I was “JK” due to the guy a couple posts up telling me like 16.5K per year. I haven’t deposited into HSA yet since it was just established 1/1/2020
I’ve been smoking thru my HSA the last few years with all these kids. 3 in 3 years. Sorry for the sex brag.
I honestly hadn't ever heard of the backdoor method before. In googling it is seems like it might be what i should do. I typically have my 401k through fidelity. Would I just call them and ask them to set it up or is that something that I need to setup directly myself?
I did not take your post seriously. I have no idea about any of that beyond not being able to withdraw funds. I have 20k in my HRA and inquired about transferring to 401k. $183 interest earned last year on $20k hurt.
Check with your company HR to see if they allow it. Mine just started allowing it this year and we use Fidelity too, not that I'll really be able to use it.
Yeah there’s no reason not to max out your HSA. It’s a truly tax exempt account (not tax deferred). you can effectively pay for medical expenses with dollars that are never taxed.
It would be good, but might be too late. I had to set it up when I selected my health insurance in Oct/Nov.
There is zero truth to this statement. It is an option available to anybody that chooses to use it. https://www.investopedia.com/terms/r/rule72t.asp https://www.irs.gov/retirement-plan...garding-substantially-equal-periodic-payments I'm not advocating user Holth take advantage of rule 72(t), merely pointing out that the option exists.
HSA should be the priority over 529 FYI. Agree that both should be created but HSA is the superior investment vehicle. If you have to pick between the two as someone in their mid 30s you should always max the HSA before investing a dime in the 529 from a pure finance perspective.
Correct. You usually have to meet a certain dollar threshold before that is an option though. I believe mine is $2,000.
no idea i manually do mine through vanguard, its easy if you do it yourself ding me and i'll send you a walk through
SEPP is one type of 72(t) expection, but all are usually thought of as contingencies that apply to life circumstances and not necessarily for planning purposes. The rigidity of SEPP carries risk, so I'd be hesitant to assume for it in a retirement plan (though i am sure there are many that do) ...
FYI couple of things to know about the backdoor Roth. 1) there’s no advantage if you are below the income thresholds for a Roth IRA contribution. 2) in order to realize the full benefit you need to eliminate all your traditional IRAs. The easiest way to do this is to roll it into your company’s 401k if they allow it and you have decent investment options.
My HSA is through whoever my work partners with, this is the first year I’ll be contributing myself. My work has previously added 500 a year the last few years. When it comes to investing the funds is this something I would go through the HSA provider for? Just see what options they have? I think it might be “Payflex”, we switched starting 2020
It doesn’t. I contributed an hourly amount through my union. Getting tax free reimbursement checks has been nice, but not compounding interest from investment nice.
I think you have to go with the provider options. I'm lucky that we are with Fidelity now. Used to be Optum and the options were high priced managed funds.
Yeah you’re limited by the provider. Honestly the fees some of these 401k and HSA providers charge smaller companies is completely insane. Top it off with limited high expense funds and it really hurts the long term growth. all that being said, it’s still almost always worth the trade off against a regular taxable account.
I'd counter and say that Mr. Holth's scenario (bridge 55 to 59.5) is a prime example of utilizing SEPP for planning purposes.. If you're smart, you get around the rigidity by utilizing multiple IRAs. Like everything else, the more options you have, the better off you are. Saying you can't use it for day to day situations is completely disingenuous. It allows a person limited access to qualified money with no penalty
I have an old HSA from a past job, you basically have to keep 5,000 in the primary HSA account to avoid being Nickel and dimed on fees. (Not to say you couldn’t put it all in the brokerage side if your investment returns were> than the fees). But through them I’m linked to a TDameritrade brokerage account and I can basically do whatever I want. The feds don’t tax your cap gains as of last year but state may depending on where you live. So yea you typically have to go through whatever your provider has.
fair enough, and i didn't realize the original article was speaking to SEPP specifically, so i was not trying to say there's no way to get at those assets outside of "last resort" scenarios. i'm accustomed to explaining 72(t) more generally (1st time home buyer, medical/educational expenses) so that's where my head goes. can't say i saw many SEPPs in practice, but we lacked customization in a lot of cases. i do think that if we ran Holth's monte carlo he'd need to be saving more than the limits for tax-deffered accts. fine to save in taxable accts towards retirement IMO, hopefully that means he'd have a nice balance to consider before qualified stuff ...
