As a healthcare professional, you’ve spent years navigating the complex world of patient care, deciphering lab results, and tackling the ever-changing challenges of medicine. Planning for retirement might feel like stepping into uncharted territory, but there’s one key concept that parallels your work: staying ahead of a condition before it becomes critical. In the financial world, that “condition” is inflation, and “preventative care” is a little acronym called COLA—Cost-of-Living Adjustment.

Just like monitoring a patient’s vital signs helps you adjust treatment plans, COLA keeps your retirement income healthy by adjusting for the rising cost of living. Let’s break down how this works, why it’s essential, and how you can structure your retirement plan to weather inflation’s long-term impact.

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Handwritten list of amenities that go up in time.

What is COLA? A Prescription for Inflation Protection

Imagine inflation as a chronic condition. It slowly diminishes your purchasing power over time. You might not notice it day-to-day, but over a decade or two, it can significantly affect your lifestyle. That gallon of milk that costs $4 today could cost $6 in 15 years. For retirees on fixed incomes, inflation is a sneaky adversary, quietly diminishing their ability to cover essential expenses.

COLA is the financial antidote to this issue. It’s a mechanism built into certain retirement income streams—like Social Security or some pensions—that automatically adjusts payments to keep pace with inflation. The idea is simple: as the cost of living rises, so does your income.

For healthcare professionals, COLA is like titrating medication dosages for a patient whose condition fluctuates. You adjust the dose to ensure the treatment remains effective, preventing a crisis. Similarly, COLA ensures your income doesn’t lose effectiveness as inflation creeps upward.

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Medical ventilator.

How COLA Works: A Financial Ventilator for Your Income

In the same way that ventilators adapt to meet a patient’s oxygen needs, COLA adapts your retirement income to keep it “breathing” in an inflationary environment. Social Security, for instance, applies an annual COLA based on changes in the Consumer Price Index (CPI). The CPI measures the cost of goods and services, from groceries to medical care, and reflects the average rate of inflation.

Let’s look at an example:
Suppose you retire today and start receiving $2,000 a month in Social Security benefits. If inflation averages 2% per year, your purchasing power would shrink by nearly 22% over 10 years without adjustments. However, if your benefits are tied to COLA, they increase annually to match inflation, maintaining their real value.

While Social Security is a vital source of inflation-protected income, not all retirement income streams include COLA. Many private pensions and annuities are fixed, meaning their purchasing power erodes over time. That’s why understanding which income sources have built-in COLA and which don’t is crucial for planning your retirement.

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Man being vaccinated on upper arm.

Inflation in Action: Why COLA Matters to Healthcare Professionals

As a healthcare provider, you know the importance of planning for worst-case scenarios. You wouldn’t discharge a patient recovering from surgery without ensuring they have the resources for post-operative care. Similarly, planning for retirement means preparing for the inevitable rise in expenses over time.

Healthcare professionals face unique challenges with inflation, especially considering how medical costs tend to outpace general inflation. Fidelity estimates that the average 65-year-old couple retiring today will need over $315,000 to cover healthcare expenses in retirement—and that figure doesn’t include long-term care.

Think of COLA as a financial vaccine that bolsters your retirement plan against these rising costs. Social Security’s COLA is a start, but it’s just one part of a comprehensive strategy to maintain your financial “vital signs” throughout retirement.

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The Anatomy of a COLA-Proof Retirement Plan

Creating a COLA-proof retirement plan is like designing a care plan for a complex patient. You need a mix of treatments that address both immediate needs and long-term risks. Here’s how to build a retirement strategy that stands up to inflation:

1. Maximize Social Security Benefits

Social Security is the backbone of many retirees’ income plans because of its guaranteed payments and COLA protection. As a healthcare professional, you’re no stranger to maximizing resources, and Social Security offers a significant opportunity.

Key Steps:

• Delay Filing: By delaying benefits past your full retirement age (FRA), you increase your monthly payment by about 8% per year until age 70. This higher base amount benefits from COLA, amplifying its impact.

