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The Personal Finance Podcast
What Do I do With an HSA at an Old Employer?! (Plus How to Avoid RMD's) - Money Q&A
00:39:07
In this episode of the Personal Finance Podcast, we're going to talk about what to do with an old HSA at an old employer, plus how to avoid RMD’s.
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David
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Andrew
On this episode of the Personal Finance Podcast what to do with an old HSA at an old employer. Plus how to avoid RMDs let's get into it. What's up everybody and welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of MasterMoney Co and today on the Personal Finance Podcast we are going to be talking through your questions on this episode of Money. Q and A. If you guys have any questions, make sure you reach out to us via the Master Money newsletter by going to MasterMoney Co newsletter and you can respond to any of those newsletter issues that come out every single week. And don't forget to follow us on Spotify, Apple Podcasts, YouTube or whatever your favorite podcast player is. And if you want to help out the show, consider leaving a five star rating and review on Apple Podcast, Spotify or your favorite podcast player. Now today we're going to be diving into four questions that you all sent in via the Master Money newsletter. And the first one is can I transfer investments from a brokerage account to a retirement account? We're going to actually talk through that process if you have money in a brokerage account, how you can actually get those dollars into a retirement account if you've changed your mind and or your investment plan has changed.
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David
Number two is we're going to talk.
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Andrew
Through how to set up a retirement plan for a small company. I actually just went through this process with someone in my life and so we want to talk through how to set up a retirement plan for a smaller company. Number three is how to use and transfer an HSA from an old employer. So if you have an HSA that is sitting at an old employer, your employer offered that HSA you money there. How do you transfer that money? How do you use that money? What do you actually do with that hsa? We're going to answer all of those questions for you during that question. And lastly is what are some strategies to limit required minimum distribution? So if you don't know what a required minimum distribution is, it is dollars you have to draw down by a certain age when you have money in something like a 401k for example. And so we're going to talk through how you can actually limit that because those dollars are typically taxed and the reason why they require you to pull those down is because they want to tax you on those dollars. And so we want to make sure that we can limit those if we can. And I'm going to give you a couple of strategies that you can utilize to limit those RMDs. Now this is an action packed episode. I am super excited. I believe anybody in this world can build wealth and that's what we are trying to help you do is bring you as much value as possible on this podcast. Without further ado, let's get into it. Question 1 I listen to your podcast all the time and had a few questions about converting brokerage accounts to tax advantage accounts like a Roth IRA or Roth 401K. I have about 11,000 in a brokerage account that I started with my financial advisor. At that time I didn't know that it was better to use Tax advantaged accounts like an IRA or 401k. I know you have covered how to transfer money through backdoor roths or from IRAs to 401ks, but it seems more complicated to do from an individual brokerage account. What are my options for converting funds over to an account like that without incurring penalties or taxes? So this is a fantastic question, and you are correct. It is a little more complicated to be able to move funds from a brokerage account to a tax advantage account if you wanted to do something like a direct transfer, because it's not possible to do that. And you cannot direct transfer from your taxable account to a tax advantage account, something like an IRA, something like a 401K. Because contributions to tax advantage accounts must come from earned income. This is the key here. They cannot come from existing investments, they must be from earned income. So what you can do is I can give you some options here on how to think through this. Number one is while a direct transfer is impossible, you can achieve your goals by a you can sell investments and contribute cash. So if you have investments in a brokerage account, what you can do is liquidate those investments in the brokerage account and then use the cash to contribute to your IRA or 401k. Now this is something for a lot of people who think through, they want to change their strategy and they all of a sudden realize, hey, I want to invest in a Roth IRA or I want to invest in a 401k and I just don't have the funds available right now. I've kind of just learned about these accounts. What can I do? Well, what I would do is look at your brokerage account and say to yourself, hey, I can liquidate this stuff and then I can invest some of those dollars back into exactly what I was investing in and continue on my investment plan. And this is something that a lot of people do, especially early on in their financial journey if they want to max out some of these accounts. So maybe early on you started investing, you getting involved, investing, testing the waters. Then you started to gain some financial education. And then once you started to have that financial education, you decided, hey, I want to invest more of these dollars into a Roth ira. Well, you can go ahead and do that. Just liquidate those investments and you can move them over to a traditional IRA or any other retirement account that you want to go through and do that. Now what are the tax implications of doing that? Because when you sell something in a brokerage account, there are tax implications. If it's a Traditional brokerage account. So typically it depends on how long you have held those investment. So there are things like short term capital gains, which any investment that you held for under a year, the gains would be taxed at a higher rate. Whereas if you had what is called long term capital gains, so any investment that is held over a year is going to be taxed at a lower rate.
