in value.
  • You’re able to create equity. Equity is the difference between what you owe and your home value. With each payment, you build equity. With your house, you can borrow against your home’s equity to meet other financial needs.
  • You may be able to reduce the amount of income taxes you may owe. Federal rules may allow you to deduct mortgage interest. Tax law has changed so you should consult with a professional tax preparer to learn more.[v] You may be able to deduct more during the early years of your mortgage with higher portions of your monthly payment going to interest.
  • Making consistent, on-time mortgage payments builds your credit history and may bolster your credit score. Lenders view you as a responsible borrower with a lower-default risk.
  • You have the freedom to decorate or renovate your home as you envision. You can paint your walls whatever color you want. You can knock down walls, redo floors, lay new carpeting, and design your home to fit your tastes or personality—without seeking permission from a landlord.

As you weigh your options, you can use rent-versus-buy calculators to determine your best financial options. The calculators request you plug in specific information: zip code, target monthly rent, target home price, and available home price. The calculator then shows you which is less expensive, buying or renting. Go to https://www.trulia.com/rent_vs_buy/ for a sample calculator.

Bankrate asks you a series of questions to help you determine your best choice financially. These questions include:

  • How much of a down payment are you able to make?
  • How much debt do you have?
  • What percentage of a home’s value would you be willing or able to make as a down payment?
  • What is your credit history?
  • How long do you plan to stay in your new home?
  • What are the average home prices in the area you’re considering?
  • Do you plan to itemize your mortgage interest?
  • What is the state of your budget?

To learn more, go to https://www.bankrate.com/calculators/mortgages/rent-or-buy-home.aspx.

We can guide you in making the tough financial decisions. Working with an independent financial professional can help you build a strategy for the pursuit of your future goals.

Contact us today at 800.929.1001 to learn more or visit our website!

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.bankrate.com/mortgage/renting-vs-buying-a-home/

[ii] https://www.investopedia.com/financial-edge/1112/reasons-renting-is-better-than-buying.aspx

[iii] http://time.com/money/collection-post/2792045/rent-or-buy-my-home/

[iv] https://www.discover.com/home-loans/articles/advantages-of-homeownership

[v] https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law

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