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At What Age Should I Teach my Child about Money?

There is no agreed-upon age to begin teaching your child about money. Some sources claim they should learn around age 7, while others say they need to be familiarized with the concepts at age 3. There are plenty of ways to teach your young child about money, especially in subtle ways that help them build the skills they will later need for financial literacy. 

Does a toddler really need to know about money?

As with many financial matters, our team at Blakely Financial believes the best advice is to start early. The sooner children learn financial fundamentals, the more likely they will become informed investors later in life. You never know; you may even benefit from learning alongside your child! If there are areas where you could use a refresher, take the time to review those topics as you approach them with your son or daughter. Remember to always consult with your financial advisor for guidance on investing and saving.

Obviously, a toddler will not understand the importance of a diverse portfolio. There are ways, however, to provide children with skills that will help them make smart financial decisions as they age. The first few years of life are critical for mental development. Toys that incorporate counting, such as building blocks, can help your child develop mathematical skills. Many young kids books also cover important topics like saving, spending, and the value of a dollar. 

How can I teach money skills to a young child?

Teaching your child about money doesn’t just mean describing how to create a budget. Forming a positive association with the concept of money is essential to future financial wellness. Be sure you and your partner don’t instill a negative association with money in your child by arguing about finances in front of them. Do not avoid the topic of money altogether, but be careful not to speak in such a way that could cause your child to associate negativity and stress with the concept of money. Your child could develop “money avoidance” tendencies where they resist acknowledging their finances or learning more about budgeting and saving. 

Consider using physical cash more often. If your young child only sees things being purchased with a card, they may take longer to understand the concept of money and the value of a dollar! 

Another way to indirectly teach a young child about money is to educate them on the difference between wants and needs. When you are very young, it can feel as if you need something that is actually just a want. Be sure to discuss the difference between these terms with your child so that they can learn to categorize the two by themselves. Talk about wants and needs in terms of the consequences they will face if they don’t get to have/do the thing they want or need. This line of thinking will help them prioritize their needs over wants; an essential skill for dealing with money later in life. 

How can these skills be expanded as my child grows?

The skills they learn (physical cash, wants vs needs, math) can be applied to their own purchases as they begin to earn and possess their own money. If your child receives money from family members for birthdays or holidays, consider how you will help them use it wisely! Maybe you will offer to hold on to some of the money for them or get them a piggy bank. Try to discuss what they would like to do with the money and make suggestions, but don’t go overboard!

Let them make mistakes. Though it may be tempting to take full control over your child’s money, you need to allow them the freedom to slip up. If, for instance, they immediately spend all of their birthday cash on a video game, they will learn the consequences when they want something else and don’t have any money left over. This is a far more effective lesson than simply being told what to do, so be sure to give your child a reasonable amount of freedom when it comes to spending! By the time they become a teenager, these skills will help them navigate the financial freedom of their first job and beyond. 

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other specialized advice we can provide towards your financial well-being.

What’s Driving Gas Prices Higher?

What’s Driving Gas Prices Higher?

Whether you’ve seen the prices at the pump, clicked on the headlines, or overheard discussions in the grocery store, you know the rising cost of gas has everyone talking. At the start of the summer driving season, the average price of regular gasoline in the U.S. reached an all-time high, surpassing $4.50 per gallon. Inflationary pressures, including strong demand, supply chain disruptions, and low inventories, have caused price spikes for many consumer goods. As the cost of filling your tank rises, you’re likely wondering which markets factors caused the spike in gasoline prices.

Costs and Taxes

Crude oil is the most important input cost for gasoline. This commodity is primarily refined into gasoline and other transportation fuels, including diesel and jet fuel. Ethanol, a fuel made from corn, is blended with crude oil to represent 10 percent of gasoline volume on average, according to the Energy Information Administration (EIA). Operating costs associated with refineries, transportation (e.g., pipelines, tankers, trucking), and gas stations, as well as federal, state, and local government taxes, contribute to gasoline prices. Differences in operating costs and taxes explain the wide range of gasoline prices across states.