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David
This is why we are here at.
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Andrew
Master Money and the personal finance podcast. We are long term investors because a your returns end up being much higher if you're a long term investor. Day traders really don't have a long term strategy that I believe in. But secondly is that you reduce your tax liability when it comes to investing. And by reducing that tax liability, you are boosting returns significantly over time. So you need to make sure you're considering those tax implications. Secondly, you need to make sure you are considering the contribution limits of the retirement account. So for example, if you wanted to put that money into an IRA, a traditional IRA, you have $7,000 that you are able to put into that account at the time of recording this. Or if you wanted to contribute to a 401k, the max for a 401k is $23,000 at the time recording this. So these are things that you also have to consider when you're going to move that cash over. And so one thing you can do for your example is say you have that $11,000 and you're like, I just want to go in all in on the Roth. Well, at the time that this episode comes out, we're in the middle of December. So you can put $7,000 into that Roth in December and then you can come back and put another six into the Roth in January if you wanted to, so that you can actually contribute for two years. And so this is something that you can do kind of incrementally contribute over time. The next thing you can do is if you want to use this money to contribute to a 401k, what you can do is increase your contributions for a few months to the 401k. Because contributions to a 401k come directly from what your employer is going to be paying you. So your income coming in on your paycheck is actually going to be taken and Contributed to your 401k. So if you wanted to increase those contributions and use the money that's in your brokerage account, you're going to have to do a little finagling here. So what you can do is increase those contributions for a few months and Then use the brokerage account money to offset the income difference for those few months until you get that $11,000 into the 401k or if somebody else out there is listening and so you get whatever the amount is into that 401k. That is another consideration there that you can think through. This achieves the effect of moving the money from the brokerage account to the tax advantage account without having to do any direct transfers. Now there are some other key considerations that you can think through. I don't think in your situation a lot of these have to be stressed about. But just for anybody else listening, there are three other things I want to touch on which are one, the capital gain strategy. So if you have an unrealized gain or losses, you can actually utilize those to minimize taxes. So for example, you might sell high gain investments during a year when your income is lower so you can reduce that tax bill that year. The second thing is just be mindful of your tax bracket and avoid pushing yourself into a higher tax bracket when you're selling some of these investments. So just kind of think about that and make that consideration as you're going through this. And then lastly, when you sell investments, it's also a great time that you could probably rebalance your portfolio if that is something that you do each and every single year. Is selling off investments helps you rebalance your portfolio and get that balance back in check. So while you can't directly move money from your taxable brokerage account to retirement accounts, you can absolutely do it in other ways. And the easiest way is just liquidating those dollars and then moving them over to the account that you want them to go in. So I hope that helps. Let me know if you have any other questions on that. I'm here to help. And congratulations on starting to get your financial education going and learning how that you can grow your wealth through retirement accounts. That's absolutely amazing. I am so proud of you for getting that started and it's going to be an amazing start to the new year that you are getting that rolling. So congratulations again and reach out with any other questions. Hi Andrew, I am an employee of a small business that does not currently offer a retirement plan. The owners of the company have indicated a willingness to begin offering such a plan, but they have concerns about fees, cost, ease of management, requirements for matching, contributions. I'd like to provide them with information about launching such plan, but I haven't had much success in finding helpful material online. Can you provide me any guidance? Would love to start saving towards retirement In a meaningful way again. So first of all, for anybody listening out there who has an employer that does not have a retirement plan, and typically these are employers that are smaller. You know, larger companies will have