Can I Use My Hsa For My Spouse
You can use money from your HSA to pay for your spouses medical expenses as long as those expenses fit into the IRS rules. The IRS allows you to use your HSA to pay for eligible expenses for your spouse, children or anyone who is listed as a dependent on your tax return.
Thats true whether you have individual coverage or family coverage with an HSA through your health plan. There are, however, a few rules to know:
- You may only use your HSA to pay for qualified medical expenses for yourself, spouse, children or other dependents.
- Using your HSA to pay qualified medical expenses for your spouse does not affect your annual contribution limit.
- If you both have an HSA, your total contributions for the year cannot exceed the annual contribution limit for family coverage.
Again, qualified medical expenses are defined by the IRS. But if your spouse needs new glasses, for example, you could use your HSA to pay for them.
Paying medical expenses for a spouse out of your Health Savings Account doesnt entitle you to a higher contribution limit. However, the total amount you can contribute as a couple is affected by which of you has an HSA.
Is $150000 A Good Retirement Income
This is a difficult question because it depends on many things, such as your pre-retirement annual income, expenses, and retirement goals. However, in general, $150,000 is a good retirement income. This will allow you to cover most of your living expenses and leave some money for leisure activities and travel. Additionally, if you have other sources of income, such as Social Security or a pension, this will help supplement your income in retirement.
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To qualify for The Foundation, you must have an active account with a bank or financial institution, as approved by Spring Financial, and a valid government-issued Canadian ID. The Foundation is available in all provinces except Saskatchewan, Quebec, and New Brunswick. Results from The Foundation depend on the individual. All guarantee references are made in connection to the Evergreen Loan. To qualify for the Evergreen Loan, you must first successfully complete 12 months on The Foundation and save $750, have an active account with a bank or financial institution, as approved by Spring Financial, and a valid government-issued Canadian ID.
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How To Retire On $500k
By Justin Pritchard, CFP® in Montrose, CO
Sometimes retirement advice relies on round numbers and rules of thumb. For example, you might hear that you need $2 million to retire. But the amount you need depends on things like your monthly spending and any sources of retirement income.
Most people never reach $1 million in savings. In fact, many of my clients have somewhere between a few hundred thousand to a few million in assets. So, if youre anything like them, it may be helpful to see how it looks to retire on $500k.
Ultimately, anybody approaching retirement faces a choice: Do you work longer so you can continue saving, or can you retire comfortably with less?
Retire At : It Is Possible
So, can you retire at 60?
And if you can, how much is that going to cost you? As you can see, it is possible to retire at 60, even if you dont have millions of dollars saved.
- The key is to focus on what you personally need in retirement,
- how much you live on now, and
- factor in a few extras, like a longer life span and inflation.
If you can live frugally now and save more money, its entirely possible to have $500,000 or even $1 million saved before retirement.
And of course, those numbers will depend on you and how much you can realistically save and invest, what youll need during retirement, and what youll want to do. But overall, retiring early isnt impossible at all.
So how much do you need to retire by 60? Are you targeting $500k? $800k? $2 million? Tell us in the comments below!
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Factor In Other Forms Of Retirement Income
In addition to your liquid savings, there are other forms of retirement income that can shield you from market ups and downs and protect your nest egg. While pensions are less common today than with previous generations, they do provide a regular benefit. If youâre concerned about outliving your savings, an income annuity can be a good option, as youâll receive a monthly payout for the rest of your life. A whole life insurance policy, which has accumulated value that’s guaranteed to grow and is not tied to the market, can be another way to supplement your income.
Youâll also want to factor when you plan to start taking Social Security. While you’re eligible to begin collecting at age 62, waiting can mean receiving a larger benefit each month. But doing so will also require that you have enough income to support yourself until then. A financial advisor can help you decide when it makes the most sense for you to take Social Security.
Where Do You Stand So Far
As shown below, only 26% of people in their 60s have over $500,000 set aside for retirement. You can see the average retirement savings ranges at different ages, but everybodys situation is unique.
Average Retirement Savings at Age 65
Reminder: The median is the middle of all answers from biggest to smallest. Data source: Hou .
Example: Assume you want to retire on $500k of assets in your IRA, 401, and taxable accounts. You want to spend roughly $52,000 per year. Your Social Security benefits amount to $24,000 per year, and you have an additional pension of $6,000 per year.
Subtotal: You have $30,000 of income per year, and you need an additional $22,000.
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Percentage Of Your Salary
To figure out how much you need to accumulate at various stages of your life, it can be useful to think in terms of saving a percentage of your salary.
Fidelity Investments suggests saving 15% of your gross salary starting in your 20s and continuing throughout the course of your working life. This should include savings across various retirement accounts as well as any employer contributions you receive to those accounts, assuming you have access to a 401 or another employer-sponsored plan.
