Monday, January 16, 2012, AM | 5 Comments
We Americans like to save. These days it has become an almost pass-time for us. We look for coupons, discounts and many other venues to save money. However, there are other paths on this journey we can start embarking on where we can save even bigger. Many folks at work are either unaware that they can save more on what their employer may be offering, or worse they just don’t care or are lazy enough that they keep procrastinating. Folks can save more when they act now.
Health Savings Account
Opening Health Savings Account (HSA) may turn out to be one very important step to save money. It’s the kind of savings that is underutilized. Experts tell us this option may offer you significant medical expense savings benefits both now and in the future.
HSAs are tax-advantaged savings accounts that are paired with high-deductible health plans (HDHPs). For 2012, the annual contribution limit for joint filers is $6,250 ($3,100 for a single person filer) a year, including pretax contributions from your employer. Consider the tax benefits of an HSA:
- The money you put into an HSA is tax deductible,
- Investment gains are tax deferred, and
- Withdrawals from the account are tax free when used to pay for qualified medical expenses.
The tax advantages and potential savings gains of an HSA combined with an HDHP may make this workplace benefits path worth exploring.
Workplace retirement savings plan
Interest on debt such as mortgage or student loan is generally tax-deductible. That’s fine and dandy. But contributing to your workplace retirement plan may save a lot more because the amount you need to save for even basic expenses in retirement can be hundreds of thousands of dollars. For 2012, the maximum contribution is $17,000 to your 401(k) plan or other workplace savings account. That’s a $500 increase from 2011.
Employee Stock Purchase Plan (ESPP)
Many companies offer ESPP. If your employer does, participate in it to its maximum. That will save you more beyond your 401(k) plan. ESPP typically allows an employee to buy shares of a firm’s common stock at a discount of up to 15% from its current fair market value.
To enroll in the plan, you indicate the percentage or dollar amount you want withheld from your paycheck during a clearly stated offering period. This period can last up to 24 months. During this time, the employer holds the funds. At the end of this period, you receive shares of company stock that you can either sell immediately or continue to hold.
Talk to your Human Resources rep because details vary from plan to plan. As always, make sure your diversified portfolio reflects your risk tolerance, financial circumstances, and time frame.
In a Nutshell
So, you can save a lot by participating fully in your company’s retirement plan, Health Savings Account, and Employee Stock Purchase Plan. Do your own research. Understand issues concerning each plan. It will save you more money in the long run.