Higher Gasoline and Crude Oil Prices

Figure 1 illustrates the strong correlation between the prices for gasoline and crude oil, which is currently around $115 per barrel for West Texas Intermediate (WTI), the U.S. index. Prices for both commodities have just about doubled since early 2021. Covid-19 lockdowns in China and plans by several countries to release strategic oil reserves helped ease oil prices in recent months. The price of gasoline, however, has continued to increase.

 

Figure 1. U.S. Gasoline and WTI Crude Oil Prices, 2007–2022

U.S. Gasoline and WTI Crude Oil Prices, 2007–2022

Source: Bloomberg

 

Decreased Refinery Capacity

Demand for transportation fuels, such as gasoline, dropped sharply early in the pandemic when consumers stayed home, causing several refineries to close permanently. Global refinery capacity fell in 2021 for the first time in 30 years, according to the International Energy Agency (IEA). U.S. refinery capacity dropped to 2015 levels, as shown in Figure 2. Additionally, existing U.S. refineries have limited spare capacity with utilization rates above 93 percent, the highest since December 2019. Meanwhile, refiners are generating record profits from strong demand, capacity constraints, and a higher spread between prices for oil and refined products, such as gasoline.

 

Figure 2. U.S. Refinery Capacity, 2007–2022

Figure 2. U.S. Refinery Capacity, 2007–2022

Source: Bloomberg

 

Lower Inventory and Higher Demand

Both U.S. gasoline and oil inventories are at low seasonal levels compared to the five-year range, as shown in Figure 3, which highlights U.S. gasoline inventories. Gasoline and oil demand recovered faster than supply over the past two years while the economy bounces back from the pandemic. Refineries typically boost output before demand peaks during the summer; however, capacity constraints limit supply increases. Although the U.S. still imports oil because its refineries were initially designed to process heavy crude produced from other countries, such as Canada and Venezuela, higher U.S. exports have reduced inventories as Europe seeks to reduce its reliance on Russia for energy imports.

 

Figure 3. U.S. Gasoline Stocks, 2020–2022

U.S. Gasoline Stocks, 2020–2022

Decline in Oil Supply

Global oil producers quickly cut capital expenditures early in the pandemic to preserve cash for debt servicing and other operating expenses amid highly uncertain oil demand and plummeting prices that fell to around $20 per barrel. Figure 4 illustrates the decline in oil production from the OPEC and the U.S., the world’s two largest groups of producers. Supply from Russia, the world’s third largest oil producing country behind Saudi Arabia, also declined after its invasion of Ukraine.

 

Figure 4. OPEC and U.S. Oil Production, 2012–2022

Figure 4. OPEC and U.S. Oil Production, 2012–2022

Source: Bloomberg

 

Oil Production Constraints

Global oil production is slowly recovering as producers have been more cautiously investing in long-term projects, such as offshore drilling, due to a highly uncertain demand outlook for oil. Traditional automakers, for instance, are investing heavily in electric vehicles amid policy support and plans by several countries to phase out internal combustion engines (e.g., gasoline, diesel) in the coming decades.

Furthermore, shareholders have forced publicly traded oil and gas producers to focus on capital discipline, profitability, reducing debt, and investor returns through dividends and stock buybacks. Production growth was the prior objective from a capital allocation standpoint, but producers struggled to generate positive cash flow and earnings following the 2014–2016 crash in oil prices.

Several other market developments have contributed to a slow recovery in oil production:

  • S. oil producers focused on drilled but uncompleted wells (DUCs) to limit costs when oil demand began to recover after the pandemic. In other words, producers sacrificed future supply growth by completing existing wells at a faster rate than drilling new wells.
  • A large portion of U.S. oil supply is produced from shale regions, such as the Permian Basin. Compared to conventional wells, shale wells have high depletion rates that average around 70 percent by the end of the first year, according to asset manager, GMO. This requires continuous capital expenditures to maintain or increase production levels by drilling new wells.
  • Small private oil producers have been the main source of production growth in the U.S. as opposed to larger publicly traded producers given shareholder demands for capital discipline.
  • Inflationary pressures and shortages for labor and materials, such as steel, reduced the operating capacity for oil field service companies, which supply oil rigs and other equipment to producers.