• Coordinate with Spousal Benefits: Married couples can use strategies to maximize lifetime Social Security income, such as one spouse claiming early while the other delays.

Think of it like using a staged treatment plan for a patient: the early intervention provides immediate support while delaying certain treatments maximizes long-term results.

2. Supplement with Inflation-Protected Investments

Beyond Social Security, you’ll need other income streams to cover your expenses. Here’s where investment planning comes into play.

Options to Consider:

• Treasury Inflation-Protected Securities (TIPS): These are government bonds designed to protect against inflation. Their principal value adjusts with the CPI, ensuring your investment keeps pace with rising costs.

• Dividend-Growing Stocks: Some companies regularly increase their dividends, which can provide a growing income stream over time.

• Real Estate: Rental properties or REITs (Real Estate Investment Trusts) can offer income that tends to rise with inflation.

Think of these options like supplemental oxygen for your retirement plan, ensuring you can “breathe easy” even as costs rise.

4. Incorporate Flexible Spending Strategies

Flexibility is key when managing a chronic condition, and the same goes for your finances. A mix of fixed and variable income sources gives you the adaptability to adjust as inflation fluctuates.

Examples:

• Use fixed income sources (like a pension) to cover essential expenses.

• Use variable income (such as portfolio withdrawals) to manage discretionary spending, adjusting withdrawals based on market performance and inflation.

It’s like creating a care plan with both baseline treatments and as-needed medications, ensuring you can handle both predictable and unexpected costs.

3. Plan for Healthcare Costs

Healthcare inflation is like a rare but aggressive disease—it requires special attention. Medicare provides a baseline of coverage, but out-of-pocket costs can add up quickly.

Strategies:

• Health Savings Accounts (HSAs): If you’re still working, max out your HSA contributions. These accounts offer tax-free growth and withdrawals for qualified medical expenses, making them a powerful tool for managing healthcare inflation.

• Medigap Policies: Consider supplemental insurance to cover expenses Medicare doesn’t, such as copays and deductibles.

This is your financial equivalent of specialty care: targeted strategies for a high-risk area of your retirement plan.

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Woman getting her blood pressure taken by medical professional.

The Long Game: Monitoring and Adjusting Your Plan

Retirement planning isn’t a set-it-and-forget-it process, just as patient care requires ongoing monitoring. Regular check-ups with your financial advisor can help you adjust your strategy to reflect changes in inflation, healthcare costs, or personal circumstances.

Questions to Ask During a Financial Check-Up:

• Are my income sources still aligned with my expenses?

• How has inflation impacted my budget in the past year?

• Do I need to adjust my investment allocations to maintain purchasing power?

This ongoing oversight ensures your financial health stays on track, much like tracking a patient’s recovery trajectory.

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Closing Thoughts: A Retirement as Resilient as Your Career

As a healthcare professional, you’ve dedicated your career to improving others’ quality of life. Your retirement years should reflect the same level of care and intentionality you give your patients. By understanding the role of COLA and building an inflation-resistant strategy, you can transition from scrubs to sunshine with confidence.

Retirement is your time to thrive—not just survive. With a well-designed plan that accounts for inflation, you’ll have the financial stability to enjoy your hard-earned freedom, whether that means traveling, pursuing hobbies, or simply savoring time with loved ones.

After all, just as you wouldn’t discharge a patient without a robust recovery plan, you shouldn’t embark on retirement without ensuring your income is prepared for the long haul. COLA is one of the key tools to keep your retirement healthy and vibrant, no matter how the cost of living changes over time.

By planning proactively and staying adaptable, you’ll ensure your retirement lifestyle doesn’t just survive inflation—it thrives in spite of it. If you need help designing a COLA-proof plan, let’s talk. After all, every great retirement plan starts with a clear diagnosis and the right “treatment.”

