Income and Savings Iinvesting Strategies

How I create income and support my family. 

I have worked in the IT field for over 25 years in the Pacific Northwest and California. I really enjoy the work and the people I interact with each day. Here are the key retirement strategies I implement for me and my family: 


First, I max out my annual 401k pre-tax contributions, which is $25k ($19k plus the $6k catchup once you reach your 50th birthday). So, in this example, my taxable income is reduced by $25k. In addition, I receive a small 401k matching, which is basically free money that provides me with additional investment funds each year.


Second, I max out my pre-tax Health Saving Account 

If your company offers the HSA, you typically have to select the high deductible health plan, which is a annual expense you must prepare for each year. For my HSA, I can contribute up to $7k pre-tax ($7k is the combined maximum of company- and self-provided contributions). 


What's unique about the HSA is that all of the company-provided HSA dollars plus my own HSA contributions go directly into a brokerage account that funds a Vanguard S&P 500 index fund. 


My investment into the company-sponsored HSA has the following triple tax benefit

(a) I contribute to the HSA account pre-tax, 

(b) this investment grows tax free, and 

(c) if I withdraw the money for medical expenses I pay zero taxes for these distributions. 


Again, my taxable income decreases up to $7k depending on the amount the company contributes to my HSA, which means I keep more of my income for future growth and use.


The HSA sailboat provision. 

One last benefit of the Health Savings Account is what I call the sailboat provision. In this example all HSA contributions saved and compounded by your 65th year can be withdrawn for any type of expense, medical or not without penalty. This means that you could buy a sailboat with your saved HSA investments at age 65, however these sailboat (non-medical) distributions are included in your income, and as with most income you will have to pay some income tax. 


Note that I am not a financial or legal professional, nor am I licensed to sell securities, or any other financial instruments. Given this statement, I strongly recommend that you consider this blog as entertainment value. Although, I sincerely hope that I can motivate you to learn to build your own financial knowledge and wealth.


Financial Sombrero



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