 

U.S. Production Forecasts

The U.S. is the world’s top oil-producing country with supply averaging 11.9 million barrels per day over the past two months. Forecasts from the U.S. EIA imply moderately higher production of about 200,000 barrels per day for the remainder of 2022. Oil production growth is expected to accelerate in 2023 and reach an all-time high, averaging more than 12.8 million barrels per day.

A Look Ahead

For the immediate future (this summer), it looks like gas and oil prices will remain high due to global supply issues, low inventories, and increased travel. There is hope for an ease or decline of prices later in the year with the potential for more supply and lower demand. Please contact my office with any questions or requests for more information on current prices or future forecasts.

 

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This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide for your financial well-being.

 

Robert Blakely is located at 1022 Hutton Ln #109 High Point, NC 27262 and can be reached at 336-885-2530

Securities and Advisory Services offered through Commonwealth Financial Network®,

Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products

and services are separate from and not offered through Commonwealth Financial Network®.

Authored by Brad McMillan, CFA®, CAIA, MAI, managing principal, chief investment officer, at Commonwealth Financial Network®.

© 2022 Commonwealth Financial Network®

Mid-Year is a Good Time for a Financial Checkup

The first half of the year is coming to a close. Conducting a mid-year financial analysis can be helpful. Here are some ways to make sure that your financial situation is continuing on the right path.

Reassess your financial goals

At the beginning of the year, you may have set financial goals geared toward improving your financial situation. Perhaps you wanted to save more, spend less, or reduce your debt. How much progress have you made? If your income, expenses, and life circumstances have changed, you may need to rethink your priorities. Review your financial statements and account balances to determine whether you need to make any changes to keep your financial plan on track.

Take a look at your taxes

Completing a mid-year estimate of your tax liability may reveal new tax planning opportunities. You can use last year’s tax return as a basis, then factor in any anticipated adjustments to your income and deductions for this year. Check your withholding, especially if you owed taxes or received a large refund. Doing that now, rather than waiting until the end of the year, may help you avoid owing a big tax bill next year or overpaying taxes and giving Uncle Sam an interest-free loan. You can check your withholding by using the IRS Tax Withholding Estimator at irs.gov. If necessary, adjust the amount of federal or state income tax withheld from your paycheck by filing a new Form W-4 with your employer.

Check your retirement savings

If you’re still working, look for ways to increase retirement plan contributions. For example, if you receive a pay increase this year, you could contribute a higher percentage of your salary to your employer-sponsored retirement plan, such as a 401(k), 403(b), or 457(b) plan. For 2021, the contribution limit is $19,500, or $26,000 if you’re age 50 or older. If you are close to retirement or already retired, take another look at your retirement income needs and whether your current investment and distribution strategy will provide the income you will need.

Evaluate your insurance coverage

What are the deductibles and coverage limits of your homeowners/renters insurance policies? How much disability or life insurance coverage do you have? Your insurance needs can change over time. As a result, you’ll want to make sure your coverage has kept pace with your income and family/personal circumstances. The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased.

Ask questions

Finally, you should also ask yourself the following questions as part of your mid-year financial checkup:

  • Do you have enough money in your emergency fund to cover unexpected expenses?
  • Do you have money left in your flexible spending account?
  • Are your beneficiary designations up-to-date?
  • Have you checked your credit score recently?
  • Do you need to create or update your will?
  • When you review your portfolio, is your asset allocation still in line with your financial goals, time horizon, and tolerance for risk? Are any changes warranted?Asset allocation is a method used to help manage investment risk; it does not guarantee a profit or protect against investment loss. All investing involves risk, including the possible loss of principal, and there is no guarantee that any investment strategy will be successful.

Doing that mid-year checkup will help you maintain course and achieve your goals. The team at Blakely Financial is always here to help, so call us today!

 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide for your financial well-being.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

BFI April Blog • Social Security Benefits

Working While Receiving Social Security Benefits

The COVID-19 recession and the continuing pandemic pushed many older workers into retirement earlier than anticipated. More than 50% of Americans aged 55 and older said they were retired in Q3 2021, up from about 48% two years earlier, before the pandemic.1

For people age 62 and older, retiring from the workforce often means claiming Social Security benefits. But what happens if you decide to go back to work? With the job market heating up, there are opportunities for people of all ages to return to the workforce. Or, to look at it another way: What happens if you work and want to claim Social Security benefits while staying on your job?

