00:00 Intro
01:08 Brokerage Account
01:43 IRA
03:43 Employer Sponsored Plans
04:48 Brokerage Account
05:55 Unrestricted Access
07:52 Taxes & Fees
09:13 Interest On Cash
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Disclaimer: Please note that this video is made for entertainment purposes only and not to be taken as financial advice. Always make sure to do your own research.
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My Favorite Investment Account & Only 35% of Investors Use It
When it comes to investing, there are countless options available to individuals looking to grow their wealth. From stocks to bonds, real estate to cryptocurrency, the possibilities may seem overwhelming. However, there is one investment account that I have found particularly beneficial, yet surprisingly underutilized. In fact, only 35% of investors take advantage of this incredible opportunity.
I am referring to a Health Savings Account (HSA). While HSAs are primarily known for their use in paying for medical expenses, these accounts also provide a unique investment opportunity that many investors are unaware of.
An HSA is a tax-advantaged account that allows individuals with high-deductible health insurance plans to save money for qualified medical expenses. These expenses can include doctor visits, hospital stays, medications, and even certain dental and vision costs. What sets HSAs apart from other traditional investment accounts is their triple-tax advantage.
Firstly, contributions to an HSA are tax-deductible, meaning that the money you put into the account can reduce your taxable income for the year. Secondly, any interest, dividends, or capital gains earned within the HSA are tax-free. Lastly, withdrawals from the account for qualified medical expenses are also tax-free.
Unlike a Flexible Spending Account (FSA), which requires individuals to use the funds within the year or lose them, HSA funds roll over year after year. This means that individuals can contribute and invest in their HSA for years, allowing the funds to grow substantially.
Investing within an HSA is similar to investing in a 401(k) or an Individual retirement account (IRA). Many HSA providers offer a range of investment options, from mutual funds to ETFs, allowing for diversification and potential growth. While these investments come with risk, the tax advantages of the HSA can help offset any potential losses.
One of the main reasons I consider an HSA to be my favorite investment account is the control it offers. Unlike retirement accounts that have strict withdrawal rules or penalties for early withdrawals, HSAs can be used for medical expenses at any age without penalty. This makes it a highly flexible investment vehicle, especially for individuals looking to plan for future medical costs or save for retirement.
So why aren’t more investors taking advantage of HSAs? One reason could be the misconception that these accounts are only suitable for those with chronic health conditions or high medical expenses. While it is true that HSAs are particularly beneficial for individuals with larger medical bills, they can also provide significant tax advantages for anyone.
Another barrier for many is the lack of knowledge or understanding of HSAs and their investment potential. Many investors simply do not know that their HSA funds can be invested in the stock market or other investment vehicles. It is crucial that financial advisors and employers make it a priority to educate individuals about the potential benefits of HSAs as an investment account.
In conclusion, an HSA is a powerful investment vehicle that offers unique tax advantages and flexibility. With the ability to contribute, invest, and grow funds over time, individuals can potentially build a substantial nest egg to cover future medical expenses or supplement their retirement savings. It is time for more investors to discover and take advantage of this underutilized saving and investment opportunity.
I retired early at 53 years of age with a nice pension.
I have a Roth IRA that I don't need to tap but I also cannot contribute to anymore because I have no "earned income". I really like this account because there is no minimum distribution requirement.
I discovered the HSA late in life, and I maximize those contributions every year; unfortunately, the HSA cannot be contributed to after the age of 65. I'm still very healthy and hope I will not need this account either. I really like this account because there is no minimum distribution requirement.
I started investing in brokerage CDs as the interest rates are now 5% for a 30 day CD.
I put the rest of my investment money into a regular brokerage account.
In addition I own gold, silver, paid off real-estate and a 1 time fixed amount of cryptocurrency. I promised myself a 10 year speculation in cryptocurrency then after 10 years I'll decide to get out or stay longer.
So far so good.