Partnering with Outside The Box Financial Planning (OTBFP) offers numerous benefits for individuals seeking college planning, retirement planning, small business support, wealth management, and beyond.  As a fee-only fiduciary with a comprehensive approach, unbiased advice,  and transparent fee structure, OTBFP acts as a trusted advisor who prioritizes your best interests. Click here to schedule a complimentary “Fit” meeting to determine if we would make a good mutual fit.

Remember, financial decisions have long-lasting implications, and working with a professional like the financial professionals of Outside The Box Financial Planning can provide the expertise and guidance necessary to make informed choices that align with your financial aspirations.

Social Security cards laying on top of American twenty dollar bills

When it comes to retirement planning, Social Security is a critical income stream that often serves as the foundation for many retirees' financial well-being. Much like creating a treatment plan for a patient, your Social Security strategy needs to be carefully coordinated with other elements of your financial life to achieve the best outcome.

This blog will walk you through how to maximize your benefits, including spousal options, how working affects your Social Security, and how to incorporate it all into a broader retirement income plan. With the right strategy, you can ensure your Social Security works as efficiently as possible, whether you claim early or late, and whether you continue working or transition fully into retirement.

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1. Understanding When to Claim Social Security: The Age Matters

Social Security offers flexibility in when you can start receiving benefits. The timing of your claim has a big impact on how much you’ll receive for the rest of your life.

1. Early Claiming (Age 62): The earliest you can start collecting Social Security.

Benefit: Income starts flowing sooner.

Drawback: Monthly benefits are permanently reduced by about 25-30% if you claim before your full retirement age (FRA).

When it makes sense: If you have a shorter life expectancy or need income immediately, this can be the right choice.

Full Retirement Age aka FRA (66-67, depending on your birth year): Claiming at your FRA means you’ll receive 100% of your benefit based on your earnings history.

Delayed Retirement (Age 70): For every year you delay past FRA, your benefit increases by 8% annually up to age 70.

When it makes sense: If you are healthy and have other income sources, delaying Social Security provides a larger monthly income for the rest of your life.

Key Takeaway: If you want to maximize your benefit and can afford to wait, delaying until 70 offers the highest payout. However, if you need income sooner or have health concerns, claiming earlier might make more sense.

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2. Optimizing Spousal Benefits: Don’t Leave Money on the Table

Spousal benefits can be a powerful way to boost household income in retirement. Here’s how it works:

• Eligibility: The lower-earning spouse can receive up to 50% of the higher-earning spouse’s benefit if claimed at FRA.

• Claiming Early: If the spouse claims before FRA, their spousal benefit will be reduced.

• Both Spouses Delaying: Even if the lower-earning spouse delays their own benefit, spousal benefits max out at FRA—delaying past FRA won’t increase the spousal benefit.

• Widow(er) Benefits: A surviving spouse can switch to 100% of the deceased spouse’s benefit if it’s higher than their own.

Example:
If your spouse's benefit is $3,000 at their FRA and you are eligible for a spousal benefit, you could receive up to $1,500. If your own benefit is smaller than that amount, it makes sense to claim the higher spousal benefit.

Strategy Tip: Coordinating when each spouse claims benefits can maximize household income. For example, the lower-earning spouse may claim their benefit early, while the higher-earning spouse delays until age 70 to lock in the highest possible payout.

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3. Integrating Social Security into a Comprehensive Income Plan

Just as doctors treat the whole patient—not just the symptoms—you need a plan that integrates Social Security into your broader financial picture. The key is to ensure Social Security works harmoniously with other income streams, such as pensions, 403(b)s, or IRAs.

Scenario 1: If You Continue Working After Claiming Social Security

If you plan to keep working after starting Social Security, it’s essential to understand how earning income impacts your benefits:

• Before Full Retirement Age: If you claim Social Security and work, your benefits could be reduced if your earnings exceed the annual limit ($21,240 in 2024). For every $2 you earn above the limit, $1 is temporarily withheld from your benefits.

• The Year You Reach FRA: The income limit increases significantly ($56,520 in 2024), and only $1 is withheld for every $3 earned above the limit.

• After FRA: Once you reach full retirement age, there’s no reduction in benefits, no matter how much you earn.