retirement plans in place because they want to have a competitive advantages for getting the best candidates. If you want to get the best candidates out there, having a retirement plan is a fantastic benefit to add to your repertoire of things that you can offer to your employees. And so because of this, I love that you were having this conversation. This is something we teach a lot of people to do is if your company does not have a retirement plan, hey, take the reins and see if you can get one for them and help them out through that process. Especially if they don't have some sort of major dedicated H R team that's in place. Small companies don't. You can still get retirement plans in place even for small businesses. And the retirement plan that you choose is going to matter based on how many employees that you have. So your employees are going to dictate what goes into that retirement plan. Now first, starting a retirement plan is actually a win win for both the business and the employees. For the employees like you, it provides a structured way to save for retirement with tax benefits. And for the business, it enhances employee satisfaction, which matters a lot. It aids in talent retention, which is what I was talking about at the top, and offers significant tax advantages. So what I'm going to do is I'm going to break down some of the options that are out there and what they are best for. And at the end of my answer, I'll kind of go through, hey, here's the best one for all these different scenarios. One is a simple ira. Now, a simple IRA is not talked about as much as it probably should be, especially for small business owners. And it is a really good way, especially for very small businesses to be able to have some sort of savings incentive match plan for employees. And so the pros are that it is low cost and it is simple to administer, making it ideal for small businesses. And this is probably something that I would definitely consider. And employees can contribute up to $16,000 per year in a simple IR at the time recording this. And those contributions are tax deductible for the business. So the business gets a tax deduction. Employees can contribute up to $16,000. And there is also a catch up contribution. So if you're over the age of 50, you can actually have an additional contribution of $3,500 in a simple IRA. So this is a great option and it is one that I think a lot of small businesses should consider as they think about this. Now, employer contributions are mandatory but flexible. So they must match employee contributions up to 3% of their. And then alternatively, they can contribute 2% of each eligible employee salary if they don't contribute. So they can take 2% of the employee salary and start to contribute that if they want to. Now, the cons to this are the limits are lower than the 401k plan. So 401k, you could put $23,000 per year at the time recording this into a 401k. And the second con is employers are required to contribute, which could be a concern for businesses with tighter budget. So this is best for companies with fewer employees looking for an easy low maintenance retirement plan option. That would be something that they are looking to do, a match for their employees. And I think this is one that can be really, really easy for a lot of small businesses. It is very easy to set up. You can go somewhere like Fidelity or Vanguard and you can set these up fairly easy. They actually will send you to their retirement rep. The rep will kind of walk you through the next steps of what you need to do with some of these. Okay. Secondly is a SEP ira. Now, a SEP IRA is something that is a little more complicated, but it is good for sole proprietors or businesses with a small number of employees that have kind of fluctuating profits. So employers can contribute up to 25% of an employee salary and up to $69,000 at the time recording this. Now, there's not really much administrative burden or annual IRS reporting that they have to do. And the contributions are discretionary. So they offer flexibility for years even when there's lower profits. Now, there are some cons here. The cons specifically for you are only employers can contribute. The employees cannot make contributions themselves. And it really is dictated on how the business does that year. So this is very specific and honestly, it is something I would do more so for a sole proprietor than anything else. And employers must contribute the same percentage of compensation for all eligible employees, including himself. So if your employer wants to really max the amount that they can give their employees, and maybe this is part of your comp package where they're saying to themselves, hey, we're going to try to get you the full 25% every single year where you can get to that $69,000 a year and they want to comp you in that way for additional compensation, this is great for that. But if they're not willing to do that then it's more so just something that is better for a solo person. Now let's look