The Health IRA

Health savings accounts (HSAs) are tax-deductible savings plans that allow you to put aside savings for future health care expenses. HSAs were introduced in 2004 as part of the Medicare Prescription Drug, Improvement, and Modernization Act, which was signed into law by President George W. Bush. Since their creation, advancements in technology and popularity have allowed investors to not only access their HSAs more efficiently but also grow their accounts considerably.

While HSAs are primarily known as a tax-advantage plan for paying medical expenses, they can also help you save for retirement. Although it has become common practice that we income earners should contribute to our respective company-sponsored retirement plans or similar workplace defined contribution plans and other IRAs as the best way to save or invest our way towards retirement, recent developments in HSAs have created new strategies to help work towards financial independence and retirement expenses.

Before getting into potential strategies for Health Savings Accounts, let’s first look at who is eligible to open a Health Savings Account:

  • Must be 18 years of age or older
  • Must be covered under a qualified high-deductible health plan (HDHP). For 2020, the IRS defines an HDHP as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family.
  • May not be covered under any health plan that is not a qualified HDHP
  • May not be claimed as a dependent on another individual’s tax return
  • Cannot be over the age of 65

Now, if you meet the criteria listed above, you are eligible to set up a Health Savings Account. Here is where the fun begins. HSA holders in 2020 can choose to contribute up to $3,500 for an individual and $7,000 for a family (HSA holders 55 and older get to save an extra $1,000). HSAs are considered ‘triple tax-free’ assets. 1) All contributions to your HSA account are tax-deductible. 2) All funds in your account grow tax-free. 3) Withdrawals to pay for qualified medical expenses are tax-free. Unlike a 401(k) or IRA, an HSA does not require the account-holder to begin withdrawing funds at a certain age. However, funds taken out for non-qualified expenses are both taxed and incur a 20% penalty if made before age 65. After age 65, non-qualified withdrawals are still taxed but have no penalty.

As the popularity of these accounts has increased over the years, we have seen more and more HSA providers include investment options as an added benefit to their services, which gives investors all the more reason to take advantage of the benefits of HSAs. What we suggest as a long-term strategy to turn your HSA from a healthcare plan to a retirement strategy is:

  1. To max out your contribution every year.
  2. Don’t spend it! This may sound counterintuitive, but we’re looking at an HSA primarily as an investment tool and tax-exempt future bucket of money. Let it grow!
  3. Keep all of your medical receipts. That $900 invoice for physical therapy in 2019 can be used anytime in the future; for example, you can pull that $900 out in 2059 tax-free!
  4. The key to maximizing your unspent contributions, of course, is to invest them wisely. Don’t leave your HSA account in cash!
  5. It may be wise to set up a separate savings account for unplanned future medical expenses so that you aren’t scrambling to find funds to pay for these expenses out of pocket.

In golf, we are all familiar with the main clubs in our bag. Our woods, irons, and (eventually) the putter. However, every once in a while we need a little extra help getting our ball to the green. That’s where the rescue club comes into play. If your woods and irons are your 401(k) and IRAs, then the HSA is kind of like your rescue club to give you that extra push towards the green. The HSA can be a great addition to your long-term planning.

Do you still have questions about HSAs and how they fit into your overall plan? Please do not hesitate to reach out to your dedicated DWM team members to learn about new developments in this area, and how an HSA may fit into your overall planning.

Two Suggestions for Your Personal Well-Being

women well beingMany people make New Year’s Resolutions.  How about adding a couple of good ones mid-year?  At DWM, we’re focused on both your financial and personal well-being.  Therefore, we’d like to suggest you consider two resolutions-spending more time in nature and less time sitting.  Each can provide huge rewards for you and your family.

Spending More Time in Nature.  In May of 2013, more than 10,000 Canadians participated in a 30×30 Nature Challenge spending 30 minutes in nature, every day, for 30 days.  The impact on the participants was:

  • Increased sense of well-being
  • More energy
  • Feelings of stress and negativity were reduced
  • Less sleep disturbances
  • Felt more productive on the job
  • Felt happier

Other benefits from more time in nature can include increased creativity, lower risk of cancer and other diseases, improved immunity, more spiritual benefits and less depression.

There are some scientific reasons these occur:

  1. Exposure to plants and parks provides increased immunity. One reason is the existence of the chemical phytoncides which plants emit to protect themselves from rotting and insects and which benefits humans.  In Japan, there is therapeutic practice called “forest bathing.”  These regular forest walkers have been shown to exhibit lower concentrations of cortisol (a stress hormone), lower pulse rate and lower blood pressure.
  2. Sunlight is beneficial. When sunlight hits your skin, it starts a process to create and activate Vitamin D.  This vitamin helps to lower the risk of osteoporosis, cancer, and heart attacks.  Light skinned individuals need about 10 minutes of sunlight each day, while dark skinned individuals may need 15 to 20 minutes.
  3. Studies show that spending just 20 minutes in vegetation-rich nature improves vitality.
  4. A study done in 2012 revealed that a group of backpackers were 50% more creative after four days on a hiking trail.
  5. Research demonstrated that performance on memory and attention tests improved by 20% after participants took a pause for a walk through an arboretum.
  6. Green is good. If you live near a green space, you’re less likely to be depressed.  German researchers in 2012 concluded that simply focusing on a green cube for a few seconds can trigger greater creativity than cubes of other colors.