Planning Tip: If you plan to keep working, it may make sense to delay Social Security to avoid penalties and maximize your future benefits. Alternatively, you could claim early and accept reduced benefits if you need the cash flow.

Scenario 2: If You Fully Retire After Claiming Social Security

For those fully retiring, the goal is to create a steady, sustainable income stream. Social Security will play a major role, but coordinating withdrawals from other accounts is essential to minimize taxes and ensure your savings last.

INCOME PLANNING FOR RETIREES:

• Rebalancing Your Portfolio:
  Incorporate Social Security as a fixed income source in your overall asset allocation. With Social Security acting like a bond, you may be able to take on more growth-oriented investments in your other accounts.

• Sequence of Withdrawals:

  Instead of a one-size-fits-all approach, consider a coordinated withdrawal strategy. Balancing distributions from taxable, tax-deferred (like IRAs and 401(k)s), and even tax-free accounts can help you maintain your desired tax bracket, optimize Social Security taxation, and make your retirement savings last longer. A tailored plan ensures that each dollar works smarter for your overall financial health.

• Minimize Social Security Taxes:

  Up to 85% of your Social Security benefits can be taxed if your combined income (Social Security + other income) exceeds certain thresholds. Instead of relying on Roth IRA withdrawals early in retirement, consider implementing a Roth conversion strategy during years of low or no income—often before Social Security benefits begin or while delaying them until age 70. This approach allows you to move assets from tax-deferred accounts to a Roth IRA at lower tax rates, potentially reducing your taxable income later in retirement and minimizing the impact on your Social Security benefits.

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4. Social Security in the Context of Longevity and Inflation

While Social Security provides a reliable income stream, it’s important to think about the long-term risks you may face in retirement—especially longevity risk and inflation.

• Longevity Risk: If you live well into your 90s, delaying Social Security can help make sure you have a higher income stream later in retirement and preserve your savings. Example: A retiree who claims at 70 will receive a larger monthly check that will continue to grow with inflation over the years.

• Inflation Protection: Social Security benefits include Cost of Living Adjustments (COLAs). In high-inflation environments, these COLAs help maintain your purchasing power. While COLAs may not keep up with every expense, they offer more protection than many fixed-income sources.

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5. Putting It All Together: A Holistic Approach to Retirement Income

Here’s how to pull all these pieces together into a cohesive Social Security and retirement income plan:

1. Evaluate Your Health and Longevity Prospects: If you expect to live a long life, delaying benefits makes more sense. If health concerns arise, early claiming may be better.

2. Coordinate with Your Spouse: Decide when each spouse should claim benefits to maximize total household income.

3. Plan Around Your Work Status: If you continue working, consider delaying Social Security to avoid reductions and taxes.

4. Incorporate Social Security with Other Income Sources: Use a tax-efficient withdrawal strategy to balance Social Security with pensions, investments, and other savings.

5. Account for Inflation and Longevity Risk: Ensure your plan remains flexible to account for rising costs and a potentially long retirement.

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Conclusion: Social Security as Part of Your Retirement Treatment Plan

Planning for Social Security is like creating a well-thought-out treatment plan—it requires understanding your options, making the right decisions at the right time, and coordinating with other elements of your financial life. Whether you continue working after claiming Social Security or fully retire, your strategy should reflect your unique circumstances, health, and goals.

Remember, Social Security isn’t just about when you claim—it’s about how you integrate it into a larger income plan that keeps you financially healthy throughout retirement. Much like medicine, there’s no one-size-fits-all solution. A thoughtful strategy, tailored to your needs, can ensure your retirement income plan works just as well as a carefully prescribed course of treatment.

If you’re ready to build or adjust your Social Security strategy, consider sitting down with a financial planner to create a customized plan for your future. After all, the right prescription can make all the difference.