Retirement Earnings Test

Some people may think they can’t work — or shouldn’t work — while collecting Social Security benefits. But that’s not the case. First, however, it’s essential to understand how the retirement earnings test (RET) could affect your benefits.

  • The RET applies only if you are working and receiving Social Security benefits before reaching full retirement age (FRA). After reaching full retirement age, any earnings do not affect your Social Security benefit. Your FRA is based on your birth year: age 66 if born in 1943 to 1954; age 66 & 2 months to 66 & 10 months if born in 1955 to 1959; age 67 if born in 1960 or later.
  • If you are under full retirement age for the entire year in which you work, $1 in benefits will be deducted for every $2 in gross wages or net self-employment income above the annual exempt amount ($19,560 in 2022). The RET does not apply to income from investments, pensions, or retirement accounts.
  • A monthly limit applies during the year you file for benefits ($1,630 in 2022) unless you are self-employed and work more than 45 hours per month in your business (15 hours in a highly skilled industry). So, for example, if you file for benefits starting in July, you could earn more than the annual limit from January to June and still receive full benefits if you do not make more than the monthly limit from July through December.
  • In the year you reach full retirement age, the reduction in benefits is $1 for every $3 earned above a higher annual exempt amount ($51,960 in 2022 or $4,330 per month if the monthly limit applies). Starting in the month you reach full retirement age, there is no limit on earnings or reduction in benefits.
  • The Social Security Administration may withhold benefits as soon as it determines that your earnings are on track to surpass the exempt amount. After that, the estimated amount will typically be deducted from your monthly benefit in full. (See example.)
  • The RET also applies to spousal, dependent, and survivor benefits if the spouse, dependent, or survivor works before full retirement age. Regardless of a spouse’s or dependent’s age, the RET may reduce a spousal or dependent benefit based on the benefit of a worker who is subject to the RET.

Back to Work

In this hypothetical example, Fred claimed Social Security in 2021 at age 62, and he was entitled to a $1,500 monthly benefit as of January 2022. However, Fred returned to work in April 2022 and is on track to earn $31,560 for the year — $12,000 above the $19,560 RET exempt amount. Thus, $6,000 ($1 for every $2 above the exempt amount) in benefits will be deducted. Assuming that the Social Security Administration (SSA) became aware of Fred’s expected earnings before he returned to work, benefits might be paid.
In practice, benefits may be withheld earlier in the year or retroactively, depending on when the SSA becomes aware of earnings.

The RET might seem like a stiff penalty, but the deducted benefits are not lost. Your Social Security benefit amount is recalculated after you reach full retirement age. For example, if you claimed benefits at age 62 and forfeited the equivalent of 12 months’ worth of benefits by the time you reached full retirement age, your benefit would be recalculated as if you had claimed it at age 63 instead of 62. You would receive this higher benefit for the rest of your life, so you could receive substantially more than the amount that was withheld. There is no adjustment for lost spousal benefits or lost survivor benefits based on having a dependent child.

If you regret taking your Social Security benefit before reaching full retirement age, you can apply to withdraw benefits within 12 months of the original claim. You must repay all benefits received on your claim, including any spousal or dependent benefits. This option is available only once in your lifetime.

1) Pew Research Center, November 4, 2021

 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other expert advice we can provide towards your financial well-being.

ROBERT BLAKELY, CFP® is a financial advisor with BLAKELY FINANCIAL, INC. located at 1022 Hutton Ln., Suite 109, High Point, NC 27262. He is the founder and president of Blakely Financial, Inc.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Diversification and asset allocation programs do not assure a profit or protect against loss in declining markets, and cannot guarantee that any objective or goal will be achieved.

the Difference Between Medicare and Medicaid Blakely Financial

What’s the Difference Between Medicare and Medicaid?

