What is your largest expense in retirement?

Are you ready to dominate your financial course?

Then you came to the right place.

Welcome to the only newsletter that’s one part #golf, all parts #money.

I’m super happy you’re here.

I know you’re reading this because you want to have confidence and clarity over your financial future.

I’m here to help guide you there.?Think of me as your financial caddie.

Together, we're going to remove the complexity from your financial course so that you can spend more time doing things you enjoy with the people you enjoy doing them with.

So, if you’re feeling loose, let’s tee one up on…

Your largest expense in retirement

The number one fear of most retirees? Outliving their retirement savings?

The expense that increases most in retirement?? Heath care

Research from Fidelity estimates that a 65 year old retiring in 2023 may need roughly $157,500 saved to cover health care expenses.?A retired couple would need $315,000, and that’s before considering taxes.

Think back to our couple with $2,000,000 saved in their 401(k)s for retirement.?If they pay a 25% effective rate between Federal and state taxes, health care costs and taxes associated with them could cost nearly $400,000.

That’s a good amount of money going towards:

• Something you need, but don’t really enjoy spending on, and
• Something you want to avoid as much as possible

That's a lot of shots in the rough and bunkers on your financial course. ?

Not good for your score.?

Saving for heath care expenses in retirement

Retirement saving has evolved dramatically in the post-WWII era.?

Here's a quick stroll down memory lane...

1950s-1960s - Employer-sponsored pensions were the most common vehicle for retirement savings.?Workers would earn credits for their years of service to their employer, and upon retirement they would receive a monthly payment for life based on their years of service. ?

These pensions provided a reliable source of income for workers during their retirement and put the burden of providing retirement income on the employer.?

In 1960, 18.7 million workers, or 41% of all private-sector employees were covered by a pension.?

1970s - IRAs, or Individual Retirement Arrangements (not accounts) came into existence in the early 1970s.?These accounts provided individuals with tax advantages for saving for retirement, and provided an opportunity for the employee to contribute to their own retirement savings. ?

Later in the decade, the introduction of the 401(k) plan provided another avenue for employees to save money for retirement and earn tax breaks in the process.

Pensions were still a prevalent force, with 46% of private sector employees being covered by a pension plan at the end of the decade, but the shift to employee-provided retirement savings was well underway.

1990s – The pension's stronghold as the preferred retirement savings scheme began to loosen. For the first time in history, the number of participants in a 401(k) or other defined-contribution plan surpassed the amount of workers covered by a pension.

Towards the end of the decade, Roth IRAs were introduced.? Roth IRAs allowed workers the option of contributing after-tax money to a retirement account where the investments could grow and compound tax free. Roths are now a key tool to minimizing taxes in retirement.?

2000s - Heath Savings Accounts (HSA) were introduced in 2003. The "triple tax advantaged" accounts were the first of their kind and contain many unique benefits.

They are roughly as popular as Traditional IRAs (36.8M households have an IRA vs. 32M Health Savings Accounts) but many of their benefits are misunderstood or underutilized by consumers.

Health Savings Accounts can be one of your best tools for retirement saving

HSAs are one of the few accounts to offer triple tax benefits, and the most powerful.

1. Contributions to an HSA are tax-deductible, meaning you can reduce your taxable income by the amount you contribute.
2. If you invest the money in your HSA, the funds in the account grow tax-free
3. You can also make tax-free withdrawals for qualified medical expenses

This means money you contribute to an HSA might NEVER be taxed.

There’s also, no “use it or lose it” rule, like Flexible Spending Accounts (FSAs), which means HSA funds roll over from year to year.

But wait, there’s more…

Once the HSA balance reaches a certain threshold (varies depending on the provider), you may have the option to invest the funds in mutual funds or other investment vehicles, potentially allowing your savings to grow faster.

This opens up a world of strategies for using your Health Savings Account as a retirement savings vehicle.

3 ways to use your Health Savings Account

Like a checking account

A lot of HSAs come with a debit card or checkbook.?So, just like a regular checking account you can pay for qualified medical expenses, like doctor’s copays or prescriptions, right from your account.?

Like a savings account

Our brains favor short-term pleasure over delayed gratification, which makes saving hard.?Sometimes it can be helpful to employ some behavioral “nudges” to trick ourselves.?Your Health Savings Account can play a roll in this.?

Contribute money to your HSA via payroll deduction – you won’t miss the money if you never see it.

Pay for your medical expenses with regular funds throughout the year, but be sure to save your receipts

At the end of the year, or whenever you need a little “boost” for extra spending (think Christmas gifts for the kids or a vacation without them ??) submit your receipts to reimburse yourself from your Health Savings Account.

Like an IRA

The optimal way to use your Health Savings account for retirement is to treat it just like an IRA.?Max out your annual contributions, invest the money, and don’t touch it until you’re retired.?

The benefits of long-term compounding can be AMAZING.?

• If you opened a health savings account in 2004
• Maxed out your families contribution each year
• Invested the proceeds and earned an 8% return

You would have nearly $300,000 of TAX FREE assets to spend on qualified medical expenses in retirement.?

That could potentially be enough to fully fund health care expenses in retirement.

3 things you should know about Health Savings Accounts

Health Savings Accounts aren’t for everyone

To be eligible for an HSA, you must be covered by a high-deductible health plan. The plan must also have out-of-pocket maximum limits.

There are contribution limits

Each year, the IRS sets contribution limits for HSAs, and they’re different depending on whether you have a individual or family coverage.?Individuals aged 55 or older can also make an additional "catch-up" contribution.

They’re only intended for Qualified Medical Expenses

HSA funds can be used tax-free for a wide range of qualified medical expenses, including doctor visits, prescription drugs, medical equipment, dental care, and vision care.

Non-medical expenses are subject to income tax and may be subject to an additional penalty if withdrawn before age 65.

Financial Swing Tips

HSAs can be an excellent way to save for medical expenses and reduce your tax burden. However, they are not suitable for everyone, and it's essential to consider your personal financial situation and healthcare needs before deciding to open an HSA.

?It's also recommended to consult with a financial advisor to determine if an HSA is the right choice for you.

Positive Swing Thoughts

It's FedEx Cup Playoff time in golf!

While several big name, former major winners will be watching from home this week (Shane Lowery, Adam Scott, and Justin Thomas) this is positive swing thoughts, so let's celebrate some great stories from this past weekend.

Lucas Glover came into the Wyndham Championship this past week ranked 112th in the FedEx Cup Playoff standings. He went out and won the thing by two strokes, and vaulted himself to 49th in the standings.

Cam Davis looked destined to miss the playoffs earlier this year when he recorded 5 straight missed cuts, but a T6 at the PLAYERS and a strong finish with two top 10s at the 3M and Wyndham punched his ticked to the postseason.

And then there's Ben Griffin. No one had more of a vested interest in Justin Thomas's Sunday round than him. The PGA Tour rookie was on the bubble. Had Thomas holed his birdie chip on the 18th (which he almost did) Griffin would have missed the playoffs. Instead, he's playing for a share of $50M+ with some of the other best golfers in the world. Not bad for a 27 year old grinding his way through his first season on tour.

Until next week, enjoy the playoffs!