Sitting Less.  There was a time when standing desks were a curiosity; used by folks like Hemingway, Dickens and Rumsfeld.  Now research has shown that the cumulative impact of sitting all day for years is associated with increased risk of obesity, diabetes, cancer and cardiovascular disease.  Sitting has become the new “smoking.”

One study showed that men who sit six hours or more a day have an overall death rate 20% higher than men who sit for three hours or less.  For women, it’s 40%.  And, think of this:  a gym workout won’t cancel out the effects of sitting for long hours.  When you sit in your chair, in the office or at home, your metabolism drops to 1/3 of the rate when you are walking.  Standing burns about 50 calories more per hour than sitting.  The American Cancer Society’s recent report showed that people who stand for at least a quarter of the day reduce their chances of becoming obese.

Many of you know that I developed “laptopitis” five years ago.  I was hunched over my laptop for long hours a day for 3 weeks straight on client projects.  My back and my body didn’t like it one bit and after seeing my general practitioner, a chiropractor, having an MRI and few other diagnostics, the basic solution was that  I needed to stop sitting and get my working space in order.  I bought a desk that moves up and down.  I changed my monitors so they were eye-level.  I bought an ergonomic keyboard and mouse.  These days, I stand most of the day and love it.  In fact, Ginny and Sam in Charleston are now part of the “standing generation.” Both have desks that move up and down and we all use gel mats and wear comfortable shoes.  My wife Elise has converted her home office space to allow her to stand and view her monitor at eye level when she is working.

Hopefully, many of you will take or have already taken a vacation this summer. Think about how good you will feel or have felt while on vacation as you are next to nature, active and not sitting.  By incorporating some of the ideas above you can extend that “vacation high” when you get home by spending more time in nature and sitting less.  It should increase your feeling of well-being, which will make you and us very happy.

Your Health Matters

healthcare_costs_2[1]How are you feeling today?  At DWM, we hope you are feeling your best and enjoy robust good health every day.  As financial advisors, we certainly pay attention to your financial health and look for ways to maintain and improve your overall financial well-being.  And with the cost of health care these days, the state of your physical health has become inextricably linked with your financial well-being.  A recent WSJ article about health expenses in retirement noted that excellent health can actually raise an individual’s lifetime health spending needs because of the likelihood that they will live longer.  So good health may actually cost you more!  At DWM, we want to make sure we help you plan for these costs and analyze ways to save.

There are many changes occurring in the healthcare industry.  Aging populations and longer life-spans will strain the existing resources.  The industry is evolving to invent strategies and plans for preventive medicine and new technology to make healthcare more efficient.  As consumers, we are able to be pro-active in managing our own health care.  We can now download health apps, consult a medical practitioner by email and use strap on devices to monitor our own vitals.  Technological health advances in diagnostic tools and treatment options are ever-changing and, when we have medical questions, we will likely hit the internet and educate ourselves before calling the doctor.  As consumers in the marketplace, we can select from a vast menu of insurance options and many health care providers are offering innovative ways to finance even traditional medical services.  Welcome to the new health economy!

There is also a cost to new medicines, better technology and a shift from traditional strategies.  According to reports by the Centers for Medicare and Medicaid Services, which published its projections last August in the policy journal Health Affairs, spending on healthcare is expected to grow at an average annual rate of 5.8 % over the next decade.  Another report from the Pricewaterhouse Coopers (PwC) Health Research Institute estimates those costs growing at 6.5% per year.  Some estimates for Medicare Part B and Part D are over 7%!  WSJ quoted a report by HealthView Services Inc that says a healthy 65-year old couple can expect to pay, on average, $266,589 for insurance premiums and $128,365 for related expenses (dental, vision, copays and out-of-pocket bills) over their lifetime.  These figures show that healthcare costs are far outpacing cost-of-living increases of 1-3% and have made us take notice of how these increasing healthcare costs will affect your future financial health.

With these rising health care costs, mandatory Medicare premiums can account for a larger share of retirement spending than even recreation or housing.  And few people realize that your annual Medicare premiums are based on your retirement income, according to Mary Beth Franklin of Investment News.  It makes good financial sense, therefore, to understand your modified adjusted gross income (MAGI) and plan withdrawal strategies with income targets in mind.  Even moving one tax bracket can result in significant savings in Medicare costs.  You really need to put the ‘microscope’ on your health care expenses and make sure you are doing everything you can to minimize their impact on your financial plan.