It’s easy to confuse Medicare and Medicaid because they have similar names and are both government programs that pay for health care. But there are essential differences between the programs. For example, Medicare is generally for older people, while Medicaid is for people with limited income and resources.

What Is Medicare?

Medicare is a fee-for-service federal health insurance program that provides reasonably priced health insurance for retired individuals, regardless of their medical condition, and for specific disabled individuals, regardless of age. Centers for Medicare & Medicaid Services manages the benefit.

What Is Medicaid?

Medicaid is a health insurance assistance program jointly administered by state and federal governments. Medicaid serves financially needy individuals who are also elderly, disabled, blind or parents of minor children.

Who Is Eligible for Medicare?

You are eligible for premium-free Part A (hospital insurance) if you are age 65 or older and you (or your spouse) worked and paid Medicare taxes for at least ten years.

You may be able to buy Part A if:

  • Neither you (nor your spouse) paid Medicare taxes while you worked

AND

  • You are age 65 or older and a citizen or permanent resident of the United States

Medicare coverage also may be available for disabled individuals and people with end-stage renal disease. While most people do not have to pay a premium for Part A, everyone must pay for Part B if they want it. This monthly premium is deducted from your Social Security, Railroad Retirement, or Civil Service Retirement benefit.

Who Is Eligible for Medicaid?

Each state has different rules about eligibility and applying for Medicaid. To qualify, you must be a resident of the state you are applying to and a U.S. citizen (or have qualified immigration status). While eligibility varies by state, federal law requires states to cover certain groups of individuals. Low-income families, eligible pregnant women and children, and individuals receiving Supplemental Security Income (SSI) are examples of mandatory eligibility groups. In addition, recipients must meet a financial eligibility requirement. As determined by income and asset limitation tests, the individual must be financially needy.

What Does Medicare Cover?

Currently, Medicare consists of four parts: Original Medicare Part A helps cover costs related to inpatient care in a hospital, a skilled nursing facility, hospice care, and home health care. Original Medicare Part B helps protect services from doctors and other healthcare providers, outpatient care, ambulance services, lab tests, physical therapy, durable medical equipment (like wheelchairs, walkers, hospital beds), and many preventive services such as screenings and vaccines. Medicare Advantage (Part C) replaces Parts A and B and enables beneficiaries to receive health care through managed care plans such as health maintenance organizations and preferred provider organizations. Finally, Medicare Part D helps cover the costs of prescription drugs.

What Does Medicaid Cover?

Each state administers its own Medicaid program within broad federal guidelines. Thus, states determine the amount, duration, and types of Medicaid’s benefits. Typical Medicaid programs cover inpatient and outpatient hospital services; physician and surgical services; lab tests and X-rays; family planning services and preventive care, including immunizations, mammograms, colonoscopies, and other needed care; mental health care; and services for pregnant women. There are also numerous optional benefits that states may offer.

Can Both Medicare and Medicaid cover you?

Some people who qualify for both Medicare and Medicaid are called “dual-eligibles.” Most healthcare costs are likely covered if you have Medicare and full Medicaid coverage.

What About Long-Term Care?

Most long-term care isn’t medical care but instead helps with basic personal tasks of everyday life, called custodial care. Medicare does not pay for custodial care. However, Medicare may pay for skilled care (e.g., nursing, physical therapy) provided in a Medicare-certified skilled nursing facility for up to 100 days. States have considerable leeway in determining benefits offered and services provided by their respective Medicaid programs. Generally, if you meet your state’s eligibility requirements, Medicaid will cover nursing home services, home, and community-based services, and personal care services.

 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Tax Season Scam Alert Warning Blakely Financial

Tax Season Scams Alert

Presented by Robert Blakely, CFP™ 

With tax season upon us, many of us are busy gathering the appropriate documents, meeting with CPAs, and ensuring to meet all relevant tax deadlines. But in all the hustle and bustle, taxpayers also need to keep an eye on the risks, especially tax season scams. Scammers get savvier with strategies to access other people’s personal information and money each year. To help you steer clear of this year’s top scams, learn red flags to watch out for—along with some timely tax-filing reminders.

