HSAs – Opportunity Lost

High resolution man drawing chart heartbeat

Health Savings Accounts (HSAs) are a phenomenal retirement savings vehicle. In fact, HSAs can be even beat a 401k plan as your #1 priority for retirement savings. And yet, the average growth of HSA balances has been far below its potential.

Health Savings Accounts were established as part of the 2003 Medicare Prescription Drug Improvement and Modernization. The primary qualification for an HSA is a high deductible health plan (HDHP) with very specific annual limits for deductibles and annual out-of-pocket maximums. These HDHPs may come via your employer, direct to individual insurance, and even the relatively new Healthcare Marketplaces.

Pre-tax contributions to an HSA avoid ALL taxes, even payroll taxes! 2016 Contribution is $3,350 for an individual or $6,750 for a family. A catch-up contribution of an additional $1,000 is available at age 55.

What makes an HSA a phenomenal retirement savings vehicle?

  • Triple tax savings– tax free contributions, gains, and qualified withdrawals has the government paying you to save
  • Balances can build year over year
  • Balances can be invested into mutual funds
  • Qualified withdrawals can be made at any time making an HSA an ideal vehicle for early retirees
  • Medicare premium payments can be made from the HSA
  • Nonqualified withdrawals after age 65 are treated the same as any other retirement account – no fee but you will have to pay income tax on the amount withdrawn

If the HSA is such a great account, it’s fair to assume that people are taking full advantage, right? A quick look at average HSA balances for accounts opened over the last 10 years will show a tremendous opportunity lost.

Read more

Boxed Cheesecake – Mom’s Budgeting Secret

MoM

Buttery graham cracker crust. Delicious creamy cheesecake filling. Ready in just one hour! One of my favorite memories growing up.

We had boxed, also called no-bake, cheesecake on special occasion and holidays. I remember thinking “To heck with the main course. When can we eat dessert?”

What I didn’t realize at the time, and for many many years, was that right there on the table was a great money lesson. Right there, in a 6×9 inch box, was a way to enjoy something wonderful without breaking the bank. Boxed cheesecake was a budgeting secret!

Read more

10 Ways to Make HSAs Awesome

Cost of health care

An HSA helps individuals with qualifying high-deductible health plans pay for current and future medical expenses. Contributions can be made through an employer based benefit plan on a federal income, state income, and payroll tax-free basis. Contributions can also be made outside of an employer plan on an after-tax basis with the right to claim the amounts as an income reduction in your annual tax filing.

Usage of health savings accounts, or HSAs, has exploded over the last five years as has the amount of tax money saved by account holders. But changes are needed to increase access, remove complexities, and encourage healthy behaviors.

Below are my 10 ways to make HSAs Awesome.

 

Read more

Not All Dividends are Created Equal

94H

With another tax return filing deadline in my rearview mirror, I am once again focused on my tax plan. My tax plan is fairly basic – do everything, legally and within my control, to reduce the amount of taxes paid now and in future years.

One area that is getting more and more of my attention is qualified dividends. Since I plan to have a sizeable – oh lets say $20-30k – amount of my annual income coming from dividends, I have to make sure that they are fairly tax efficient. With some planning, I believe that I can receive most of this future dividend income at a tax rate of zero, zip, zilch.How’s that for tax efficient!

So how is it done? It’s really not all that hard.

Read more

Who is the Bigger April Fool?

138H

It’s a great day on the calendar for anyone that wants to have a little fun with friends, family, co-workers, or complete strangers. April 1st is celebrated in many countries as a day for pulling practical jokes or spreading hoaxes.

Well, instead of trying to fool others with a story that Bigfoot is Real, let’s look at the US stock market for the first three months of the year and decide – Who is the bigger April Fool?

Read more

A Justified Aversion to Investment Fees

231H

I hate investment fees. Maybe it could be called a severe aversion to investment fees. These fees eat away at my earning and therefore my plan for financial independence. These fees affect my net worth all hours of the day – yes even when I am sleeping!

Albert Einstein once said “Compound interest is the most powerful force in the universe.” I believe that he was thinking of the power of compounding from two angles – gains (interest) and loses (fees). If I am correct, Einstein could have said “Compound fees is the most powerful force in the universe.”

To see the negative power of compound fees, lets take a look at a few examples.

Read more

The Government is Paying Me $2,000 Every Month to Save for Retirement

ITA18FXIBL

$2,000 a month is a ton of money. It is way more than the average mortgage payment. It is more than you would make flipping burgers for 160 hours in a month.  It is enough money to buy 2,000 items from the $1 menu at that fast food chain. Better yet, it is an amazing boost of adrenaline to my already strong retirement savings plan. You really should get in on this deal!

So why does our beloved Government care so much about my retirement savings that they are willing to give me $2,000 a month, every month? Short answer – the Government does not believe that anyone would take advantage of every retirement options available to them. Who would do that? Well, I would.

Read more

Financial Lessons from a Military Brat

Military

I loved my military brat childhood! Growing up on a military base, I was able to see and do so many new things and I was influenced in so many wonderful ways.

Some of the lessons learned were easy to see, even as a child. I traveled the world and gained an appreciation for things outside of my comfort zone. I learned to love a wide variety of foods, to see the bright side of many cultures, and to feel right at home no matter where I am. I have friends from all walks of life, all backgrounds, all nationalities.

But some of the lessons learned have only become apparent as I have aged. These financial lessons are subtle in nature but have had tremendous impact on my life and, most importantly, on my early steps towards financial freedom. Here are three of my favorite lessons learned.

Read more

Reboot With a Spend Nothing Month

E5RETXVN7R

I feel it coming on. It starts as a nagging feeling in the back of my brain, slowly moves to something darting in and out of my consciousness, and finally invades my thinking all day long. I need to reboot and get my savings back on track!

I am not going to strike a new path here but instead go to my tried and true, my proven again and again plan – a spend nothing month. This plan has served me well over the years. It does not care if I am young or young at heart. It does not care if I live in suburbia or in the backwoods. Heck, it does not care that I like 80s hair bands or wear flip-flops when it’s cold outside.

What is a spend nothing month? What is my plan? How did I do? I will cover the first two questions below and come back with another post after 30 days to report my successes and…nah no failures – I can do this!

Read more