I was surprised that only 35% of people use a brokerage account. It's as easy as buying something from Amazon but without the return hassle.
Thanks for another great video.
You never discussed an important nuance to using a brokerage account. You may not receive the same protections from bankruptcy or litigation that you receive by having your money in a 401K, IRA, or other company plan. There are a lot of specifics on this topic, but you need to be aware of this.
My favorite is my Solo 401K w the back door Roth. I also love my Roth IRA that I opened years ago. My brokerage is my in case of emergency, break glass account. My trad IRAs are the red headed step children, but they are still a part of my overall portfolio.
Your teeth are so perfectly white! What’s the secret??
I'm the opposite. about 90% of my investment is in a SEP IRA and 10% is in a brokerage account. Taxes drive the train and that $66k limit in the SEP IRA is the bomb.
I used to think about access, but now I'm 58, so that's going to be coming before I know it.
I do retirement accounts, not brokerages, but earlier this year I did take some "dead cash" out of my savings that was earning those awful rates, and get an I-bond at 6.5%, and also ladder T-Bills at 4 – 5% with Treasury Direct.
I admire your knowledge. I wish I was as smart as you when i was your age.
If you really want to blow your mind, and become more efficient and make the most of it, look into whole life insurance and more specifically IBC(infinite banking concept). Dig into how these accounts can create a personal savings, your personal banking system, as well as a tax free retirement bucket. This account has no governmental/IRS limitations so can accessed anytime, all while taking full advantage of compound interest for life. This is my favorite account.
So do you consider the brokerage account as a home for your emergency fund then?
6 years straight my return has been better than just vti/voo so i must be doing something right lol
You do a great job of calmly and simply explaining investing concepts. Whether your are experienced or novice investor there is something to take away from your videos. Good job!
Erin I think part of the reason that the Brokerage account is your favorite is due to your investment style – buying low cost index funds and never selling them. For those like me who trade positions several times a month, tax free accounts are easier. My 457b plan allows no-penalty withdrawals starting at 51.
I wish she would’ve just gotten to the point
Do you have videos on dividend investing
Keep in mind “The rule of 55” allows you to withdraw money from your 401k at age 55 without penalty should you decide to retire.
Broker account for sure.
Yeah, but the taxes???
If you love what you do then keep doing it for as long as you’re able. If you retire early and don’t have something to get up for or look forward to doing then it’s just a ticket to an early grave. Balance is the key and of course taking the time to learn about good nutrition and get some exercise and most importantly is what you inherited from your parents.
We are new to the USA and looking for a financial advisor or a platform we can use to manage all our investments. What’s your advice? Thanks
What I don't like about my taxable brokerage account (S&P fund) is that I have to pay taxes on the roll over dividends every year eventhough I have never withdrawn money and it lost value some years.
It's going to sound odd, but my favorite "account" has a zero balance. It's a HELOC. A HELOC affords you tremendous flexibility – it's a source of money available at an instant, for an unexpected expense or any reason at all. But keep the balance zero most of the time (i.e. when you're NOT experiencing a money emergency) so as to not pay any interest on it. Having a HELOC in your back pocket means you don't need an emergency fund or a low-interest savings account, allowing you to keep all your assets invested at all times.
I max out my 401k and Roth. If I have anything left over, I throw it in my brokerage account and let it grow. I only dip into it if I need to make a big purchase like a car which only happens once every 10 years or so. I also treat it as a kind of insurance policy if were to develop a major health issue that isn’t completely covered by health insurance. It’s all index funds and, like my Roth and 401k, I don’t have to check on it frequently. I’m confident I’ll have enough when I retire.
You said having income is the only qualification to contribute to an IRA. You can still contribute to your spouse's IRA even if they don't have an income when you file a joint tax return. I have been maxing out my wife's IRA contributions every year and she has not earned an income for over 8 years (she stays home with our three children).
I am almost 70 and have no investing experience,any help is welcome.
