Tax-Free Retirement Income

Are you aware that a health savings account could be used as a source of tax-free income for retirement? Saving for medical costs, a major expense in retirement, is necessary and an HSA is a vehicle for that. An HSA offers more tax advantages than either a 401(k) or an IRA and may be used to generate tax-free income in retirement.

Federal and state tax payments are not required on savings in an HSA. The money you deposit grows tax-free and may also be withdrawn tax-free when used, now or in retirement. Therefore, experts recommend contributing the maximum allowed to both an HSA and a 401(k). For those with limited funds, first contribute to a 401(k) for the company match (if they offer one), then to an HSA until able to save more.

Here's where it pays off to get creative. One option is to choose a high-deductible insurance plan with lower premiums, freeing up money to contribute to an HSA. Perhaps driving an older, paid-for automobile would free up money for this. Grab coffee or your beverage-of-choice and brainstorm ways to free up money to meet future needs; make a contest out of it! If the thought of retirement is worrisome, act now to alleviate deficits later!

This plan reaps the greatest benefit when the money saved compounds over time if it has not been used on medical expenses now. That money would then be available for medical needs during retirement. All the taxes that would have been paid are not withheld on HSA contributions so that more money is available to use for future medical bills.

Extra tax advantages of an HSA allow for greater savings for retirement than later withdrawing money from a 401(k) and paying taxes at that time, while also increasing take-home pay now. It is important to understand, however, that money withdrawn from an HSA must be used for qualified medical, dental, and vision care expenses or for certain Medicare premiums or partial payment of long-term-care insurance premiums. If used for other expenses, income tax will be owed, along with a 20% penalty if under age 65. Consult an expert for details and the best course for your situation.For more details, see article "How to Get Tax-Free Retirement Income" by Anne Tergesen, The Wall Street Journal, 11/13/17.

Get thinking outside-the-box!

Why We Think of Stars as Pointed

Starry Night VG.jpg

Are Stars Pointed?

As children we learned to draw star-shapes, wanted to earn a gold star, and sang “Twinkle, twinkle, little star”. Our connection to the stars in the night sky caused fascination and encouraged imagination. Yet, how many of us have stopped to ask why we think of them as having points (except for Van Gogh in his painting “Starry Night”).

Recently I read an intriguing article by Helen Czerski (WSJ, 3/9/19) about this phenomenon ( ) which clarifies this mystery. Stars appear as tiny dots, being so far away that their true shapes, really spheres, as we all know, cannot be seen. However, photographic and telescopic images portray them as having points or spikes, just as images of other lights often do. Photography accounts for the spikes and the star-shaped association. This camera construction creates points on images of light sources. A camera’s aperture, through which light passes to create a photograph, must move apart or together easily, and as such is generally a hexagon or octagon shape.

Seeing pointed star images is evidence that light has wave qualities. Quantum mechanics evidences light has particle qualities also, but that is a different story. Anyway, stars are spread out by the flat faces of a camera’s aperture into lines, or diffraction spikes. The resulting photos are of stars with six or eight points, determined by either a hexagon or octagon-shaped aperture, accounting for our ideas of the shape of stars.You have probably experienced a similar effect by squinting while looking at stars, outdoor lights, or, for some of us, as seen with blurred vision when not wearing corrective lenses. So, even apart from, or before, photography, those before us observed this effect.
All of this makes for a great conversation, and gives us pause to stop and reflect on what we might otherwise assume or take for granted, and truly wonder at the world around us.It is also wonderful to consider the construction of our own irises and how perfectly they are made.

Here's to looking up!

10 Tips For Buying In A Hot Market

If you are currently trying to buy, or are thinking of buying, you have undoubtedly heard how hot the housing market is and how difficult it can be to find a home.

Why is this? Several factors: a stable economy, population growth, growing popularity of Denver, Millennials entering the hunt for a home (America’s largest generation), low unemployment, low inventory, and current homeowners are staying put on average almost double the time as a decade ago.

Before the housing bust, people were moving every 4-6 years into new homes keeping a steady flow of houses available for purchase. Now, the latest data shows us people are staying in their homes on an average of 8.6 years. People are weighing the cost of moving since inventory is low and the process is slow, and if they will have to trade in their low interest rate for a higher one.

The meat and potatoes of the real estate business, people selling and buying from an agent, is changing too. Due to a healthy economy and increase in real estate values, more and more people are deciding the keep their current homes as rentals and buy a new home for themselves. Although this is a great investment move, it is taking a toll on the inventory in the market.

So how do you get a leg up on the competition when it comes to buying? Here are a few tips that will help you become a more prepared and attractive buyer in a seller’s market:

  1. Plan early and often

    • Home buying is a process and the more you plan ahead, the more money you will save in the long run. Get with a lender to check your credit scores and work on getting them as high as possible.

  2. Get educated about the best loan program for you

    • There are many different programs out there that can benefit you, even if you aren’t a first time home-buyer.

    • For example, if you have good credit, a 3% down conventional loan might be a better deal for you than choosing an FHA loan

  3. Gather the biggest down payment that you can

    • Sellers seem to be more attracted to larger down payments as well as conventional loans vs. FHA

  4. Get pre-approved

    • When you make an offer, agents and sellers alike want to know if you are pre-qualified for a home loan, and even better yet, pre-approved. This process isn’t hard, just sit down with your lender who will get specific details from you about income and debts etc. and from there, they can send your agent a letter of your status to include when you make an offer.

  5. Be flexible on the parts of town

    • Because of low inventory, you will need to look outside your favorite one or two neighborhoods. Take into account what the longest commute to work you are willing to drive is and search everything in between.

  6. Be flexible on taste

    • Because of high prices and low stock, you will probably need to adjust what you want in a home. Don’t be intimidated by ugly carpet and cabinets. Asses that getting into a home that you can change to your liking over time is better than not getting into one at all or spending more later as prices continue to rise.

  7. Be prepared to act fast in making an offer

    • As soon as something comes on the market, the quicker you can see it the better, and the quicker you can make an offer the better. It is not uncommon in the Denver metro area for properties to only be active for 24-48 hours before the seller has accepted an offer. In this hot market, buyers often times don’t have the time luxury to mull things over like they have had in previous years.

  8. Don’t be discouraged if it takes 3-8 offers to land a sale

    • It should be expected that most properties for sale will have multiple offers and so more than likely it will take you putting in offers on multiple properties. Talk to your realtor about ways to spice up your offer also. Common ways seen today is adding an escalation clause, appraisal waiver, cash offer etc.

  9. Plan ahead with your landlord on lease flexibility

    • If you are renting and trying to buy something, working around when your lease is up can be very difficult, especially if it takes 3-6 months to find a home to buy. Talk with your landlord about maybe going month to month or what the cost of breaking your lease would be.

  10. Be patient and embrace the process

    • In such a crazy market, you need to mentally prepare yourself that buying a home will most likely take a while. You could start looking, find a place, make an offer and get the keys to your new home in 45 days, but than likely this will not be the case. It could take several months to get an offer of yours accepted and the deal could still fall through if you aren’t comfortable with the inspection results, or appraisal results etc. Remind yourself once you do go under contract it usually takes an additional 30-60 days to close your loan and get everything squared away before you are handed the keys. Remember, it will be worth it in the end! Hang in there!

If you have any questions about the current housing market, loan process, or what you can do to be more prepared, feel free to give me a call and I would be happy to give you some advice!

Dan Hagstrom





Copyright © 2016 Yellowstone Mortgage All rights reserved.

Our mailing address is:
1499 Blake Street #1D
Denver, CO 80202

Our phone number:
(303) 995-8800