at the traditional 401k. This is what a lot of big, big companies have in how they kind of think about this. So With a traditional 401k, employees can save $23,000 in 2024. The employer matches optional but can make the plan more attractive. Traditional, which is pre tax account and Roth which is an after tax account for employees. And it's customizable to include features like profit sharing and loans. So 401ks are used exclusively because they have a lot of flexibility. The problem with 401ks is they have a lot more administrative work and IRS compliance. So your employer stating that you know they want less administrative work, this is the reason why 401k may not be the perfect option for you. And they also have higher costs and set up for annual maintenance. So it could be anywhere from $500 to $3,000 depending on the provider and the plan. Fe so this is great for companies who want to offer competitive benefit packages and attract and retain talent. It's something that really is for probably the larger companies overall. And so I think this is something that could make some sense. Now there's other things like a safe harbor 401k probably not the best option out there for you. Now let's talk about costs and tax incentives. So administrative Costs simple and SEP IRAs typically have little to no setup costs and minimal ongoing fees. While 401k plans usually are the most expensive, which is why it's usually not what a lot of small business employers want to do because of how expensive they are. Now there are increasingly affordable providers out there. It's gotten a lot less expensive as it used to be. And there's companies like Vanguard is a great one to look at. Fidelity has some options even like betterment for business now is out there if you want Robo Advisors. So there is stuff available out there that is cheaper but it is still more expensive than would be just like opening up a brokerage account or traditional account. Now there are tax credits for small businesses. So this is something else that you can kind of talk through is employers can claim a tax credit of up to $5,000 per year for the first three years to offset startup costs. And they can get an additional $500 credit per year for implementing automatic enrollment. And then lastly, employer contributions are tax deductible. So they do have a lot of tax incentives there that can help you out. And it is something I think that could make a lot of sense now to choose the right plan for you. If you're looking for simplicity and low cost, it is a simple IRA for sure. Simplicity and low cost. Simple ira. I honestly think for most small businesses, if you are going to set up these plans for employees and you have less than 35 employees, this is a great option is having that simple IRA setup. The only downside is to the employee, they can't contribute as much. But there's other ways to get dollars invested into retirement accounts that are going to help you through that process. For flexibility and contributions, the SEP IRA is available. And for higher contributions and competitive benefits, a 401k or a safe harbor 401k could be the two that I would kind of think through. And then for providers, Vanguard Fidelity, just go with the ones, if you can, that have the best investment options. Those are the ones that I would consider. Schwab would be a third, I guess. But Vanguard Fidelity are both just have the best investment options out there and the best flexibility. Now, if your employer also wants to offer an hsa, Fidelity for sure on the hsa, they have the lowest cost and they have by far the best investment options there, in my opinion. That's just my opinion. You know, do your own research. But that's kind of how I would think about that. And so really it comes down to your employees. Again, I think the simple IRA is the easiest process. That's what I just helped a friend set up. And they were really, really happy with the results. The employees love it. And it is something I think that most people don't even know exists. And it needs to be talked about a little more. It's the best for small business, in my opinion, and it needs to be made easier. I'm not sure why it's not to set up that benefit package. So let me know if you have any other questions on that and really appreciate the question. I think it's a great question. And it's so cool that you are looking to kind of work through this stuff and kind of think through that process. There are some other resources to share. So one is the IRS has resources. If you kind of go to the IRS website, you can type in retirement plans for small business and they have some cool resources there for that. If you wanted to give it to your employer. You can also go look at Vanguard's guides on simple and step IRA plans. I think they are really, really kind of clear and kind of show you what's available there. And so that is another option that you can do, but those are some great resources for that. Hope this helps and let me know if you have any other questions.
