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Hills Bank and Trust Company

HBT Connect eNewsletter from Hills Bank and Trust Company

  HBT Connect  
Volume 2, Issue 4: July - August 2012  

  Didn't win the lottery? You can still fund your retirement.

Even if you are not a member of 'The Shipping 20' group from Quaker Oats in Cedar Rapids that recently won the $241 Million Powerball Jackpot, you can still fund your retirement using some of these techniques.

Employer-Sponsored Retirement Plans*
If your employer offers a retirement savings plan, contribute as much as you can. Not only do you receive tax benefits, but your company may even match savings, which is essentially like missing out on extra money if you don't contribute. The earlier you start the better, and over the lifetime of your career, the small savings will compound and accumulate to larger amounts by the time you retire. Just remember, you can't win if you don't participate.

Put Money into an Individual Retirement Account*
You can put up to $5,000 a year into an Individual Retirement Account (IRA) and you can contribute more if you are 50 or older. There are two different kinds of IRAs; traditional or Roth. Each has unique tax options, and can be set so an amount is automatically deducted from your checking or savings account and deposited into the IRA.

Social Security*
You can get your Social Security Statement online via ssa.gov which provides estimates of retirement and disability benefits you may receive, a list of your lifetime earnings according to Social Security records, an estimate of Social Security and Medicare taxes you've paid, and much more.

Certificates of Deposit
Certificates of Deposit (CDs) are a low risk way for investors to save cash and get interest because they are Member FDIC insured. Often times, CDs are viewed as a tool to protect wealth versus a tool to build wealth, but can be useful for retirees who ladder CDs and want steady income.

Downsizing
Your home is most likely the largest purchase you will make. The larger the home, the more you pay in taxes, utilities, and upkeep. During your retirement years, you can downsize and have a sizeable amount of funds while reducing your daily living expenses.

And Remember, Don't Stop or Pause Retirement Savings*
Pausing or stopping your retirement contributions can be very expensive over the long term. Even if your balance is relatively small, the impact on your retirement funds could be significant as the chart shows below. Plus using retirement money early can have an immediate and substantial penalty withdrawal and tax cost.

The Long-Term Cost of an Early Withdrawal
Retirement Account Balance at Age 30 $8,000 $8,000
Withdrawal at Age 30 $8,000 0
Contributions Age 30-65 $100 per month $100 per month
Balance at Age 65* $180,105 $272,154

Assumes a 7% average annual total investment return. Money will be taxed upon withdrawal. This is a hypothetical example with investment returns compounded monthly. Your investment returns and contributions will be different.

The odds of winning the $241 Million Powerball Jackpot were approximately 1 in 176 million. By doing a simple internet search, you will find the odds are better for birthing identical quadruplets, becoming the next US President, dating a supermodel, or becoming a movie star. Don't play against the odds: build a solid retirement plan that you know is a sure bet.

*Investment products are not a deposit, not FDIC insured, not insured by any federal government agency, carry no bank guarantee, and may go down in value.

   
   
  Consider a Health Savings Account to Combat the Rising Cost of Health Care

The rising cost of health care has contributed to the growing popularity of health savings accounts (HSAs). An HSA is a tax-favored account that can be used to pay out-of-pocket medical expenses. To be eligible for an HSA, an individual must be covered under a high deductible health plan. The plan must have certain provisions, including a specified minimum annual deductible and a dollar cap on the expenses required to be paid out of pocket for covered benefits.

From a federal income tax standpoint, an HSA offers several benefits.

  • Within limits, HSA contributions are tax deductible (or pretax under an employer's cafeteria plan).
  • Earnings on HSA investments accumulate tax-free if used for medical expenses.
  • HSA withdrawals used to pay qualified medical expenses are tax-free.

Any withdrawals not used for qualified expenses are subject to tax, and a 20% IRS penalty. However, there's no "use it or lose it" rule as there is with a flexible spending account. Any unspent HSA funds can simply accumulate in the account for future use.

HSA CONTRIBUTION LIMITS
High Deductive Health Plan Coverage 2012 2013
Self only $3,100 $3,250
Family $6,250 $6,450
Individuals age 55 or older as of the last day of the year who aren't enrolled in Medicare may make additional "catch-up" contributions of up to $1,000 annually.
   
   
 

The Meaning of Homeownership Contest Voting Now Open

The Iowa Finance Authority has partnered with the Iowa Association of Realtors to ask Iowans what homeownership means. Iowans responded and now it's your job to determine the best entry. View all entries and vote for your favorites until July 15th on the Iowa Finance Authority's Facebook page.

   
   
 

Holiday Schedule

The bank will be closed on the following holiday:

Labor Day
Monday, September 3rd

Even though we will be closed, you can still do your banking at over 80 Hills Bank ATMs in the Cedar Rapids - Iowa City Corridor, Hills Bank Online, via mobile banking, or through Push Button Banker.

View the complete Hills Bank holiday schedule.


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