Since it seems like a lot folks are trying to get their heads around retirement I’ll give the 3-5 basic tips that I think are key. 1. Take advantage of tax protected accounts (HSA, 401k, IRA, 529 - probably in that order but if your company doesn’t give any 401k match I’d probably flip IRA and 401k). 2. invest in funds with broad market coverage and the lowest expense ratios. Traditionally Vanguard has had really good offerings for this but others are following their lead. 3. be wary of “non-fiduciary” advisors. The Obama administration was cracking down on these type of people, but effectively a non-fiduciary isn’t required by law to have your financial interests in mind. I’d be especially skeptical if the first recommendation from an advisor is an annuity or a life insurance policy. These are typically some of the highest commission products available (and the biggest rewards for FAs).
I think we work together. You should be able to move money into the investment account once you have a balance of $1,000. I hear ya. If you're working with people a long way from retirement there's really no reason to get into SEPP. If you have clients at or near retirement, then it definitely belongs in the toolkit. Most people not in the industry are clueless about the ins and outs of qualified money (hell, so are many people in the industry).
I would say the better approach is. 1. 401k up to the match. If you have low fees can max this over IRA. Personal preference over traditional or Roth. 2. HSA 3. Max IRA 4. Max 401k 5. Then decide between taxable and 529. You can take out loans for college, but can't for retirement.
Clearly no schmuck has ever tried to sell you on over funding a variable universal life policy with a hypothetical ror of 12%. Got my start in the industry working for one of those types. Probably why I'm so jaded about the industry and distrustful of FAs in general.
I actually just got that. Switched from company provided life insurance to private life insurance. He sent me a packet for this trying to get me to get it instead of term.
Yeah probably so. HSA is truly free tax dollars and 401k match is also free (taxable dollars). TBH if you aren't already maxing out your employer contributions on 401k, I'm surprised you're even reading an investment thread.
1) assuming you have the funds, contributing extra toward a mega backdoor conversion could still hold a benefit to taking a backdoor strategy even if you are contributing your initial $19,500 toward a Traditional 401k. 2) Could you expand on this a bit? Not saying I disagree with this, just curious as to why you would need to eliminate all of your traditional IRAs to see the full benefit?
Point 1 is true, but very few employers allow the mega backdoor conversion so I left it out. 2) You pay a pro-rata tax based on all your IRA holdings; I'll post a quote below rather than type my interpretation: The pro-rata rule. The IRS requires rollovers from traditional IRAs to Roth IRAs to be done pro rata. Here’s how it works: When determining your tax bill on a conversion from a traditional IRA to a Roth IRA, the IRS is going to look at all of your traditional IRA accounts combined. If all of your traditional IRAs combined consist of, say, 70% pre-tax money and 30% after-tax money, that ratio determines what percentage of the money you convert to a Roth is going to be taxable. In this example, no matter how much money you convert or which IRA account you pull the money from, 70% of the amount you convert to the Roth will be taxable. You can’t choose to convert only after-tax money; the IRS won’t allow it. And a word about timing: the IRS applies the pro-rata rule to your total IRA balance at year-end, not at the time of conversion.
So in this scenario, are you saying that it'd be best to determine how much you want to rollover to a Roth IRA via the backdoor method and then transfer the remaining balance to your company's Traditional 401k account? Does the IRS look at your total traditional IRA accounts at year end, or when the initial backdoor was initiated?
Speaking of this point, has anyone hear done this successfully? I realize it's pretty rare for employers to allow it, and unfortunately mine does not either, but I'd be curious to hear success stories from this. Seems like an amazing opportunity if you can find an employer that will allow it.