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Discover Hidden Savings for Businesses and Individuals

Smart Business reports that there are many money-saving opportunities for businesses and individuals—via IRA conversions or Health Savings Accounts (HSA)—but it’s important to do so within the law and banking regulations to avoid hefty fines that can eliminate any savings.

The article, “Money-saving financial tips for individuals and companies,” says that the unique feature of a Roth IRA retirement savings vehicle for individuals is that, unlike a traditional IRA, it lets you withdraw all of the funds in the account tax-free. However, be sure to read the fine print.

If you earn $193,000 or more, you can’t contribute to a Roth IRA, but you can make contributions to a nondeductible IRA, which has no income limit. The bad thing is that the income accumulated is taxed at ordinary income rates when withdrawn. However, there’s a work-around: you can make contributions to a nondeductible IRA, and then convert it to a Roth IRA.

Beware that if you convert a nondeductible IRA to a Roth, any IRA you have is considered converted on a pro rata basis, which could create ordinary income. Speak with an experienced attorney before moving forward.

Likewise, an HSA can work like an IRA. Contributions go into the HSA on a tax deductible basis and can then grow tax-free, but it can only be used for medical expenses.

However, if you can afford to pay for your health care expenses out of pocket, the HSA builds up tax-free and will accumulate indefinitely. You can use it to fund your health care through retirement or leave it to beneficiaries and they can use it for medical expenses. You can actually increase money saved for retirement or beneficiaries, just like an IRA.

Reference: Smart Business (December 2, 2015) “Money-saving financial tips for individuals and companies”

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