What else besides IRAs and HSA?

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rudycreat
Posts: 40
Joined: Mon Nov 14, 2016 2:54 pm

What else besides IRAs and HSA?

Post by rudycreat » Sat Sep 02, 2017 1:48 pm

Hi there,

Background:
- Personal: Mid 30s, single, no kids
- Income: $140k annual gross, no state tax
- Debt: None
- Savings: $20k in cash (plus $200k which I let my parents have)
- Expense: < $10k annual

Currently I'm close to maxing out the IRAs -- $18k to 403b (TIAA) and $18k to 457 (Nationwide). I thought I was on the right track and nothing else I could do, other than making another $5.5k to traditional/ Roth IRA.

The other day I looked at my payslip and realized that my employer has been contributing to an HSA since last year. I haven't heard of it before (I saw it when I filed tax but ignored it), and now I realized that I could contribute $2.9k to it and I'll do it.

My question is: After $18k (403b) + $18k (457) + $5.5k (IRA) + $2.9k (HSA), what else can I possibly invest in passively with the rest of my income?

Thanks!

nervouscorps
Posts: 36
Joined: Sun Jan 05, 2014 8:01 pm

Re: What else besides IRAs and HSA?

Post by nervouscorps » Sat Sep 02, 2017 1:55 pm

In a similar situation myself except I live in a HCOL area so I am envious your expenses are less than 10k annually. I'd start kicking into a taxable account. I was loathe to do it at first but once I did the research as to some of the other options for a situation like ours (e.g. annuities, CDs, etc) I decided the best avenue was the taxable. If you do it right its a great option.

jcerickson
Posts: 29
Joined: Sat Aug 13, 2016 11:08 am
Location: Tampa, FL

Re: What else besides IRAs and HSA?

Post by jcerickson » Sat Sep 02, 2017 2:00 pm

rudycreat wrote:
Sat Sep 02, 2017 1:48 pm
...The other day I looked at my payslip and realized that my employer has been contributing to an HSA since last year. I haven't heard of it before (I saw it when I filed tax but ignored it), and now I realized that I could contribute $2.9k to it and I'll do it.
An individual with an HDHP can contribute $3,400/year to an HSA, $4,400 if you're 55 or older. Many HSA's have an option to invest in mutual funds, also (typically after you've exceeded their minimum cash requirement).

rudycreat
Posts: 40
Joined: Mon Nov 14, 2016 2:54 pm

Re: What else besides IRAs and HSA?

Post by rudycreat » Sat Sep 02, 2017 2:03 pm

jcerickson wrote:
Sat Sep 02, 2017 2:00 pm
rudycreat wrote:
Sat Sep 02, 2017 1:48 pm
...The other day I looked at my payslip and realized that my employer has been contributing to an HSA since last year. I haven't heard of it before (I saw it when I filed tax but ignored it), and now I realized that I could contribute $2.9k to it and I'll do it.
An individual with an HDHP can contribute $3,400/year to an HSA, $4,400 if you're 55 or older. Many HSA's have an option to invest in mutual funds, also (typically after you've exceeded their minimum cash requirement).
I thought $3400 includes the contribution from the employer as well. I think my employer is contributing $500. Thanks!

rudycreat
Posts: 40
Joined: Mon Nov 14, 2016 2:54 pm

Re: What else besides IRAs and HSA?

Post by rudycreat » Sat Sep 02, 2017 2:08 pm

nervouscorps wrote:
Sat Sep 02, 2017 1:55 pm
In a similar situation myself except I live in a HCOL area so I am envious your expenses are less than 10k annually. I'd start kicking into a taxable account. I was loathe to do it at first but once I did the research as to some of the other options for a situation like ours (e.g. annuities, CDs, etc) I decided the best avenue was the taxable. If you do it right its a great option.
Don't envy.... :happy
Expenses less than $10k due to no cars (and no uber), no phone plan, no house (and cheap rents), no preferences for branded goods, no dining out etc.
Personal choice on lifestyle, and sort of happy with it as long as it doesn't affect social life (I really wish I'd spend more seriously).

Thanks for pointing the taxable out. I'm sure there must be tones of materials I can look at, but where would be a good start?

jcerickson
Posts: 29
Joined: Sat Aug 13, 2016 11:08 am
Location: Tampa, FL

Re: What else besides IRAs and HSA?

Post by jcerickson » Sat Sep 02, 2017 2:11 pm

rudycreat wrote:
Sat Sep 02, 2017 2:03 pm
jcerickson wrote:
Sat Sep 02, 2017 2:00 pm
rudycreat wrote:
Sat Sep 02, 2017 1:48 pm
...The other day I looked at my payslip and realized that my employer has been contributing to an HSA since last year. I haven't heard of it before (I saw it when I filed tax but ignored it), and now I realized that I could contribute $2.9k to it and I'll do it.
An individual with an HDHP can contribute $3,400/year to an HSA, $4,400 if you're 55 or older. Many HSA's have an option to invest in mutual funds, also (typically after you've exceeded their minimum cash requirement).
I thought $3400 includes the contribution from the employer as well. I think my employer is contributing $500. Thanks!
You are correct: the maximum annual contribution includes any employer match. I wasn't sure if that is what you meant in your original post - I thought you may have meant that they had signed you up for the HSA without your realizing it! :wink:

aristotelian
Posts: 4902
Joined: Wed Jan 11, 2017 8:05 pm

Re: What else besides IRAs and HSA?

Post by aristotelian » Sat Sep 02, 2017 2:13 pm

I think IRA, employer plan, and HSA are about it. If you have kids, you can do 529s.

You can do $10k per year in EE Bonds and I Bonds. Those get tax deferred interest.