How Much Do I Need To Retire Early At Age 50
This couple recently left their twenties, and theyre starting out slow and steady. Their home is modest, and their expenses moderately low. And although they have a fair amount of debt and pay higher interest rates than some, theres still time to pay debt down and refinance for better rates to save more money. One thing this couple is doing right is investing a larger percentage of their savings in stocks. Over time, that should pay off and help their plans to retire in 20 years, at age 50. But they still have room to improve.
Heres a snapshot of where they are today:
- Amount added to savings each month: $900
- Percentage of savings in stocks: 30%
- Other debt: $15,000
This couple is starting young to retire young. But at the rate theyre going, their savings is projected to dwindle by the time they turn 69. With their income, they can afford to max out their 401 and IRA contributions and save more than their current savings contribution of about $900 monthly.
A nick of time strategy where savings is projected to deplete when projected life expectancy comes could easily create a shortfall. Many people live well past their late 70s, and that is a time when health care costs could skyrocket.
Theyre on track to have between $560K and $990K when they retire at age 50. But their projected retirement needs fall between $700K and $4.4M. If they added a lifetime annuity, Medicare Supplemental Insurance, and long-term care insurance, their need could change to $1.4M.
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Spending Drives How Much Money You Need To Save To Retire At 60
Estimating expenses in retirement is difficult. Some outflows contributions) will stop while others , appear. While some investors overestimate retirement spending needs, others underestimate at least one major category: housing. As indicated by the Chase data below, the majority of retirees pay housing costs throughout life as a major expense.
Before getting consumed with your travel budget, recognize that where youll spend money will change throughout retirement. As some costs increase , other expenses decrease.
While expenses will ebb and flow over the years, its most important to monitor spending just before and after retirement. This period is pivotal because retirement savings are generally at their highest levels, making you most vulnerable to stock market volatility.
If retiring at 60 is your main priority, reducing your spending assumptions during retirement might be an acceptable trade-off to make the numbers work.
Longevity is also a major concern for anyone looking to retire early. According to J.P. Morgan, married couples have an 89% chance at least one spouse will live until 80 and almost a 50% probability that one person will live until 90. Keeping fixed costs low and spending in check can help ensure retiring at 60 doesnt leave you destitute later on.
How To Stress Test A $2 Million Portfolio With Monte Carlo
When it comes to projecting income in retirement, the best financial advisors for retirement often use a retirement calculator called Monte Carlo Simulation.
If you’re like many of our clients, the term “Monte Carlo” may take your mind to a seaside town in France as you enter one of the most famous casinos in the world.
Unfortunately, the Monte Carlo we are referencing isnât as glamorous.
But it does a much better job at projecting the likelihood of being able to enjoy a comfortable retirement without running out of money.
At Covenant Wealth Advisors, we use Monte Carlo to help us estimate the probable outcomes of money lasting in retirement for clients.
Monte Carlo simulation works by running 1,000 possible stock market return scenarios by altering variables input into the tool.
The result is one number that represents the probability of making your money last in retirement.
The chart below is an example of Monte Carlo results and provides a hypothetical example of 1,000 simulations.
Each green line indicates a single hypothetical simulation where a 60 year old couple accomplished all financial goals in retirement without running out of money.
Conversely, the red lines indicate scenarios where the 60 year old couple ran out of money.
Based on these results, Monte Carlo can help you answer a lot of questions including:
Do I have the right mix of investments?
Am I withdrawing too much from my portfolio?
Do I have enough money to live the lifestyle I want in retirement?
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What Can Change Your Retirement Income Needs
Calculating your income needs in retirement is not an exact science. Life happens and it may leave your retirement plan in tatters. Some possibilities include:
- Health issues that cause you to retire earlier than planned or which result in higher-than-expected medical bills early in retirement
- Financially dependent kids in retirement
- Significant mortgage payments
- Run-away inflation or a market crash, and much more.
If for one reason or the other, you are unable to save enough money for retirement at age 60, or 65, or earlier depending on what your plans were initially, the following strategies may be useful in managing your savings/income gap:
1. Work for longer and delay government pension till later: Working for a few more years and/or delaying when you start receiving OAS/CPP can significantly increase your eligible payouts down the road.
2. Semi-retire and work part-time: Every year you delay dipping into your retirement nest egg means more money to spend in the future.
3. Start saving aggressively: The earlier you start saving, the better for you. Time is the game-changer when it comes to the returns you are able to earn on your investment portfolio. If you are running out of time, you will need to put aside more funds more often.
6. Other Government safety nets: If your income in retirement puts you in the low-income bracket , you may qualify for additional government benefits, including the Guaranteed Income Supplement or the Allowance.
