Retirement Planning Thread

[Devilmaycare]

I didn't realize that you could roll over HSA balances. In my case it's moot, because the health plan I have doesn't qualify for an HSA, but it's still good to know, if something might happen to change down the road.

Regarding the other stuff, the restrictions on IRAs or our 403b make me uncomfortable, and their tax advantages depend on assumptions about future tax brackets that I'm not all that confident are valid. So we have more than half of our retirement savings in normal investment accounts that are partially taxed as they grow. I'd rather get some of the tax out of the way now than have to pay it all later.

Yes, the money in an HSA is yours and is there forever until you use it unlike an FSA. You can also use it to pay medical expenses even if you don't have a qualifying plan anymore. The money just have to be put in while you have one. Most of the HSA accounts also let you invest the money once your balance is over X. I believe it's $2100 for the one I'm currently on. It's not a full on investment account but more like my 401k where I have a list of funds that I can invest in.

Thanks for the suggesting @Ouchie-Z-Clown on them. I hadn't been thinking of it for retirement and was mainly using it just for my max yearly out of pocket amount. It makes a lot of sense though to put more money in since it's pre-tax money and grow it for my medical expenses when I get old.

 

[Ouchie-Z-Clown]

I didn't realize that you could roll over HSA balances. In my case it's moot, because the health plan I have doesn't qualify for an HSA, but it's still good to know, if something might happen to change down the road.

Regarding the other stuff, the restrictions on IRAs or our 403b make me uncomfortable, and their tax advantages depend on assumptions about future tax brackets that I'm not all that confident are valid. So we have more than half of our retirement savings in normal investment accounts that are partially taxed as they grow. I'd rather get some of the tax out of the way now than have to pay it all later.

Are you missing matching contributions as a result? If so, that’s a mistake.

what limits on the 403(b) make you uncomfortable?

 

[Ouchie-Z-Clown]

Yes, the money in an HSA is yours and is there forever until you use it unlike an FSA. You can also use it to pay medical expenses even if you don't have a qualifying plan anymore. The money just have to be put in while you have one. Most of the HSA accounts also let you invest the money once your balance is over X. I believe it's $2100 for the one I'm currently on. It's not a full on investment account but more like my 401k where I have a list of funds that I can invest in.

Thanks for the suggesting @Ouchie-Z-Clown on them. I hadn't been thinking of it for retirement and was mainly using it just for my max yearly out of pocket amount. It makes a lot of sense though to put more money in since it's pre-tax money and grow it for my medical expenses when I get old.

It’s not just pre-tax, it comes out TAX FREE if used for healthcare. And we are ALL going to be spending hundreds of thousands of dollars on healthcare in retirement. So if you’ve got access to HSAs, use them primarily for retirement savings. Don’t be misled by it’s name it’s greatest value is as a retirement health savings account. Right now most have mediocre investments available bc they haven’t been given the same attention as retirement plans and they aren’t subject to ERISA (so employers don’t have fiduciary duties to make prudent investment choices), but the industry is shifting and options are improving.

 

[elindholm]

Are you missing matching contributions as a result? If so, that’s a mistake.

what limits on the 403(b) make you uncomfortable?

I'm making some additional contributions to the 403(b), but not maxing it out, which would be $19,500 out of pocket annually. We don't have the kind of cash flow that would make that realistic.

Edit: I may have misunderstood your question. My employer contributes whether I do or not, so I'm not missing out on any employer contributions.

I don't like either (a) being unable to withdraw before a certain time or (b) being forced to withdraw at a certain time. I'm okay with those restrictions for some of my retirement funds, but not for all of them. For example, it's unlikely, but maybe there will be some spectacular home we'd want to buy that would, in effect, become a retirement investment. If the numbers make sense such that we'd want to pay for a signficant chunk of that up front, I want to have the freedom to do that.

 

[Ouchie-Z-Clown]

I'm making some additional contributions to the 403(b), but not maxing it out, which would be $19,500 out of pocket annually. We don't have the kind of cash flow that would make that realistic.

Edit: I may have misunderstood your question. My employer contributes whether I do or not, so I'm not missing out on any employer contributions.

I don't like either (a) being unable to withdraw before a certain time or (b) being forced to withdraw at a certain time. I'm okay with those restrictions for some of my retirement funds, but not for all of them. For example, it's unlikely, but maybe there will be some spectacular home we'd want to buy that would, in effect, become a retirement investment. If the numbers make sense such that we'd want to pay for a signficant chunk of that up front, I want to have the freedom to do that.

It depends on a few things: does your plan allow loans? Does it allow in-service withdrawals? Does it allow hardship distributions? How old are you? If you’re 59 1/2 you likely have access. If you’re younger you can likely take a $50,000 loan out and pay the interest to yourself rather than a bank.