Can't think of too much else. Any leftover money can go in a taxable brokerage account. At some point, you do have to pay taxes.

rudycreat
Posts: 40
Joined: Mon Nov 14, 2016 2:54 pm

Re: What else besides IRAs and HSA?

Post by rudycreat » Sat Sep 02, 2017 2:17 pm

jcerickson wrote:
Sat Sep 02, 2017 2:11 pm
rudycreat wrote:
Sat Sep 02, 2017 2:03 pm
jcerickson wrote:
Sat Sep 02, 2017 2:00 pm
rudycreat wrote:
Sat Sep 02, 2017 1:48 pm
...The other day I looked at my payslip and realized that my employer has been contributing to an HSA since last year. I haven't heard of it before (I saw it when I filed tax but ignored it), and now I realized that I could contribute $2.9k to it and I'll do it.
An individual with an HDHP can contribute $3,400/year to an HSA, $4,400 if you're 55 or older. Many HSA's have an option to invest in mutual funds, also (typically after you've exceeded their minimum cash requirement).
I thought $3400 includes the contribution from the employer as well. I think my employer is contributing $500. Thanks!
You are correct: the maximum annual contribution includes any employer match. I wasn't sure if that is what you meant in your original post - I thought you may have meant that they had signed you up for the HSA without your realizing it! :wink:
Thanks! Frankly I didn't really know. I came across the term HSA several times, but there were many other items on my payslips I didn't know about anyways so I ignored it. I finally asked the HR, and they told me the employer has been contributing to my HSA because I'm on HIHP. The payslip showed the YTD employer contribution is around $300, so I suppose they're contributing $500/ year. Now I'm asking around where to locate my HSA.

I just started my job last year. When they asked me to choose my health insurance plan, I told them I didn't want any. They then told me there'd be some penalty when I file tax, so I picked the cheaper option ($15/ month). :happy

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whodidntante
Posts: 4309
Joined: Thu Jan 21, 2016 11:11 pm

Re: What else besides IRAs and HSA?

Post by whodidntante » Sat Sep 02, 2017 2:20 pm

Equity index ETFs held in a taxable account are remarkably tax efficient. It's not as good as a tax advantaged account but it's still great because:

- You can defer capital gains tax until you sell. It could be many years until you sell so this is a huge benefit.
- Tax loss harvesting will reduce tax in the current tax year.
- An equity index ETF probably will not distribute taxable capital gains to you unless you pick one that is thinly traded. The ETF redemption process allows the fund to shed capital gains rather than distribute them to you as a taxable event.
- The federal tax rates are much lower on qualified dividends and on long-term capital gains. For you it would be 15% tax rate which is much lower than your marginal tax rate.
- You may get a credit for foreign taxes paid.
- The market for ETFs is booming and competitive, and there are several liquid, low-cost options to chose from.
- You will not normally need to pay commissions. Some brokers offer a commission free ETF list, and some brokers offer free trades on anything depending on your level of assets. Fidelity will offer you free trades for 2 years, and Merrill Edge will give you 30 trades a month once you accumulate 50k and keep it there for 3 months.
Last edited by whodidntante on Sat Sep 02, 2017 4:26 pm, edited 1 time in total.

jcerickson
Posts: 29
Joined: Sat Aug 13, 2016 11:08 am
Location: Tampa, FL

Re: What else besides IRAs and HSA?

Post by jcerickson » Sat Sep 02, 2017 2:27 pm

rudycreat wrote:
Sat Sep 02, 2017 2:17 pm
jcerickson wrote:
Sat Sep 02, 2017 2:11 pm
rudycreat wrote:
Sat Sep 02, 2017 2:03 pm
jcerickson wrote:
Sat Sep 02, 2017 2:00 pm
rudycreat wrote:
Sat Sep 02, 2017 1:48 pm
...The other day I looked at my payslip and realized that my employer has been contributing to an HSA since last year. I haven't heard of it before (I saw it when I filed tax but ignored it), and now I realized that I could contribute $2.9k to it and I'll do it.
An individual with an HDHP can contribute $3,400/year to an HSA, $4,400 if you're 55 or older. Many HSA's have an option to invest in mutual funds, also (typically after you've exceeded their minimum cash requirement).
I thought $3400 includes the contribution from the employer as well. I think my employer is contributing $500. Thanks!
You are correct: the maximum annual contribution includes any employer match. I wasn't sure if that is what you meant in your original post - I thought you may have meant that they had signed you up for the HSA without your realizing it! :wink:
... I finally asked the HR, and they told me the employer has been contributing to my HSA because I'm on HIHP. The payslip showed the YTD employer contribution is around $300, so I suppose they're contributing $500/ year. Now I'm asking around where to locate my HSA.
Check with HR again - if they are contributing to an HSA, it would already be set up for you with whatever firm they chose (typically through the insurance provider). We use United Healthcare insurance at work, and United offers their HSA through Optum. With our HSA, I have to keep $2,000 in cash but invest the rest in a Vanguard fund. :D

nervouscorps
Posts: 36
Joined: Sun Jan 05, 2014 8:01 pm

Re: What else besides IRAs and HSA?

Post by nervouscorps » Sat Sep 02, 2017 2:44 pm

Thanks for pointing the taxable out. I'm sure there must be tones of materials I can look at, but where would be a good start?
[/quote]

Its great you are frugal and happy-- wonderful way to be! For the taxable, You could do a Robo-Advisor like Betterment, Motif (personally I use this), Wealthfront, or even Fidelity has one. Or you could just do it yourself by opening a Brokerage and do the 3 fund portfolio type thing.

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badbreath
Posts: 918
Joined: Mon Jul 18, 2016 7:50 pm

Re: What else besides IRAs and HSA?

Post by badbreath » Sat Sep 02, 2017 2:44 pm

“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

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