“Ghost” Tax Return Preparers

One truly frightening scam haunting taxpayers is the ghost preparer. These preparers remain hidden from the IRS by not signing returns, making the returns appear to be self-prepared. In cases where the individual e-files, the ghost preparer will refuse to sign the return digitally. The result can be disastrous for taxpayers, leaving them open to serious filing mistakes, tax fraud, penalties, and audits by the IRS.

Red flags. To help avoid this issue, be aware of red flags surrounding ghost preparers. They usually:

  • Don’t sign the return with a Preparer Tax Identification Number (PTIN) (The PTIN is required by law for anyone who is paid to prepare or assist in preparing a federal tax return.)
  • Lure clients in with the promise of big refunds (Unfortunately, these scammers will resort to claiming fake deductions to boost the size of the refund.)
  • Require payment in cash
  • Have refunds directed into their bank accounts, not the taxpayer’s

Pro-tip. If you’re looking for someone to prepare your taxes, the IRS has an excellent online resource that offers a tool for checking your tax preparer’s credentials and tips for avoiding potential tax scammers. No matter who prepares your return, it’s essential to review it carefully, including the routing and banking numbers if you’re receiving your refund via direct deposit.

New Round of COVID-19 Scams

As the coronavirus continues to spread, so do scams, unfortunately. Criminals often try to exploit taxpayers during times of uncertainty, and this pandemic has been no exception. The latest COVID-19 scams center around the most recent round of stimulus payments. They have taken on a few forms, all with the singular goal of stealing taxpayers’ money and personal information.

 Red flags. The IRS Criminal Investigation Division has compiled a list of the latest COVID-19 scams. Here’s what to be on the lookout for:

  •  Text messages asking you to disclose bank account information to receive the $1,200 economic stimulus
  • Emails, letters, and social media messages that use “coronavirus,” “COVID-19,” and “stimulus” in different ways, requesting personal information and financial account information (e.g., account numbers and passwords)
  • Sale of fake at-home COVID-19 test kits
  • Fake donation requests for individuals, groups, and areas heavily affected by COVID-19
  • “Opportunities” to invest in companies developing COVID-19 vaccines, which also promise these companies will drastically increase in value as a result

 Pro-tip. If you receive unsolicited emails or social media attempts to gather your personal information and appear to be from the IRS or an organization linked to the IRS, forward the message to phishing@irs.gov.

Online Identity Theft

One of the most common tax scams remains personal identity theft, particularly rampant during tax season. Why? Scammers can file phony tax returns and steal refunds by accessing unsuspecting taxpayers’ social security numbers, addresses, and birth dates. The worst part is this can all be done before the victims even know their identities have been stolen.

Red flags. So, what can you do to help ensure that someone doesn’t file a return in your name? Know the warning signs of this pervasive scam. If you receive an IRS notice regarding any of the following, contact the IRS immediately: 

  • a duplicate return
  • that you received wages from somewhere you never worked
  • you owe additional taxes or that the IRS will offset your tax refund
  • collection actions are being taken against you for a year you did not file a tax return
  • As noted above, ensure that your tax preparer has the appropriate credentials.
  • Unless there is a valid reason, don’t give out your social security number—and always know who to whom you’re giving it.

Pro-tip. The best way to avoid this scam is to file your taxes early before a scammer can access your information. You might also think about proactively using an Identity Protection PIN (IP PIN) to protect yourself from identity theft. The IP PIN is a six-digit number known only to you and the IRS that you can use to help the IRS verify your identity when a paper or electronic tax return is filed.

Never Has the IRS Ever . . .

One of the most important things to know is how the IRS does (and doesn’t) contact taxpayers regarding tax scams. Here are some things the IRS won’t do:

  • Demand that you pay taxes without the opportunity to question or appeal the amount it says you owe
  • Call to demand you make an immediate payment using a specific method (e.g., prepaid debit card, gift card, or wire transfer)
  • Threaten to bring in local police, immigration officers, or other law enforcement to arrest you for not paying (Threats are a common tactic used by scammers.)

If you get a call or email that sounds like any of the above, it’s likely a scam. For steps to take if you suspect fraudulent tax activity, visit the IRS’s Report Phishing and Online Scams page.

