JP Morgan Retirement Study

[Markola]

That also assumes they have limited saving ability such that they can’t do both.

It also seems to assume that someone with an HSA will never withdraw from it FOR MEDICAL EXPENSES. Facepalm. From slide 24:

“Investing your HSA contributions for the long term and paying for current health care expenses out of income or short-term savings can provide significant tax-free funds for health care expenses in retirement.”

I’m skeptical that using after tax dollars to pay for medical expenses during one’s highest tax career phase is good or practical advice. Staying in one’s house for life, eating only salads and becoming a Christian Scientist would also allow the Healthcare Savings Account to grow dramatically.

 

[Carbon8]

Right.

And I can’t imagine how an HSA would avoid or reduce RMDs anyway. Maybe someone can enlighten me. It might reduce how much you need to withdraw from an IRA to meet living expenses, but that wouldn’t reduce the RMD.

As others have posted once you are on Medicare you cannot contribute to HSA. However in the bridge years between FIRE and age 65 you can contribute to an HSA if you have a qualified high deductible insurance plan.

The annual HSA contribution is tax deductible assuming you use after tax dollars to fund it. However, there is also an option to fund it with a direct transfer from an IRA (not sure about a legacy 401k - may be dependent on the plan administrator). If you use the IRA-HSA transfer funding then there is no HSA contribution tax deduction. But you have reduced your IRA balance thereby reducing your future RMD.

Further, HSAs have no RMD requirement. So you can grow the HSA tax deferred until your final years when just about everything will be a medical expense.

To answer someone else's question - yes you can have an HSA at a brokerage. Mine is with Fidelity. I transferred it there from my final employer's custodian. I trade in it exactly like an IRA: Equities, Options, ETFs, etc.

 

[d.davis]

However, there is also an option to fund it with a direct transfer from an IRA

You may do this only once. A one time thing per IRS.

 

[Carbon8]

You may do this only once. A one time thing per IRS.

Good catch d.davis. I remembered the option for IRA-HSA transfers but wasn't interested in it so had not clicked down on the details.

Kind of diminishes the RMD reduction attraction of the IRA-HSA transfer for larger IRA balances.

Investopedia has a good description of this for anyone who wants to read more: https://www.investopedia.com/transfer-ira-money-to-an-hsa-4770819

 

[Car-Guy]

In this report, the average life expectancy at birth in the US is 77.0 years and at age 65, the life expectancy is 18.5 years. Link to the report https://www.cdc.gov/nchs/data/nvsr/nvsr71/nvsr71-02.pdf

Every time I see one of these it makes me want to increase my spend rate. Looks like I have ~!0 years to go... Personally I think that's a bit optimistic.


Heck, I've been on this forum that long.

 

[Out of Steam]

I did not like the retirement planning guides extending to age 100 near the beginning of the presentation. Statistics say most of us will pass away long before then. According to the CDC in their NVS report released on August 23, 2022 the average life expectancy at birth was reduced 1.8 years from 2019 to 2020.

Agree. Assuming an excessively long lifespan is a way to end up staying in the workforce longer than necessary, or living on an unnecessarily low income in retirement.

I've never used assumptions beyond age 95, and believe that lifespan decreases due to COVID will be with us for a long time.

 

[MomintheSouth]

Thank you for sharing this article!

 

[imnontrad]

I look forward to this report and downloaded it yesterday. I think it is well researched and covers a lot of material. I thought it interesting that they had longevity graphs for not only married couples but also for same sex couples as part of the decision about when to file for SS.

 

[Dtail]

Agree. Assuming an excessively long lifespan is a way to end up staying in the workforce longer than necessary, or living on an unnecessarily low income in retirement.

I've never used assumptions beyond age 95, and believe that lifespan decreases due to COVID will be with us for a long time.

I use 95 as a longevity assumption.