Rule : 70% Of Working Income
This rule estimates that you will need between 70% and 100% of your pre-retirement income in retirement: 70% if you are typical and do not have a mortgage, and up to 100% if you are still paying a hefty mortgage plus other atypical expenses while retired.
The idea behind this rule is that your expenses are generally expected to be lower in retirement: no mortgage payments, no longer need to save for retirement, kids are financially dependent, etc. After computing this amount, you can then proceed to calculate how much you need by going back to Rule 1 or 2.
For example, assume you earn $100,000 per year before retiring. Using the 70% rule, you will need approximately $70,000 in annual income to maintain your lifestyle in retirement. Going back to Rule 2, it implies you need:
$70,000 x 25 $1.75 million in retirement.
I think the 70% rule is a fairly liberal estimate of retirement income needs . A survey conducted by Sunlife and released in 2016, shows that Canadian retirees were on average living on 62% of their pre-retirement income.
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How Much Does A Couple Need To Retire
Much like an individual, how much a couple needs to save to retire comfortably will depend on their current annual income and the lifestyle they want to live when they retire. Many experts maintain that retirement income should be about 80% of a couples final pre-retirement annual earnings. Fidelity Investments recommends that you should save 10 times your annual income by age 67.
How Much Money Do I Need To Retire At 60
So now we need to find £29,600 from somewhere else. The best way to work out what level of investments you need to support your income, is to do proper cashflow planning on an excel spreadsheet or specialised software program. Failing that, we can use the 4% rule to give us a very broad rule of thumb on how much you need to support your retirement income.
The 4% rule basically states that you can safely withdraw 4% of your investment portfolio whilst broadly maintaining its value over the long term. So if you have a portfolio worth £100,000, you can withdraw £4,000 and that £100,000 should stay around the same or even grow a little bit to cover inflation.
Using this rule, its pretty straightforward to work out how much you need to have in investments to support your desired retirement income. In our example, it means that the couple need to have £740,000 in order to generate a sustainable income of £29,600 each year. Of course, if you want to retire at 60, youll need to also add in the extra money you need to cover the years until your Final Salary and State Pension kicks in.
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Saving For Retirement In Your 20s
In your 20s, youve only recently entered the workforce and started receiving regular paychecks. As you learn to grapple with all of lifes expenses, dont put off saving for both retirement and for a rainy day.
Emergency fund: Start your emergency fund and aim to save three to six months of living expenses in cash savings.
Retirement savings: Make sure youre enrolled in your employer-sponsored retirement plan and contributing at least enough to get your full company match. If a company plan is unavailable or not great, choose either a Roth or traditional IRA. Even if youre focused on paying down debt, you should make sure you invest small amounts for retirement. .
Catch-up tip: If youre behind, consider investing a portion of your emergency fund at years end in a Roth IRA. Because Roth IRAs are funded with after-tax dollars, youve got options for making penalty-free withdrawals. Handled carefully, a Roth IRA can help you get more growth from your emergency fund. The majority of your emergency fund should remain in a more liquid account, though.
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Average Spending Of Canadian Retirees
The 2019 Survey of Household Spending by Stats Canada found that the average consumption spending per household for Canadians over the age of 65 was $68,980 .
If you assume that you and your partner will retire at age 65 and live until age 82, this will work out to be $68,980 * 17 = $1,172,660 total spent during retirement per household.
Keep in mind that these are average numbers, and yours could be much higher or lower depending on your circumstances. If youre looking at that number and thinking that its way too high, continue reading to see how you can save and invest to reach your goal.
How To Save For Retirement In Your 50s
By the time you reach your 50s, youre heading for the home stretch. That doesnt mean, however, that youre done working or saving. This is the right time to pay off your mortgage and ensure your overall debt is at a minimum. Stay the course with your savings and speak to a financial advisor about gradually adjusting your investment strategy as you near retirement.
Emergency fund: Keep your emergency fund topped up, especially if unexpected expenses have come along.
Additional savings: Invest additional savings once you max out your contributions to individual and employer-sponsored retirement plans.
Educational savings: Once the kids head off to college, tap these funds to pay for college. Funnel the amount you were saving for college expenses into your retirement and taxable brokerage accounts.
Retirement savings: Review your contribution percentage annually. Once you turn 50, youre eligible for an increased annual contribution limits in tax-advantaged retirement accounts. If youre behind on your goals, take advantage of these increased thresholds. By the time you turn 55, aim to have seven times your current annual salary in retirement savings across all of your savings and retirement accounts. By the time you turn 60, you should have eight times your annual salary in retirement savings.
Catch-up tip: If you need some extra cash to sock away, you explore seasonal employment around the holidays to up your annual retirement savings rate.