Most people are aware of the limits of their plans but not the full flexibility.

 

[elindholm]

It depends on a few things: does your plan allow loans? Does it allow in-service withdrawals? Does it allow hardship distributions? How old are you? If you’re 59 1/2 you likely have access.

Still several years shy of 59. As for the others, it's TIAA, which has struck me as pretty limited. Another reason I'm not thrilled about dumping more money with them is that their range of investment options is pretty narrow and, thanks to how bad their website is, difficult to research.

If you’re younger you can likely take a $50,000 loan out and pay the interest to yourself rather than a bank.

I'm not clear on what you mean here, but, in any case, I'm talking about a hypothetical involving much more than $50,000.

Most people are aware of the limits of their plans but not the full flexibility.

That's entirely possible in my case. On the other hand, I know what I can do with my investment accounts through E*Trade and Fidelity, and the only disadvantage seems to be that I pay some tax as I go rather than trying to guess what the ideal time for paying all of it is. And should I happen to leave some of the assets behind as an inheritance, the tax burden disappears in a puff of smoke (I'll be nowhere near the estate tax threshold), which isn't the case for inherited IRAs.

 

[Devilmaycare]

It’s not just pre-tax, it comes out TAX FREE if used for healthcare. And we are ALL going to be spending hundreds of thousands of dollars on healthcare in retirement. So if you’ve got access to HSAs, use them primarily for retirement savings. Don’t be misled by it’s name it’s greatest value is as a retirement health savings account. Right now most have mediocre investments available bc they haven’t been given the same attention as retirement plans and they aren’t subject to ERISA (so employers don’t have fiduciary duties to make prudent investment choices), but the industry is shifting and options are improving.

I get it. As soon as you said that the light when on and I thought "dang, why didn't I think of that sooner?" (except it wasn't dang but with this language filter... I even jumped on my work's slack right away to enlighten my team. Most of them are under 40 and I know haven't given it enough thought. So hopefully they realize the advantage too.

I need to check out each of the funds available to me but some of them on the surface don't look too bad. There's some Vanguard and Fidelity funds in the list. They're not going to be the super aggressive ones but even getting 4-5% over the next 20 years will be better than nothing.

 

[Russ Smith]

It’s not just pre-tax, it comes out TAX FREE if used for healthcare. And we are ALL going to be spending hundreds of thousands of dollars on healthcare in retirement. So if you’ve got access to HSAs, use them primarily for retirement savings. Don’t be misled by it’s name it’s greatest value is as a retirement health savings account. Right now most have mediocre investments available bc they haven’t been given the same attention as retirement plans and they aren’t subject to ERISA (so employers don’t have fiduciary duties to make prudent investment choices), but the industry is shifting and options are improving.

That's why I haven't done an HSA but now I think I'll take another look. The lack of choices has always bugged me but I should be looking at it.

 

[Russ Smith]

Possibly mentioned in here but just in case, for people factoring in social security, remember the estimate you get from SS is NOT as of today. I'm 55 if I put in what i'll get at 62 I get an estimate, that's assuming I continue to work until I'm 62 and that the years from 55 to 62 are in my highest 35 years of earnings. SS is based on your top 35 years, I think I have 36 right now but if I stop working today the money I get at 62 will be LOWER than the estimate SS shows because I won't have those 7 years of higher earnings to replace the bottom 7 years of my current 35 year history.

Lots of people make that mistake

 

[Devilmaycare]

That's why I haven't done an HSA but now I think I'll take another look. The lack of choices has always bugged me but I should be looking at it.

The lack of choices sucks, I have the same complaint with my 401k. I want more options, even "dangerous" ones like trading individual stocks. At least give us ETFs in them. But getting 100% tax free money with the HSA outweighs it. I just wish Ouchie make the retirement comment 7 or 8 years ago to me.

 

[Devilmaycare]

Question that I just thought of reading Russ's last post. When SS calculates your distribution does it take your gross or taxable income? Or something in between? The HSA discussion got me thinking on it if maximizing it is then slightly hurting the SS calculation since the money is pre-tax. It's not going to change what I'm going to do with my HSA, more of a curiosity since the last couple years I've been raising the pre-tax dollars going into my retirement accounts.

 

[Zeno]

Possibly mentioned in here but just in case, for people factoring in social security, remember the estimate you get from SS is NOT as of today. I'm 55 if I put in what i'll get at 62 I get an estimate, that's assuming I continue to work until I'm 62 and that the years from 55 to 62 are in my highest 35 years of earnings. SS is based on your top 35 years, I think I have 36 right now but if I stop working today the money I get at 62 will be LOWER than the estimate SS shows because I won't have those 7 years of higher earnings to replace the bottom 7 years of my current 35 year history.

