Saving Beyond Your 401(k)

Ray’s Take: Buried treasure may sound like something from a fairy tale, but in 2013 a California couple discovered the largest buried treasure in U.S. history. The Saddle Ridge Hoard, as it became known, was made up of 1,411 gold coins minted in the 1800s and worth more than $10 million.

While I have yet to meet anyone who buries their money as a method to save it, most people do use their employer-provided 401(k) as their primary savings vehicle. While a 401(k) is a simple and effective way to save money, it’s always good to consider other savings options to build your wealth in addition to your 401(k).

If you are enrolled in a qualified high-deductible health plan and are eligible for a health savings account (HSA), this can be a great option to help you save. Contributions to these accounts are pretax and withdrawals are tax-free for qualified medical expenses. In addition, unused money can stay in the account until retirement and you can use the money to pay your Medicare premiums.

Roth IRAs (individual retirement accounts) can also be a key player in your overall portfolio. The tax shelter benefits are so extraordinary that Congress specifically limits them to individuals and families with adjusted gross incomes of less than certain predetermined thresholds. Contributions are not tax-deductible, however, if you need to make a withdrawal of your past principal contributions, you can do so tax-free without an early withdrawal penalty, though you won’t be able to replace the funds again once they’ve left the account.

A traditional IRA is another option to consider. You can make contributions with money you may be able to deduct on your tax return, and any earnings can potentially grow tax-deferred until you withdraw them in retirement.

Finally, a nonqualified investment account can be layered onto the above tax-favored accounts. With wise planning, these retirement savings options can help you save without burying your riches in your backyard.

Dana’s Take: As adults, we marry, get a good job, buy a house, start a family and assume our happily ever after will continue forever. In 2017, the probability of a marriage lasting 20 years was 52 percent for women and 56 percent for men.

Three of my close friends are going through major reversals of fortune in their mid-50s. Each of them had six-figure household incomes and large homes. Now, because of divorce, they are renting much smaller spaces and splitting their retirement fund in half.

Putting your money into a retirement fund is never fun, but it’s a good idea. Since we can’t see what is around the corner, it’s a good idea to seek the counsel of a financial adviser who plans for all outcomes.

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