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Wanted to share a story. Our son started a new job at the first of the year that paid more than his last one. He got his first paycheck last week and the net amount was less than he expected. We talked about it and what the problem could be. He was not in a higher tax bracket. I asked about W4 and he did need to adjust it. He also needed to get his taxable income down, so the first thing I asked him was “Are you maxing out your HSA?”, and he wasn’t. So I went into a short lesson about how they are the only account that is triple tax advantaged, the money can be invested, and for him to try not to touch it, pay his bills OOP and save the receipts. If he did this, he would have a lot in the accounts at retirement. I told him how Spouse and I did this after I learned about HSAs. As I was talking to him, I could see the light bulb go off in his eyes. As you all know, I was not taught about finances and had to learn on my own, so am making sure our kids will do better. It made me feel good that he came to Spouse and me and that we could help him. Chris
Nice story, Chris. Our HSA in the 90’s was very helpful in paying for childcare. Much later, I was left with several thousand to be used for healthcare. I’ve started spending it down but was dinged one year by the IRS because I forgot to give my receipts for appropriate expenses to my tax preparer. It was a tiny amount – so I sent them a check but I won’t make that mistake again. (When I told my financially sophisticated son the story, he was surprised. He thought you only had to produce receipts if your return was being audited. Idk).
HSA for childcare? Do you mean FSA?
Question for you, Linda. If you had the HSA receipts for appropriate expenses in your possession, why did the tax preparer need the HSA receipts too?
As a novice a HSA, FSA, and other Roth savings guidelines I’d recall reading about Peter Thiel had started his retirements incomes all under a Roths umbrella, ..somehow.
Little doubt his having had a tax Atty’s guidance both before, during and after PayPals inception.
My best to you, and your helping your sons incentive to learn the ropes asap that many of us are still grappling with.
Chris, I like your story. Most important is to save. How we invest this savings is then a good problem to have. Financial education begins early and it is best not to learn the wrong things. Parents are important. My children all decided to go to college and pursue engineering careers . When they decided to go to out of state schools, I required that they take on a small part of the financial responsibility. The loans were a trivial part of the costs, but I felt it was important that they spend a small part of their post graduate paychecks as a reminder of their financial decision. The children are doing much better in their 40s than I did at their age and that includes their retirement accounts.