This One for the Money podcast episode is all about the Financial Independence, Retire Early movement known as FIRE. I’m your host, Jonny West, and I’m going to be teaching you tips, tricks, and strategies you can use to retire early. We’ll also discuss Health Savings Accounts, which are a great way to save for healthcare expenses now and in retirement. I hope you’ll find this episode helpful for your retirement goals!In this episode...
Thank goodness it’s Monday!
- Financial Independence, Retire Early [00:31]
- What to consider before early retirement [04:11]
- Health Savings Accounts [06:37]
Most of the people I know would never utter that phrase. Generally, the goal to work toward is the weekend, not going back to work. That’s why the notion of early retirement is appealing to so many. People want more time to do what they want to do. That’s why the Financial Independence, Retire Early (FIRE) movement is so popular.
The principal strategy behind this movement is being a super-saver. That typically means saving between 50% and 70% of income each year by having higher incomes and living frugally. To give some perspective, when planning to retire at age 65, I recommend clients save between 10% and 15% of their income each year into retirement accounts. FIRE adherents often save in non-retirement accounts because distributions occur before age 59½. Life after retirement
After saving sufficient income, FIRE adherents retire from work and use their savings to generate income while continuing to live frugally. They can live off their income from portfolio gains, dividends, and interest without touching the original investment. After retirement, some people even move to less expensive locales so their retirement incomes can go further.
Early retirement requires a lot of planning. My financial planning clientele consists of several early retirees and clients who are on track to do so. You may be surprised to hear that these people didn’t have significant incomes. Instead, they lived well within their means and invested the difference. My financial planning practice specializes in taking clients like these through early retirement and helping ensure that the next stage of life is just as meaningful.HSAs
Health Savings Accounts are the only investment that is triple tax-free. The contributions are tax-deductible. Both the growth and distributions are tax-free when used for qualifying medical expenses. To be eligible for an HSA, you must have a qualifying high deductible medical plan. The money in an HSA can be used at any time to cover health care expenses. But to see the full benefit, you’ll want to let the money grow and pay for current healthcare expenses from other sources of personal savings when possible. My younger listeners may think that they can wait until later. Remember, the sooner you invest your money, the longer it has time to grow. The average couple will need about $285,000 in retirement for medical expenses, not including long-term care. That’s a ton of money and is why you want to consider HSAs as a great way to save for future medical expenses.Resources & People Mentioned
Connect with Jonny West
- Mr. Money Mustache: Blog
- More Americans Want to Retire by 55. How Can FAs Help?
- Fidelity - 20th Annual Retiree Health Care Cost Estimate
- Connect with Jonny on LinkedIn
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