Recently, we discussed the upgraded, newly released version of MoneyGuidePro – MGP4- and highlighted some of the new features in our blog (  MGP4 has added a new healthcare spending goal, a tool which allows us to isolate the rising health care spending needs in your financial plan results and make sure that your plan can successfully accommodate this spending.  There is a worksheet for including your actual expenses or estimates for Medicare Part B, Part D for prescriptions, supplemental or Medigap policies and out-of-pocket spending.  This will be a great tool for us to use to make sure our clients are prepared.

At DWM, we can help you manage and budget for a changing health care environment and the costs you will face in the future.  So get enough sleep, eat right and exercise…we want you to stay healthy and enjoy your life.  Your health matters!

How Would You Rate Your Life?

happiness prosperity healthWe hope you had a wonderful holiday weekend. Perhaps some time with the family, a barbeque, some physical activity and maybe a great beverage or two. Labor Day is one of my favorite holidays. It marks the end of summer and start of fall, including kids returning to school and another season of college and NFL football games. It’s also a reflective time, when many people take a look at their life and review where they are and where they want to be.

A couple of weeks ago, the WSJ ran an article entitled, “On Gauging the Pursuit of Happiness.” It included the most recent edition of the World Happiness Report. The six most important metrics Gallup used to gauge happiness are GDP, life expectancy, generosity, social support, freedom and corruption. In addition, the researchers posed two questions. First, they asked people about their emotional experience the previous day- were they happy, angry, or stressed? Second, they asked respondents to rate their life as a whole on a scale of 0 to 10. How would you have responded?

The U.S., while #1 in overall GDP, is eighth in GDP per capita. Norway, Switzerland, Australia, Sweden, Denmark all are wealthier than us on a per person level. In terms of happiness, however, America ranked 15th, behind Switzerland, Iceland, Denmark, Norway, Canada, Finland, New Zealand and even Mexico. We performed well in GDP but weaker in the other variables.

Countries, including the U.S., are now starting to measure well-being. In 2011, the United Nations adopted a resolution encouraging member states to measure happiness and economic well-being. The U.K. systemically collects data on well-being. Our Labor Department Bureau of Labor Statistics has included well-being questions in its American Time Use Survey. And, lots more is happening at the local level.

Santa Monica, CA, won a $1 million award to develop a well-being project aimed at increasing trust and connectedness among residents. Apparently it is working- Santa Monica residents are even filling potholes these days.

Businesses are joining in as well. Certainly companies have for decades cited lofty mission statements as proof they are interested in more than just net income. And now, workers of all types are demanding more meaning from their careers as work simply takes too much of their time; with longer hours, more competitive pressures and IT “advancements” keeping them tethered to work 24/7. In many cases, employees are not looking for a job but, rather a higher calling. For them, it’s about the purpose, not the task.

For example, KPMG is trying to inspire its accountants with world-changing focus. “We see ourselves as cathedral builders, not bricklayers,” said Global Chairman John Veihmeyer. The company held a contest for its U.S. employees to share stories illustrating the higher impact of their jobs and it received 42,000 submissions. CEO Chris Loughlin of Travelzoo encourages his 400 employees, who help customers book low-cost travel worldwide, to look at their job this way: “if everyone traveled, there would be significantly more peace on earth.” Of course, not every worker believes that their company or their job is changing the world. According to Amy Wrzesniewski from the Yale School of Management, about 1/3 of individuals feel their job is a calling, while 2/3 are happy being a “cog rather than a cathedral builder.”

And, finally, we take a look at the great number of older Americans that are continuing to work. Average retirement ages are climbing and nearly 50% of baby boomers expect to work until 66 or beyond. Certainly, for many, it’s an economic necessity. However, driving the trend of not retiring are highly educated workers in professional-services jobs who are staying there by choice, rather than economic reasons. In some cases, they may continue working (either for pay or as a volunteer) because they believe they are changing the world. However, for most, it is their passion and commitment to stay involved, stay current and make a difference that brings them happiness.

For example, Jan Abushakrah, 69, typically works a 60-hour week as the chairwoman of the gerontology department at Portland Community College with no plans to retire. “I have pretty much purged the word from my vocabulary,” she says. “As long as I am happy and healthy every morning when I wake up and something exciting on my plate to look forward to, it is easy to say I could keep doing this forever.”

As we all start the fall, we hope that you, if asked, would rate your life and well-being (including happiness, health and prosperity) as a 10, or very near a 10. At DWM, our passion isn’t about changing the entire world, but rather helping each of our clients achieve their highest possible state of well-being. It’s our higher calling and passion 365 days a year. Here’s to you and your life and making it a 10.