Scams Don’t End with Tax Season.

Although the focus here is on tax season, we would all be wise to remember that new scams pop up every day, year-round. So, keep your personal information safe and be on the lookout for potential scams.

 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

 

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© 2021 Commonwealth Financial Network®

High Deductible Health Plan Robert Blakely Blakely Financial

Is a High-Deductible Health Plan Right for You?

In 2020, 31% of U.S. workers with employer-sponsored health insurance had a high-deductible health plan (HDHP), up from 24% in 2015.1 These plans are also available outside the workplace through private insurers and the Health Insurance Marketplace.

Although HDHP participation has proliferated, the most common plan — covering almost half of U.S. workers — is a traditional preferred provider organization (PPO).2 If you are considering enrolling in an HDHP or already enrolled in one, here are some factors to consider when comparing an HDHP to a PPO.

Up-Front Savings

The average annual employee premium for HDHP family coverage in 2020 was $4,852 versus $6,017 for a PPO, a savings of $1,165 per year.3 In addition, many employers contribute to a health savings account (HSA) for the employee, and contributions by the employer or the employee are tax-advantaged (see below). Taken together, these features could add up to substantial savings that can be used to pay for current and future medical expenses.

Pay As You Go

You pay more out of pocket for medical services with an HDHP until you reach the annual deductible in return for lower premiums.

Deductible: An HDHP has a higher deductible than a PPO. Still, PPO deductibles have been rising, so consider the difference between plan deductibles and whether the deductible is per person or family. PPOs may have a separate deductible (or no deductible) for prescription drugs, but the HDHP deductible will apply to all covered medical spending.

Copays: PPOs typically have copays that allow you to obtain certain services and prescription drugs with a defined payment before meeting your deductible. With an HDHP, you pay out of pocket until you meet your deductible, but the insurer’s negotiated rate may reduce costs. For example, consider the difference between the copay and the negotiated rate for a standard service such as a doctor visit – certain types of preventive care and preventive medicines may be provided at no cost under both types of plans.

Maximums: Most health insurance plans have annual and lifetime out-of-pocket maximums above which the insurer pays all medical expenses. HDHP maximums may be the same or similar to that of PPO plans. (Some PPO plans have a separate annual maximum for prescription drugs.) If you have high medical costs that exceed the yearly maximum, your total out-of-pocket costs for that year would typically be lower for an HDHP with the savings on premiums.

Your Choices and Preferences

Both PPOs and HDHPs offer incentives to use healthcare providers within a network, and the network may be identical if the same insurance company provides the plans. Make sure your preferred doctors are included in the network before enrolling.

Also, consider whether you are comfortable using the HDHP structure. Although it may save money over a year, you might be hesitant to obtain appropriate care because of the higher out-of-pocket expense at the time of service.

HSA Contribution Limits
Annual contributions can be made up to the April tax filing deadline of the following year; any employer contributions must be considered part of the annual limit.

Health Savings Accounts

High-deductible health plans are designed to be paired with a tax-advantaged health savings account (HSA) that can be used to pay medical expenses incurred after the HSA is established. HSA contributions are typically made through pre-tax payroll deductions, but in most cases, they can also be made as tax-deductible contributions directly to the HSA provider. HSA funds, including any earnings if the account has an investment option, can be withdrawn free of federal income tax and penalties as long as the money is spent on qualified healthcare expenses. (Some states do not follow federal tax rules on HSAs.)

The assets in an HSA can be retained in the account or rolled over to a new HSA if you change employers or retire. In addition, unspent HSA balances can be used to pay future medical expenses whether you are enrolled in an HDHP or not; however, you must be enrolled in an HDHP to establish and contribute to an HSA.

1–3) Kaiser Family Foundation, 2020

 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other expert advice we can provide towards your financial well-being.

ROBERT BLAKELY, CFP® is a financial advisor with BLAKELY FINANCIAL, INC. located at 1022 Hutton Ln., Suite 109, High Point, NC 27262. He is the founder and president of Blakely Financial, Inc.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Diversification and asset allocation programs do not assure a profit or protect against loss in declining markets, and cannot guarantee that any objective or goal will be achieved.