Lots of people make that mistake

Yep, a lot of people do forget about that. The SSA website has a calculator that allows you to estimate your benefits based on what year you stop working, you should have your SS statement on hand because you have to enter ALL of your previous years earnings. I did mine with an estimate of me stopping working at 57 and it reduced my monthly SS at 62 by around $75. The calculator however doesn't have an estimate if you wait until you elect to take it at a later age. Probably not 100% accurate but gives you a better idea than your annual statement.

 

[Zeno]

My health plan doesn't qualify for a HSA but I get to carry my current plan when I retire--at the same rate, except monthly premiums instead of broken up over 26 pay checks. HSA seems like a great retirement vehicle for those that qualify.

I do plan to purchase a Long Term Care policy prior to retirement, the fact that dementia runs in my family will mean I will have limited choices and likely have to pay more as I will be seen as more of a risk.

 

[Zeno]

Some Long Term Care info...

American men who turn 65 over the next few years will require an average of 2.3 years of long-term care, reports Medicareguide.com. For American women, that estimate rises to 3.2 years.

Meanwhile, American men who turn 65 in the next few years will spend an average of $142,000 on long-term care, while women will spend $176,000. But unfortunately, Medicare won't cover long-term care. And unless you come into retirement with a very robust nest egg, you might easily run down your savings balance in an effort to keep up with that expense.

This Expense Could Deplete Your Retirement Nest Egg. Are You Prepared?

Hint: It's an expense that many seniors face but don't properly plan for.

oanow.com

 

[BigRedRage]

its a shame that half of the retirement thread is about how to pay for medical costs while retired.

 

[Dback Jon]

its a shame that half of the retirement thread is about how to pay for medical costs while retired.

Yup - but Freedumb!

 

[BigRedRage]

Yup - but Freedumb!

I'm hopeful that a medicare for all type solution is at our doorstep in the near future.

 

[Dback Jon]

I'm hopeful that a medicare for all type solution is at our doorstep in the near future.

Me Too - but even current Medicare has limitations - like no long term care.

 

[Devilmaycare]

I'm hopeful that a medicare for all type solution is at our doorstep in the near future.

We already have medicare for retirement but it still needs to be supplemented. For the talk in this thread it needs to be reformed since it's not fully covering the needs of our seniors.

 

[gmabel830]

That's why I haven't done an HSA but now I think I'll take another look. The lack of choices has always bugged me but I should be looking at it.

Yeah, I recently realized I accidentally wasn’t contributing to my HSA and was super pissed. My company contributes each year, so I didn’t realize I wasn’t contributing anything since there was always some money in there. Stupid on my part. I started small to not upset my cash flow, but I’ll end up jacking it up over time. Had the last kid late last year, so hopefully no big medical expenses coming.

 

[Folster]

Yeah, I recently realized I accidentally wasn’t contributing to my HSA and was super pissed. My company contributes each year, so I didn’t realize I wasn’t contributing anything since there was always some money in there. Stupid on my part. I started small to not upset my cash flow, but I’ll end up jacking it up over time. Had the last kid late last year, so hopefully no big medical expenses coming.

You should be able to make a deductible contribution to your HSA to the prior tax year up until the tax filing deadline similar to an IRA. That gives you extra time to contribute and can come in handy if you need to decrease your taxable income for the prior year.

 

[dreamcastrocks]

its a shame that half of the retirement thread is about how to pay for medical costs while retired.

Has anyone purchased the long term care insurance that some companies provide? I am only in my mid 40s so I don't have any experience with it.

 

[Russ Smith]

Has anyone purchased the long term care insurance that some companies provide? I am only in my mid 40s so I don't have any experience with it.

not yet but I do know many of them have all sorts of things that disqualify you. one example if you've seen a psychiatrist at any time and there's certain diagnoses, including PTSD, most of them completely disqualify you. It's a huge issue with older people where in some cases the psych will have to tell them I can treat you but if I do, you will not be able to get long term insurance do you want the meds or the insurance. Classic example of mental health being seen totally different than physical in this country.

 

[dreamcastrocks]

not yet but I do know many of them have all sorts of things that disqualify you. one example if you've seen a psychiatrist at any time and there's certain diagnoses, including PTSD, most of them completely disqualify you. It's a huge issue with older people where in some cases the psych will have to tell them I can treat you but if I do, you will not be able to get long term insurance do you want the meds or the insurance. Classic example of mental health being seen totally different than physical in this country.

Of course they do.

 

[Zeno]

Has anyone purchased the long term care insurance that some companies provide? I am only in my mid 40s so I don't have any experience with it.

I haven't purchased it yet but I have been doing my research, I may be disqualified from a lot of policies due to the history of dementia in my family. It's going to take some shopping around but to me the benefit outweighs the cost in the end.