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David
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Andrew
All right, the next one's a great question. So hey Andrew, love the podcast. Been listening for years now and the Money Q&As are super helpful. Well, I'm so glad they're helping you. I appreciate that. And a lot of times we poll our listeners to see what you want to hear more. And this year you guys wanted to hear more Money Q&As and so we delivered that. We try to send them out weekly now and if you want to continue hearing that or if you have suggestions for the show, please send me an email now. I have a couple of questions about HSAs. I had an HSA with a previous employer which now has about $8,000 in it. My new employer does not offer an HSA. What are the rules surrounding how I can use these funds or transfer to an IRA or other investment accounts? My second question My current employer has a health plan that is high deductible and very high oopm. From a Google search a couple of years ago, I found a high deductible health plan that qualifies for an HSA that has a maximum value for oopm. My employer's OOPM is above the threshold for an hsa. There's An FSA option through my employer, but I'm healthy and don't really get much value from it. Thanks so much. Keep up the good work. It's helped me and my wife so much set up for our futures. I cannot thank you enough for sending in this question. I cannot thank you enough for being a loyal listener to. That is absolutely amazing. And it's so cool to see you kind of taking action on this and thinking through this process. First, I'm going to answer the first part of your question, which is using or transferring your existing funds to your HSA. So your $8,000 in an HSA from your previous employer is now yours to keep and use regardless of your current employment situation. Now, how you can manage these funds, there's a couple of different ways. What I do personally is I go and I use my HSA as a retirement account. So I take those dollars and I invest them long term so that I my wealth over time in the hsa. I think it's a super retirement account. What happens here is you put dollars in, okay, and they're tax free. You can grow the money in that account tax free. You can actually invest dollars in an HSA and you can pull the money out tax free for a qualified medical expense. And so I like to grow that money over time. I don't like spending my HSA dollars whatsoever. But if you want to, here's how you can use it. You can use HSA funds tax free for qualified medical expenses even if you're not currently contributing to that hsa. So this includes doctor visits, prescriptions, dental care, vision and some over the counter medications. The IRS actually has like a really long list of things that qualify for an hsa. And a beautiful thing now is you can even go to Amazon and when you go click on Amazon on certain products, it'll say this is HSA eligible. Which is really cool little feature that Amazon added there and I love that. But the best thing about using it is you can also use it for past medical expenses after the HSA was established, as long as you have those receipts. So you could break your leg when you're 25 playing flag football. And you can reimburse yourself for that broken leg at the age of 65 via your HSA. There is no time limit on when you can actually reimburse yourself. Now after the age of 65, you can actually withdraw funds for any purpose, not just medical expenses without penalty though the non medical withdrawals will be taxed as ordinary income. So this is another beautiful thing. It turns into like a traditional IRA after the age of 65, if you want to use those dollars. So it has a lot of great options in the hsa. This is why I call it the Super Retirement Account. It's got lots of flexibility. It becomes a retirement account if you want to use it. That way, if you retire early, you can reimburse yourself for qualified medical expenses. Your boy loves the hsa. It is a fantastic account. So if you want to use it, that's how you use it. Secondly, if you want to transfer to an IRA or an investment account, you cannot directly transfer HSA funds to an ira. I get that question a lot, which is why I'm covering it here. But what you can do is you can do an HSA rollover or transfer. So you can actually roll over or transfer your HSA to a new provider without triggering taxes or penalties. What you do is you choose a provider that offers low fees and good investment options and then you can do a transfer there and they can help you through that process at that provider. My favorite one is Fidelity. Why it has the lowest fees. I have no association with Fidelity whatsoever, but they have the lowest fees and the best investment options for hsa. We talked about this a number of different times. We've actually talked to other people who are in the industry as well and everybody agrees Fidelity just has the lowest costs out there. It is something I think that most people should be looking at is even if your employer offers an HSA and if you can actually open one with Fidelity, that'd be great. All right, so to answer your second question on the out of pocket maximum for 2024, the maximum out of pocket limit for the HSA qualified high deductible health plan is $8,050 for self only coverage or $16,100 for family coverage. And if your plan's out of pocket MA exceeds these thresholds, it does not qualify for HSA contributions. Now you can still keep your existing HSA funds, but you won't be able to contribute new funds while on a non HSA qualified plan. So if that's all your employer offers, obviously that's still going to be the best deal is taking your employer benefits. When it comes to your health care. For the most part it depends on what their healthcare plan is. So you can do a calculation and say, hey, is this healthcare plan actually good? Most of the time it is a much better idea to take