This is pretty much general information.
Great work, thank you.
You should also mention that Roth contributions have income limits
It is important to remember that retirement accounts can also be moved into brokerage (IRA) accounts after the age of 59 1/2. I just moved all of my 403b funds into self directed IRAs. I love my brokerage account as well. High income individuals should also consider starting a ladder of municipal bonds inside a brokerage account when they have adequate income for that type of investment. This gives one the advantage of tax free income for life. I love my municipal bond account in my brokerage account.
Work until 70 if you WANT to work to 70. But plan so you don't HAVE to work to 70. I knew a lady that retired at 83, and that was only because her health got to the point where she really had to stop working. She didn't want to — she loved her job. I remember her telling me about how her high school counselor told her that if she went to college she could become a nurse or teacher. She insisted she wanted to become a chemist!
First off Erin, you are awesome and your husband is a lucky man. I currently have a Roth, not a huge balance. A 457 account that I no longer contribute to because I had to retire. I have an online savings account and CDs at my local financial institution. My pension has so far been able to pay for all of my needs. I have had brokerage accounts in the past but they really make a mess of your taxes if you actually trade. If Biden gets his way to be able to tax unrealized gains, the brokerage account might become
untenable. As far as for when you want to retire, sometimes you just don't have a choice but whe that happens it is good to know that you have been responsible and won't starve if your health suddenly goes bad. God Bless you Erin and your Husband.
I don't like stocks. The bull goes slowly up the stairs and the bear jumps out the window. During down cycles when the market crashes it does it suddenly with 50 to 60 percent losses and it takes years to recuperate. This happens a lot and can be devastating for senior adults getting ready to retire. Also, stocks average annual returns are single digit returns with only 8% at the most. It would take 9 years for your investment to double at that rate. So in a 40 year working period, your investment would double only 4.4 times. You will never get to financial freedom at that rate. As an investment, rentals are better. The returns are double digit. If you invested 50,000 in one rental and get at least 25% annually, it would out perform the stock market by 27 times in a 20 year period. It would double every 2.88 years. In a 40 year working period that equates to 13.8 times. That 50,000 would grow to 4.3 million dollars. Do the math. I have a rental I bought in 1989 and am currently getting an infinite return on it because I've gotten all my money back I originally put into it. The past year my return was 37% on the remaining equity I have in the rental after refinancing and having a 13% loss in cashflow due to property tax increases. Rentals make money in 3 ways, cashflow, paid up principal, and appreciation of value and are tax free. My favorite accounts are a personal line of credit and a HELOC. People don't know how powerful these two are unless you have them.
None of us KNOW what the 'end of life' will be for ourselves. I'm 79. My dad was mentally sound and died at 70. My mum had dementia before she was 79. I don't have dementia. But I came close to dying Dec 2022. Jsn 2023 they fixed me, TAVR. I'm better now. Since then I cashed in sever $K of I & EE bonds and invested in a special rate bank CD and stated a T-bill ladder.
People are so lucky to have smart people like you on U Tube. 50 years ago everybody was only on their own.
I have a nice mix. You can't buy time don't work till 70
Hi Erin, what are your thoughts on infinite banking concept?
I have my opinions, but wanted to see your thoughts on the matter. Perhaps a YouTube video with your thoughts?
I was made aware of this recently, and I hear a lot of pros and cons with it. Thanks in advance.
@ErinTalksMoney Please make a video on investing in the Crypto market, especially with some retirement accounts now offering crypto assets as part of their retirement portfolio.
Maybe for a future video you could do a "explain like I'm 5" for the jargon used by investors? (Index funds vs actively managed accounts, treasuriy bills/treasury bonds, brokerage accounts, 401k, 401k Roth, traditional IRA, Roth IRA, no load mutual funds, management fees and how they are structured) A lot of this stuff has multiple names and I can only imagine how confusing it is to new investors to hear these terms thrown around.