Partnering with Outside The Box Financial Planning (OTBFP) offers numerous benefits for individuals seeking college planning, retirement planning, small business support, wealth management, and beyond.  As a fee-only fiduciary with a comprehensive approach, unbiased advice,  and transparent fee structure, OTBFP acts as a trusted advisor who prioritizes your best interests. Click here to schedule a complimentary “Fit” meeting to determine if we would make a good mutual fit.

Remember, financial decisions have long-lasting implications, and working with a professional like the financial professionals of Outside The Box Financial Planning can provide the expertise and guidance necessary to make informed choices that align with your financial aspirations.

When it comes to managing healthcare expenses efficiently, Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) can be powerful tools. Think of them like different types of medical tools in a healthcare professional’s kit—each designed for specific uses and benefits. However, just like choosing the right treatment plan for a patient, it’s important to understand how these accounts work so you can make the most of them. In this post, we’ll explore the features, advantages, and strategies to optimize FSAs and HSAs, helping you keep more of your hard-earned money while managing your healthcare costs effectively.

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FSA vs. HSA: What's the Difference?

Both FSAs and HSAs allow you to set aside money tax-free to cover medical expenses, but they have different rules and purposes. Let’s break it down by using a relatable analogy:

Imagine FSAs and HSAs as two types of gym memberships. One gym gives you a “use-it-or-lose-it” deal—if you don’t show up and use your sessions by the end of the year, they disappear (that’s your FSA). The other gym allows you to carry over unused sessions from year to year, even building them up for the long term (that’s your HSA). Both memberships offer value, but they’re structured very differently.

The Basics of FSAs:

• Offered through employers: You must sign up during open enrollment.

• Use-it-or-lose-it rule: Most of the money must be spent within the plan year, though some employers allow a grace period or carry over a small amount (typically $610 in 2024).

• Annual contribution limit: $3,200 per employer in 2024.

• Expenses covered: Things like doctor’s visits, prescriptions, copays, and medical supplies.

• Pre-tax savings: Contributions are not subject to federal income tax, Social Security tax or Medicare tax, saving you money on taxes.

The Basics of HSAs:

• Paired with a high-deductible health plan (HDHP): Only available if you have a qualifying health insurance plan.

• No expiration date: Your savings roll over from year to year and can be invested for growth.

• Annual contribution limits (2024): $4,150 for individuals and $8,300 for families. If you’re 55 or older, you can add a $1,000 catch-up contribution.

• Triple tax benefit: Contributions are pre-tax, the growth is tax-free, and withdrawals for qualified expenses are tax-free.

• Expenses covered: Same as FSAs, plus additional flexibility like using funds for Medicare premiums or long-term care in retirement.

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Which One Should You Use?

Choosing between an FSA and an HSA depends on your health plan and personal situation. It’s similar to deciding between a sprint or a marathon. FSAs are built for short-term, planned expenses—like sprinting toward the finish line by the end of the year. HSAs, on the other hand, are better for those playing the long game—saving for healthcare expenses years, or even decades, down the road.

When to Use an FSA

• You have predictable medical expenses: If you know you’ll need glasses, dental work, or prescriptions this year, an FSA can help cover those costs tax-free.

• Your employer offers a grace period or rollover: If you have some flexibility with unused funds, you’re less likely to lose what you contribute.

• You don’t qualify for an HSA: FSAs can be the next best thing if you aren’t enrolled in a high-deductible health plan (HDHP).

When to Use an HSA

• You have an HDHP: If you’re enrolled in a high-deductible health plan, maximizing your HSA contributions is often a smart move.

• You want to build a healthcare nest egg: Think of your HSA as a retirement account for medical expenses. Over time, those unused dollars grow, providing a valuable safety net for future healthcare needs.

• You’re looking for investment opportunities: Some HSAs allow you to invest your contributions, helping your savings grow tax-free.

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How to Optimize FSAs and HSAs in Your Life

Once you’ve chosen the right account—or maybe you’re lucky enough to have access to both—it’s time to optimize them. Let’s dive into a few strategies that will help you get the most out of these accounts.