your employer's healthcare plan than to try to go out and get your own insurance and then get an hsa. It's just not worth the time, energy and hassle. One of the best benefits to working for somebody else is that you get healthcare benefits added into that. Now if your employer's healthcare plan is terrible and some small businesses, for example, have terrible healthcare plans, then you may want to reevaluate and reconsider and just assess those costs because you can get on a high deductible health plan somewhere else for a cheaper cost and then actually contribute to an HSA and open one up somewhere else. But if you don't have that option through your employer, then you may be stuck. This situation, there's not really a way around this without kind of going out and getting your own insurance and high deductible health plan. Now the other option though is you can go to your HR department and say, hey, I really believe in value in being able to utilize an hsa. Is there an option we can add to this plan that would allow us to have a high deductible health plan that meets the out of pocket maximum? Because that would be something that you could definitely consider is having conversations with your HR department just to see if you can kind of move the needle on that. But outside of that, most likely there's not a ton that you can do here if that's the only options that they offer currently and you still want to use their healthcare plan. So let me know if you have any other questions. That is awesome that you have an HSA balance there. If you can. I would kind of roll over that balance into something like Fidelity if you don't have any other investment options in your other one so that you can grow that account more and then just kind of do your research on other brokerages and other HSA providers just to see what else is available out there. Maybe there's something else cheaper out there that you like more and then let me know if you have any other questions on that. But I think that is is where your options stand right now is you gotta either take on that healthcare plan with your employer and unfortunately if they don't have a high deductible health plan that qualifies, then you might just have to go about foregoing the HSA and kind of prioritizing some of these other accounts for the time being. Now this kind of stuff ebbs and flows. You may go to another employer and get a high deductible health plan again, which is great. And there are just some years that you know, in your financial situation, there's just some years that you cannot contribute to certain accounts. That's just how the cookie crumbles sometimes. But I appreciate the question and congratulations again on thinking about this and trying to grow this account. That's absolutely amazing and thank you so much for sending this in. All right, the last question is I would like to know more about where to move money from pre tax account over time to avoid large RMDs later. Is it better to move money to a Roth IRA or taxable account? Is it based on how much you have in cash to pay the taxes or other factors as well? So if you don't know what RMD is, RMDs are mandatory withdrawals that retirees must take from tax deferred retirement accounts such as traditional IRAs, 401k SEF IRAs starting at the age age of 73 if you're born after 1950. Now the reason why the IRS has these RMDs in place is they wanted to make sure that you are paying your taxes from 401ks. What was happening is people were kind of hoarding their 401ks. They were not withdrawing from their 401ks because you have to pay taxes when you withdraw on your 401k. And so they wanted their tax dollars. People were not withdrawing those things. And so this was a forced way to get you to move money out of your 401k. Now RMDs can create significant taxable income depending on what your RMDs are, especially if they have grown substantially. So here are some ways to kind of think through this and see what you can do. One is you can do Roth conversions. Now Roth IRAs are not subject to RMDs during your lifetime. And by converting a portion of your traditional IRA to a Roth IRA each year, you can gradually reduce the balance of pre tax accounts. Now to perform these conversions, you would do them in lower income years such as early retirement or before claiming Social Security so that you can reduce the taxable event there. And then you can keep your conversions within your current tax bracket to avoid unnecessary tax increases. Now to pay those taxes, you can use things like cash reserves or funds from your taxable account to cover the taxes on conversions and this will ensure that your investments remain intact. Now secondly is you can do strategic withdrawals before the RMDs begin. So you can actually take withdrawals from your pre tax accounts in your 60s or earlier and you can reduce the account balance before RMD start. Now this is especially useful during the years when your taxable income is lower. So if you have a really Low tax income year, starting to take dollars out of those accounts can be really, really helpful. So here's an example. If you retire at 62 and you withdraw or convert some of your IRA funds to a roth IRA During 11 years before the RMDs begin at 73, you can start to take some of those dollars down and the RMDs will not be added as impactful when you are forced to start taking down required minimum distributions. Now another option is if you've made a ton of money and you're giving money away to charity, you can also start to do what are called qualified charitable distributions. So if you're charitably inclined, QCDs allow you to donate up to $100,000 annually from your IRA directly to a qualified charity starting at 70 and a half. And so this donation counts towards your RMD but isn't included in your taxable income. So if you're a wealthy individ, it's not included in your taxable income and you can donate towards that