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In part 5 of our 6-part series delving into our concept of a Health and Financial Security (HFS) portfolio, we take a look at our final goal of saving for the future. (Read part 1, part 2, part 3 and part 4.)
Of the four goals for one’s health and financial security portfolio – protecting and maximizing health, protecting and maximizing income, protecting assets, and saving for the future – many find saving for the future to be the most difficult.
A health and financial security portfolio can’t be entirely defensive. Some weight should be put on saving and growing financial resources for the future. Products and strategies in this category are designed to help accumulate resources and achieve growth for longer-term needs.
At a minimum, most people should take advantage of any opportunity to contribute to retirement savings through their employer (typically in the form of a 401(k) account). Setting aside even a little bit of money, as early as possible, is a critical strategy for growth. This makes even more sense if the retirement account is funded by pre-tax money (most, but not all, are), and if an employer is offering a match on contributions.
401(k) savings are usually not enough to pay for everything when you retire. Whenever possible, it is smart to do some additional longer-term investing (again, starting as early as possible), so you can grow your resources for the future. How much, and how conservatively or aggressively you decide to invest will depend on many factors, including how much you can afford, your personal risk tolerance, and your proximity to retirement.
For those with a qualifying high-deductible health plan, a health savings account (HSA) offers an additional opportunity to save, specifically to cover medical expenses incurred now or in the future. HSAs are especially attractive because they have a “triple tax advantage” – you contribute money before taxes, the money in the account grows tax-free, and you are not taxed when you use the money in the account. Because of the long-term growth potential of HSAs, some people use them as part of their retirement savings plan.
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