 

[braumeister]

Statistics say most of us will pass away long before then. According to the CDC in their NVS report released on August 23, 2022 the average life expectancy at birth was reduced 1.8 years from 2019 to 2020. In this report, the average life expectancy at birth in the US is 77.0 years and at age 65, the life expectancy is 18.5 years.

I think it's important to remember that life expectancy at birth is not really related to your current life expectancy. The longer you live, the more likely you are to live longer.

Also, going by those "average" numbers assumes that you're in the center of the normal curve, while you might actually be out on a tail.

For most of us, this seems to be a good calculator:
Actuaries Longevity Illustrator

 

[big-papa]

That also assumes they have limited saving ability such that they can’t do both.

Sure. And if they couldn't do both, then it wouldn't be the worst thing to prioritize something that's triple tax advantaged first. Even that depends on whether there's an employer contribution to the HSA and what the corporate matching might look like for the 401K.

Cheers

 

[big-papa]

It also seems to assume that someone with an HSA will never withdraw from it FOR MEDICAL EXPENSES. Facepalm. From slide 24:

“Investing your HSA contributions for the long term and paying for current health care expenses out of income or short-term savings can provide significant tax-free funds for health care expenses in retirement.”

I’m skeptical that using after tax dollars to pay for medical expenses during one’s highest tax career phase is good or practical advice. Staying in one’s house for life, eating only salads and becoming a Christian Scientist would also allow the Healthcare Savings Account to grow dramatically.

It's really going to depend on individual circumstances. While working, if a pretty large medical expense came along, I'd definitely use the HSA for whatever insurance didn't cover. But for run of the mill doctor visits, dentist apointments, prescriptions etc. I won't use it.

About to retire and I'm 100% certain that there will be plenty of opportunities over the upcoming years to spend the money in the HSA. I'm just unhappy I didn't have access to an HSA through an employer until this last one, so I've only been contributing for the last 6 years or so.

Cheers.

 

[Out of Steam]

For most of us, this seems to be a good calculator:
Actuaries Longevity Illustrator

I agree that this is probably realistic for most of us. But, in a situation where neither my wife nor I had a middle-class upbringing, and I held a job with significant chemical exposures for some years as an adult, I've decided the figures from this are a bit too high.

That said, since about 75% of our income will come from SS and a pension after 2025, our FIRECalc figures are at 95+% to age 95. Because of the assumption that we will draw extra to maintain a constant income until 2025 and my conservative allocation of only 45% stocks, it assumes only a 3.7% draw from retirement savings after I take SS.

 

[braumeister]

I held a job with significant chemical exposures for some years as an adult

Hey, for all we know, that might be a plus!

"Preservatives added to retard spoilage"

 

[Out of Steam]

Hey, for all we know, that might be a plus!

"Preservatives added to retard spoilage"

It's a crapshoot!

 

[walkinwood]

Great stuff, thanks. I just looked at the first 15 pages or so, but I plan to read through it all. Thought this was a good illustration, spending declines as we age BUT may increase substantially approaching EOL - plan accordingly.

That's what Blanchett found too. More detail in his paper
https://www.financialplanningassoci...MAY14-exploring-retirement-consumption-puzzle

Also eye opening!

It looks a lot worse than it is since it is in 2023 $s.

 

[walkinwood]

Thanks for posting this paper. Very easy to digest.



A JPMC "advisor" who just parrots these slides can make a good impression!

 

[FREE866]

eh....



40/60 portfolio? yeah, history shows us thats waaay too conservative if you want your money to last and certainly too conservative if you want any growth.......just flipping that to 60/40 or even to 70/30 shows a 30-40% increase in ending balance historically after 20-30 years.....


I also see a little too many "your portfolio might need income" references, which is always a set up for an annuity pitch....


The comparing of todays climate to 60s /70s seems like a scare tactic too......another pitch for an annuity around the corner.....




sure, some interesting charts, but pull back the curtain and I'm dubious of its true intent.....way too may "set your portfolio up for income" statements....