Strategy #1: Plan Your Contributions Wisely

Contributing to these accounts can feel a bit like ordering supplies for the hospital floor—you want to ensure you have enough on hand without overstocking. With an FSA, aim to contribute an amount close to what you know you’ll need. Too little, and you miss out on tax savings; too much, and you risk forfeiting unused funds.

With an HSA, on the other hand, maxing out contributions (if possible) can be a great long-term strategy. If you don’t use all the funds this year, they’ll be there when you need them—and you’ll benefit from compounding growth over time.

Strategy #2: Use Your FSA for Predictable Expenses

Think of an FSA as a tool for those everyday medical expenses you know are coming. Dental check-ups, vision exams, prescriptions—these are all perfect candidates for FSA funds.

If your employer offers an FSA rollover, make sure to keep track of how much can carry over into the next year, so you don’t accidentally leave money on the table.

Strategy #3: Treat Your HSA Like a Retirement Account

If your HSA funds aren’t needed for immediate medical expenses, consider investing them. This can be a powerful way to grow your savings for future healthcare costs, much like building a retirement portfolio. In fact, many people don’t touch their HSA funds at all during their working years, opting to let the balance grow until retirement. Once you reach age 65, you can even use HSA funds for non-medical expenses (though you’ll pay regular income tax on those withdrawals, similar to a traditional IRA).

Strategy #4: Keep Receipts and Stay Organized

Managing these accounts is like keeping patient records—good organization makes all the difference. For both FSAs and HSAs, it’s essential to keep receipts for your expenses. FSAs often require proof of eligible purchases, and HSAs are subject to IRS audits if withdrawals are questioned.

Some HSA providers even allow you to submit receipts online and store them digitally, creating a “paper trail” that can make life easier down the road.

Strategy #5: Enroll in a Dependent Care FSA

Think of a Dependent Care FSA as a prescription for reducing the financial stress of childcare, allowing you to save money pre-tax for daycare, after-school programs, or even elder care. Just like preventive medicine can save you from bigger health issues down the road, using this account can shield your wallet from hefty caregiving costs. By leveraging this benefit, you can create a healthier financial routine while ensuring your loved ones get the care they need.

In Illinois, like in most states, accessing a Dependent Care Flexible Spending Account (FSA) typically involves enrolling through your employer's benefits program during open enrollment. Here's how you can get one:

1. Check Your Employer's Benefits Package: Dependent Care FSAs are employer-sponsored, so confirm with your HR or benefits department that your company offers this option.

2. Enroll During Open Enrollment: Most companies have an annual open enrollment period, usually in the fall, where you can select or adjust your benefits. If you have a qualifying life event (e.g., having a child), you may also be able to enroll or make changes mid-year.

3. Set Your Contribution: During enrollment, decide how much of your pre-tax income you want to allocate to the Dependent Care FSA for the year (up to the IRS limit of $5,000 for married couples filing jointly or $2,500 if filing separately).

4. Submit Claims: As you incur eligible expenses (e.g., daycare, after-school programs, summer camps), submit receipts to your FSA provider for reimbursement.

Ask HR for a detailed benefits guide to ensure you're making the most of your options!

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Tax Savings and Peace of Mind

Both FSAs and HSAs offer significant tax advantages that can lower your healthcare costs, but they also provide peace of mind—knowing that you have a financial cushion for medical expenses. Think of it like preventive care: just as staying on top of your health can prevent costly treatments later, managing these accounts wisely can save you from financial stress down the road.

Using these accounts effectively can also boost your financial wellness. Every dollar saved on taxes is a dollar that stays in your pocket, and those savings can add up over time. Whether you’re managing healthcare costs today or building a nest egg for tomorrow, FSAs and HSAs provide tools that help you take control of your financial health.

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Final Thoughts: Making the Most of Your Healthcare Toolkit

FSAs and HSAs may feel like alphabet soup at first, but once you understand how they work, they become essential tools in your financial toolkit. Just like a good treatment plan depends on the needs of the patient, the best account for you depends on your specific situation.