rmd. And this is an excellent strategy for charitably and kind individuals who want to reduce that taxable burden. And so this is a great one. Like for me for example, I give them a lot of money away every single year. And so this is something that I would definitely consider once RMD started, only because you can save on taxes essentially. And the next thing you could do is you could reinvest RMDs into taxable accounts. So while you must take those RMDs, you are not required to spend them. And by reinvesting the funds into a taxable account, you can at least continue to grow your wealth if that's what you are considering doing. And so you can invest in things like tax efficient assets, like ETFs, index funds, those types of things. And you can leverage some tax loss harvesting to offset gains in those accounts. If you are interested in doing tax loss harvesting, the next option you have is you can use RMDs to pay taxes on Roth conversion. So this is a really cool and interesting one, but how it works is you withdraw RMDs and you use those funds to pay taxes on subsequent Roth IRA conversions. And now while this won't include RMDs in your current year, it can lower RMDs in future years by shrinking those pre tax account balances. So that's another option that you have. You can also consolidate pre tax accounts. So to simplify your RMD calculations, I would consolidate, you know, all those 401k and IRA accounts into one single IRA because it makes it easier to manage distributions and execute other strategies like roth conversions or QCDs. And so this is something to definitely consider if you are someone who is building wealth right now. RMD should be a huge part of your consideration when you were thinking through this process because you want that pre tax benefit, meaning if you're making a really high income right now, then getting dollars into a 401k is going to really help you reduce that taxable income. But at the same time, down the end of the line, you are going to have to start taking those dollars out and paying taxes on those dollars that you contributed. So it's just really important to think through that process and the RMD process and make sure you're divers those tax buckets between the Roth IRA or the post tax accounts and then the pre tax accounts, sort of the traditional IRA, the 401k and those different accounts across that board. Also, you can think through the HSA contributions. The more dollars you can get into an hsa. This is going to help you significantly over time. And if you can pull some of those as qualified medical expenses, it's going to help you reduce and eliminate some RMDs later on down the line as well. The HSA is the perfect flexibility account when you hit retirement age because you can start pulling the money out at 65, you pay taxes on the dollars that you put in, but you're not forced to pull the money out at a certain age. And so because of this, the HSA also gives you some additional flexibility based on what your tax liability is going to be at within that first couple of years. And so just planning on that is going to be really important. This is why I love Roth IRAs. They're just so tax efficient. When you hit retirement, you're not paying taxes on that money and there's no RMDs in a Roth IRA. So I just love that account account for that reason. And that's why I love to contribute to that as early as possible in many different situations. But again, it depends on your income. It depends on how much money you make on which order you should actually think about this. And so making sure that you have those considerations and understand them is super, super important. And so to kind of wrap this thing up in a bow, an example strategy for a lot of people is to start drawing down in lower income years in your 60s if you can, and start to take some money out of your 401k if you can during lower income years. Now if you're still working. If you're still running businesses and you have high income years in your 60s, this strategy is not going to work for you. But if you are someone who has lower income years at the beginning, you can start to take this money down to reduce the RMDs that you are forced to take down later on down the line. And then after you have to start taking RMDs, you could do things like reinvesting the surplus funds into taxable accounts. If you want to keep those dollars invested, you can donate via those qualified charitable donations to also reduce that tax exposure if you are someone who is charitably inclined. So this is stuff that you definitely want to be thinking through and thank you so much for the question. It is a fantastic question and planning this stuff out is super, super important. So I really appreciate you sending that in and let me know if you have any other questions. And thank you all for listening to this podcast episode. Cannot thank you guys enough for listening to this episode. If you guys want to learn more about how to invest in index funds or etf, we have a course called Index Fund Pro that'll help you through that exact process. If you go to MasterMoney Co courses, index Fund Pro is available there. We also have a course called Master your money Goals that is going to teach you how to set financial goals and that comes out at the beginning of every single year and that will be out here shortly. And that course shows you hey, here's my exact goal setting process and how I was basically broke at 23, got my first 100k by the time I was 25 and became a millionaire there in my very early 30s. And that's the exact process I used is called Master your money goals. So thank you guys again so much for listening to this podcast episode and thank you for investing in yourself because that's exactly what you are doing when you listen to this podcast is you are investing more in your financial education. Can I thank you guys enough for being here and we will see you on the next episode. It.