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HSA: How to Beat Taxes Like the Rich

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The rich have a different focus. They're not worried about saving for retirement—they’re worried about passing their wealth to heirs without paying too much in taxes.  Taxes are their biggest enemy. And they've figured out how to avoid them. For the rest of us, we don’t have millions to protect. But there’s a powerful tool we can use to save on taxes. It’s called the Health Savings Account (HSA).  Here’s how it works. True Story  I recently went to the eye doctor. Here’s what I spent: Extra test: $39 Ray-Ban frames: $375 Total cost: $414 that I paid with my HSA card. Because the money in my HSA is pre-tax, I didn’t need to earn as much to cover the cost. Pre-Tax vs. Post-Tax Spending Let’s say you're in a 24% federal tax bracket, and you also pay 5% state tax. Your total tax rate would be 29%. Without an HSA (Post-Tax): To pay $39 for the eye test, you’d need $54.93 before taxes.  To pay $375 for the frames, you’d need $528.17 before taxes.  For the total ...
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Cash, Compounding, and Cake: Your Recipe for Retirement

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Planning for retirement is important. The earlier you start, the better.

Why start now?

The sooner you begin saving, the longer your money has to grow. That’s the power of compound interest.

Starting early means even small contributions can grow into bigger savings over time.

401(k)s: Your Employer’s Gift

If your employer offers a 401(k), take advantage of it. It’s a retirement account where you can contribute part of your salary before taxes. Some employers match your contributions. 

This is essentially free money. For example, if your company matches up to 5%, and you contribute that 5%, you're doubling your savings.

IRAs: A Personal Option

An Individual Retirement Account (IRA) is another great option. Unlike a 401(k), an IRA isn’t tied to your employer. You can open one on your own and contribute up to $7,000 per year (or $8,000 if you're over 50) in 2024. 

Traditional IRAs let you contribute pre-tax dollars, meaning you don’t pay taxes until you withdraw in retirement. This lowers your taxable income now.

Roth IRAs: Tax-Free Growth

Roth IRAs are different. You contribute after-tax dollars, so you’ve already paid taxes on the money you put in.

The benefit is your money grows tax-free, and you won’t pay taxes when you withdraw it in retirement. This is helpful if you expect to be in a higher tax bracket in the future.

Start Small

You might be thinking, “I have student loans or other expenses. How can I start saving?” Start small. Even $50 a month is better than nothing. Over time, you can increase your contributions as your income grows.

Retirement planning takes time. Starting early and using these accounts wisely can put you on the path to financial freedom.

Taking the first step today—whether that’s researching retirement accounts, talking to a financial advisor, or just starting to save—can make a big difference in the long run.





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  1. JenniferJune 29, 2024 at 10:39 AM

    This is very informative G! Knowing that I don't have any retirement plan feels like a punch. But I feel motivated to do better. Thanks girl.

    ReplyDelete

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