If you have regular, predictable expenses, an FSA can be a great way to cover them while saving on taxes. If you’re playing the long game, an HSA offers unmatched flexibility, investment options, and the ability to carry your savings into retirement. And if you can manage both? You’ll be setting yourself up for success—like having both an emergency room and a long-term care unit at your disposal.

At the end of the day, using FSAs and HSAs effectively is about planning, saving, and staying organized. Whether you’re covering today’s expenses or preparing for the unknowns of the future, these accounts give you the tools you need to manage healthcare costs and maintain financial wellness. So, open that toolkit, use these accounts wisely, and enjoy the peace of mind that comes with knowing you’ve got your healthcare expenses covered.

Partnering with Outside The Box Financial Planning (OTBFP) offers numerous benefits for individuals seeking college planning, retirement planning, small business support, wealth management, and beyond.  As a fee-only fiduciary with a comprehensive approach, unbiased advice,  and transparent fee structure, OTBFP acts as a trusted advisor who prioritizes your best interests. Click here to schedule a complimentary “Fit” meeting to determine if we would make a good mutual fit.

Remember, financial decisions have long-lasting implications, and working with a professional like the financial professionals of Outside The Box Financial Planning can provide the expertise and guidance necessary to make informed choices that align with your financial aspirations.

Woman typing on a calculator with tax papers scattered on desk

The end of the year is fast approaching, which means you’re probably focused on holiday shopping, family gatherings, and maybe squeezing in some well-deserved rest. But if you take just a little time to do some year-end tax planning, you’ll thank yourself when spring rolls around. Think of it like changing the oil in your car before winter—you invest a little effort now to avoid bigger, more expensive problems down the road.

The good news? You don’t have to be a tax expert to make smart moves that keep more money in your pocket. Here’s a year-end checklist to guide you through it, with simple strategies to save on taxes and make the most of what you’ve earned.

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1. Max Out Retirement Contributions: Boost Savings While Reducing Taxes

Deadline: December 31

Saving for retirement isn’t just about securing your future—it’s also a quick way to lower your taxable income today. Every dollar you contribute to a 401(k), 403(b), or similar plan reduces your taxable income, which means less money owed to Uncle Sam.

• Contribution Limits for 2024:

• Up to $23,000 for most people (and an extra $7,500 if you’re 50 or older).

• How to Do It:
  Check your paystub to see if you’re on track to max out your contributions. If not, consider bumping up your payroll deductions for the rest of the year—especially if you got a year-end bonus.

Why It Matters:

Think of it like using a coupon at the store. You’re buying yourself a more secure future and paying less today. That’s a win-win.

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2. Use Your HSA: Save Now for Health Expenses Later

Deadline: December 31 for contributions to count toward this year’s taxes

If you have a Health Savings Account (HSA) through a high-deductible health plan, don’t overlook it. HSAs offer a rare triple tax benefit:

1. Contributions reduce your taxable income.

2. Investments inside the HSA grow tax-free.

3. Withdrawals for medical expenses are tax-free too.

• Contribution Limits for 2024:

• $4,150 for individuals, $8,300 for families, and an extra $1,000 if you’re 55 or older.

Why It Matters:

Think of your HSA like a rainy-day fund that doubles as a health piggy bank. It’s there for you now, and if you don’t need it right away, it rolls over and grows for the future—like a trusty umbrella you keep in the closet.

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3. Tax-Loss Harvesting: Turning Market Losses into Savings

Deadline: December 31

If you have investments in a taxable brokerage account, take a look at how your portfolio is performing. This has been a bumpy year for the markets, and you might have some losing stocks or funds. Selling those losers can help reduce the taxes you owe on other investments that made a profit.

• How It Works:
  Losses can offset gains, dollar for dollar. If your losses exceed your gains, you can subtract up to $3,000 from your regular income, and anything left over can be carried forward into future years.

Why It Matters:

Think of it like cleaning out your closet. You get rid of the old things you don’t need (investments that aren’t performing) and make room for new ones (or at least get some tax savings). It’s a financial fresh start.

