Insights

It’s not often we get to rejoice in a new retirement savings tool. More likely, many fear things will be taken away, our options to save limited more and more. However, the HSA, if used properly, can be just that—a tool with a new appreciation and tax advantages second to none. With the increasing use of high deductible health insurance plans, many are getting access to these health savings accounts for the first time. But they are much more than a tax-deductible way to fund your health needs this year. In fact, they can be more impactful to your retirement than any other tool out there. That is because, if invested, you will enjoy tax free growth for as long as the funds remain in the account. This is in addition to the deduction you get on the contribution. And there are no forced distributions like the age 72 marker for IRAs and 401ks. However, to enjoy these benefits you must resist the temptation to use them now, and instead, use cash to fund health care needs now while the invested balance grows tax free. You can save receipts, choosing to reimburse yourself at any point down the road should you need to, tax free.

The surprising financial health of the average consumer and corporation lead us to believe that harder times may be still further out. In looking at our last recession in 2008, we see that we are considerably less leveraged now than we were 14 years ago. In fact, corporations are not yet back to averages seen when a recession is more than a year out (see below). And while consumers may be just starting to trend the wrong way with savings and debt due to the strains created by inflation, payroll numbers have remained strong. 

Well, 2022 has started off with a bang but not in a great way.  As I type this, stocks (S&P 500) are down around (13%) YTD but what many people don’t realize is that bonds / fixed income (AGG) is down around (10%) YTD (more on this to come below.)  We began the year dealing with inflation and rising interest rates and FED policy change (less loose but not tight yet) and then the Russia / Ukraine war exacerbated inflation pressures and the supply chain disruptions caused by the Covid lockdowns and further delaying the FED from acting on interest rates. The market doesn’t like uncertainty and this added to the uncertainty.  However, almost 5 months into the year and right at 60 days from the invasion, the market “knows” about most of the things people are worrying about.  Considering the strong market results the past decade and the historic rebound off the market lows of Covid (March 23, 2020), the market is holding up pretty well and has “so far” acted more like a normal correction that historically occurs every 2-3 years.