It’s a good problem to have:
“I’ve maxed out my 401(k) and IRA contributions. Where should I save?”
Serious credit repair means serious change. If you’ve made a plan to max out your retirement savings, you’re already on the right path. Don’t get complacent, however. There are plenty of ways to invest in long-term savings. Consider the following options after exhausting your standard investments. They will help you maintain a positive edge.
Health savings. Investing in your employer’s Health Savings Account (HAS) is the best way to offset deductible costs and take advantage of pretax dollars. For example, suppose your son breaks his leg, resulting in a $4,400 medical bill. It’s the first expense of the year, and your family’s deductible is $5,000. If you use HAS contributions, you’ll pay $4,400, tax free. If you pay out-of-pocket, you’ll pay $4,400 plus state and federal tax.
In addition to securing affordable healthcare, HSA accounts can be used for retirement savings. Tax-free contributions can be withdrawn for non-medical expenses once you reach age 65. Like your 401(k), your HSA is also portable, allowing you to transfer it from one employer to another.
Real estate. We’ve talked about the value of income property. If your portfolio can afford the expense, consider shopping for a long-term investment. Talk to your financial planner about specifics and review my three-part series along the way:
Taxable accounts. Non-deferred taxable accounts can be a sound option for retirement savings. Although you will pay taxes on capital gains and dividends, withdrawals are only subject to your standard income tax rate. Talk to your financial planner about your mutual fund, Exchange-Traded Fund (ETF), and other options.
The bottom line: Saving for retirement is an admirable goal, one with many options. Choose your steps wisely. The result will secure your future and credit health.