Author Topic: funding retirement accounts priorities  (Read 4134 times)

TheBeeKeeper

  • 5 O'Clock Shadow
  • *
  • Posts: 83
funding retirement accounts priorities
« on: March 18, 2016, 11:22:50 AM »
we are both employed full time and have 401Ks that we put in s bit above the employer match.
We also have Roth IRA (with Vanguard) that we usually max each year, and we started last year a small business that nets about 15K/year but have not looked yet into retirement account options for this.

Just finished this year's tax filing, and we are still in the 15% bracket, so I'm not so sure about investing more in the 401Ks

What would be the best next step for putting more money into retirement accounts?  I have another 20K$ or so / year to invest from the business income and our rental property.


Trip

  • 5 O'Clock Shadow
  • *
  • Posts: 93
  • Age: 30
  • Location: Chicago, IL
Re: funding retirement accounts priorities
« Reply #1 on: March 18, 2016, 01:51:14 PM »
If you have access to an HSA, you should max that out if you're already getting the employer match on your 401K.

Typically the math will still favor maxing out the 401K. Do you expect to be in a higher tax bracket upon retirement than the 15% bracket? If so, then you will have to work out the math based on your expected bracket. If not, then definitely contribute to the 401K. Even if you are still in the 15% tax bracket when you retire, you are still getting the benefit of the tax free growth.

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4851
Re: funding retirement accounts priorities
« Reply #2 on: March 18, 2016, 01:54:10 PM »
I would look into a solo401k for the business. 

TheBeeKeeper

  • 5 O'Clock Shadow
  • *
  • Posts: 83
Re: funding retirement accounts priorities
« Reply #3 on: March 18, 2016, 02:06:55 PM »
If you have access to an HSA, you should max that out if you're already getting the employer match on your 401K.


I tried to consider the HSA during open enrollment, but I am really aversive to tying in health care with savings account.
I did the math, and if we don't go to the Dr a lot (which we don't) then it really looks like a great option. BUT with 2 kids , and 2 active adults someone ALWAYS gets hurt at least once a year, and then all the savings of the high deductible plan are gone, even if I don't take the money out if the HSA to pay for it. For example, last year the cost for one simple fracture would have been more than the potential savings with the HSA
 I come from a country where health care is a human right, and everyone has access, so the american system is still strange to me even after a decade. I don't even put money into my FSA because I can't know if I'll need it, and it's use it or lose it.


TheBeeKeeper

  • 5 O'Clock Shadow
  • *
  • Posts: 83
Re: funding retirement accounts priorities
« Reply #4 on: March 18, 2016, 02:07:37 PM »
I would look into a solo401k for the business.

how does this plan work? Can I do this even if I have employer 401K ?


Gin1984

  • Magnum Stache
  • ******
  • Posts: 4851
Re: funding retirement accounts priorities
« Reply #5 on: March 18, 2016, 03:03:59 PM »
I would look into a solo401k for the business.

how does this plan work? Can I do this even if I have employer 401K ?
I have one through fidelity.  You can have one and a employee 401k, as long as you the employee don't exceed $18K and you don't exceed the combined contribution limit of $53,000 for the employer and employee contributions in 2015.

TheBeeKeeper

  • 5 O'Clock Shadow
  • *
  • Posts: 83
Re: funding retirement accounts priorities
« Reply #6 on: March 18, 2016, 03:06:26 PM »

I have one through fidelity.  You can have one and a employee 401k, as long as you the employee don't exceed $18K and you don't exceed the combined contribution limit of $53,000 for the employer and employee contributions in 2015.

does the solo401k have any advantage over the employer 401k?


Trip

  • 5 O'Clock Shadow
  • *
  • Posts: 93
  • Age: 30
  • Location: Chicago, IL
Re: funding retirement accounts priorities
« Reply #7 on: March 18, 2016, 03:43:45 PM »
If you have access to an HSA, you should max that out if you're already getting the employer match on your 401K.


I tried to consider the HSA during open enrollment, but I am really aversive to tying in health care with savings account.
I did the math, and if we don't go to the Dr a lot (which we don't) then it really looks like a great option. BUT with 2 kids , and 2 active adults someone ALWAYS gets hurt at least once a year, and then all the savings of the high deductible plan are gone, even if I don't take the money out if the HSA to pay for it. For example, last year the cost for one simple fracture would have been more than the potential savings with the HSA
 I come from a country where health care is a human right, and everyone has access, so the american system is still strange to me even after a decade. I don't even put money into my FSA because I can't know if I'll need it, and it's use it or lose it.

I understand your concern, but check out this article about the HSA as a retirement vehicle by The Mad Fientist.

Here is a brief passage from this article, "there is no rule stating that you must use your HSA to directly pay for medical expenses or that you must withdraw money from your HSA within a certain amount of time after paying for a medical expense. As long as the qualified medical expense occurred after the HSA was opened, you can withdraw money from the HSA at any time after incurring the expense to reimburse yourself"

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4851
Re: funding retirement accounts priorities
« Reply #8 on: March 18, 2016, 04:07:46 PM »

I have one through fidelity.  You can have one and a employee 401k, as long as you the employee don't exceed $18K and you don't exceed the combined contribution limit of $53,000 for the employer and employee contributions in 2015.

does the solo401k have any advantage over the employer 401k?
Yes, you can put more in, than the traditional employee 401k, as the employer.

TheBeeKeeper

  • 5 O'Clock Shadow
  • *
  • Posts: 83
Re: funding retirement accounts priorities
« Reply #9 on: March 19, 2016, 09:38:11 AM »

Here is a brief passage from this article, "there is no rule stating that you must use your HSA to directly pay for medical expenses or that you must withdraw money from your HSA within a certain amount of time after paying for a medical expense. As long as the qualified medical expense occurred after the HSA was opened, you can withdraw money from the HSA at any time after incurring the expense to reimburse yourself"

my concern is that it seems to me that HSA is great if you don't have medical expenses, even if you pay directly without withdrawing.
If you do have medical expenses, as a family we would pay up to 6K$/year. Counting in tax savings and lower insurance premium, we would break even at about 3K$ of medical expenses. One trip to the ER and we're over that.
I'm certainly not planing on one trip to the ER every year, but it does happen. I think HSA may be worth the risk for an individual or a couple (though the last 3 medical events happened to the adults in the family..)  so I'm still not convinced into it.

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4851
Re: funding retirement accounts priorities
« Reply #10 on: March 19, 2016, 11:49:19 AM »

Here is a brief passage from this article, "there is no rule stating that you must use your HSA to directly pay for medical expenses or that you must withdraw money from your HSA within a certain amount of time after paying for a medical expense. As long as the qualified medical expense occurred after the HSA was opened, you can withdraw money from the HSA at any time after incurring the expense to reimburse yourself"

my concern is that it seems to me that HSA is great if you don't have medical expenses, even if you pay directly without withdrawing.
If you do have medical expenses, as a family we would pay up to 6K$/year. Counting in tax savings and lower insurance premium, we would break even at about 3K$ of medical expenses. One trip to the ER and we're over that.
I'm certainly not planing on one trip to the ER every year, but it does happen. I think HSA may be worth the risk for an individual or a couple (though the last 3 medical events happened to the adults in the family..)  so I'm still not convinced into it.
It really depends on your HSA and PPO plans, my OOP max for my PPO is $4000 and my OOP max for my HSA is only $5000.  My premiums for my HSA are more than $1000 cheaper than my premiums for the PPO plus my employer throws in $400.  Even without the tax savings I come out ahead with the HSA.