S/I

Earlier this week, we talked about the Health Savings Account (or HSA as it’s commonly called). The thing that always bothered me about HSAs are how confusing they are compared to a 401(k). I think this is part of the reason that a lot of people don’t really know what an HSA is or how it works. Almost everyone I’ve ever talked to has heard of a 401(k). But very few people in the regular world have heard of an HSA.

The problem with the HSA has to do with the fact that it requires a little bit more work to set up. 401(k)s, for the most part, are basically automatic at this point. Most employers opt you in by default, deduct a certain percentage from your paycheck each pay period, and put your contributions in a default investment option in your 401(k) – typically some sort of balanced fund or a target date fund.

Setting up an HSA, on the other hand, requires a little more work…

Read enough personal finance blogs and at some point, you’ll probably stumble across someone writing about the “secret” retirement account known as the Health Savings Account (“HSA”). For those of us who are entrenched in the personal finance world, the HSA really isn’t all that much of a secret. Most of us who are into this money stuff know that it’s a pretty advantageous savings vehicle.

The thing that I think doesn’t get pointed out enough is how perfect the HSA is for millennials. By giving yourself access to an HSA, you get two awesome things. You gain an extra tax-advantaged account that can really help you maximize your savings. And you lower your monthly health insurance premiums at a time in your life when you probably have very low healthcare costs.

Welcome to Part 3 of my series detailing how I invest in my employer sponsored retirement plans. Today, we’re going to look at the exact funds I contribute to in each of my employer sponsored retirement plans. If you haven’t already, be sure to check out Part 1, where I discuss my general investing philosophy, and Part 2, where I discuss the different types of employer sponsored retirement plans.

For those of you that don’t know, back in June 2016, I switched jobs (taking a $50,000 pay cut in the process). I ended up rolling over all of my 401(k) contributions from my prior employer into my new employer’s 457 plan. Then I needed to figure out how to put my money to work.

When I was in college, I picked up a copy of The Automatic Millionaire by David Bach. His book is still one of my favorite money books and probably the first book I recommend to anyone beginning to learn about personal finance.

When I first read Bach’s book, I too, wanted to become an Automatic Millionaire! One chapter in his book talked about setting up an IRA or a Roth IRA. I was a 19 year old kid at the time, so I didn’t have a clue what that meant. All I knew was that it was something good! After reading Automatic Millionaire, I hopped onto E*Trade, opened up a Roth IRA, and transferred 100 bucks into my Roth IRA account.

And then, I was stuck. I remember Automatic Millionaire talking about investing in mutual funds, but I didn’t really know what that meant or how to put my money into that type of investment…