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4. Charitable Contributions: Do Good, Get a Break

Deadline: December 31

Donating to charity not only feels good—it can also reduce your tax bill if you itemize deductions. You can give cash, stock, or even household items, and it all counts toward your charitable deduction.

• Pro Tip:
  If you have stocks that have gone up in value, donating them directly to a charity can help you avoid capital gains taxes. You’ll get the full deduction for the stock’s current value without paying taxes on the gain.

Why It Matters:

This is like donating clothes to Goodwill. You declutter your life, help someone else, and come tax time, you might get a little bonus for your generosity.

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5. Check Your FSA: Use It or Lose It

Deadline: December 31, though some plans give a short grace period into the new year

If you have a Flexible Spending Account (FSA) through your employer, now’s the time to check your balance. Unlike HSAs, most FSAs come with a “use it or lose it” policy. Any money left over in the account at the end of the year (or after the grace period) disappears.

• How to Avoid Losing It:
  Schedule any last-minute doctor appointments, stock up on prescription glasses, or buy eligible medical supplies. Many plans also cover things like first-aid kits or sunscreen.

Why It Matters:

Imagine if a gift card in your wallet expired at the end of the year. Wouldn’t you want to use it while you still could? Your FSA works the same way.

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6. Estimate Your Taxes: Avoid a Surprise Bill

Deadline: December 31

Did you get a big bonus this year? Sell some investments? Or start a side hustle? If so, you might owe more in taxes than expected. The IRS wants you to pay taxes as you earn, and if you underpay, you could face a penalty.

• How to Check:
  Use an online tax calculator or ask your accountant for a quick estimate. If it looks like you’ll owe more, you can make an estimated tax payment by December 31 to avoid penalties.

Why It Matters:

This is like checking the gas gauge before a road trip. If you’re running low, it’s better to fill up now than get stranded on the highway (or hit with a surprise tax bill).

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7. Review Your Beneficiaries: Make Sure They’re Up to Date

Deadline: Ongoing, but the end of the year is a great time to check

Life changes—like getting married, divorced, or having kids—should prompt a review of your beneficiary designations on things like retirement accounts and life insurance policies. These designations override what’s written in your will, so it’s important they reflect your current wishes.

Why It Matters:

Think of it like updating your emergency contacts. If something happens, you want the right people to be notified and taken care of, without complications.

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8. Take Your RMDs if You’re 73 or Older

Deadline: December 31

If you’re 73 or older, the IRS requires you to take Required Minimum Distributions (RMDs) from certain retirement accounts, like traditional IRAs or 401(k)s. If you don’t, you could face a steep penalty—25% of the amount you should have withdrawn.

• What If You Don’t Need the Money?
  Consider using your RMD to make a Qualified Charitable Distribution (QCD). This allows you to donate directly to a charity and satisfy your RMD without adding to your taxable income.

Why It Matters:

Think of it like taking the trash out before it overflows. Even if you don’t need the space right away, it’s better to take care of it now than deal with a mess later (or in this case, a tax penalty).

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Wrapping It All Up: Start the New Year Strong

Year-end tax planning doesn’t have to be complicated, but it does require some attention. A little bit of effort now can save you money and prevent future headaches. It’s just like prepping for a road trip—if you check the oil, fill the gas tank, and pack your snacks ahead of time, the ride will be much smoother.

If any of this feels overwhelming, don’t hesitate to reach out to a financial planner or tax advisor. Having someone in your corner to guide you through these steps can make all the difference—just like having a good mechanic for your car or a trusted doctor for your health.

Here’s to finishing the year strong, staying organized, and keeping more of what you’ve worked so hard to earn!

Partnering with Outside The Box Financial Planning (OTBFP) offers numerous benefits for individuals seeking college planning, retirement planning, small business support, wealth management, and beyond.  As a fee-only fiduciary with a comprehensive approach, unbiased advice,  and transparent fee structure, OTBFP acts as a trusted advisor who prioritizes your best interests. Click here to schedule a complimentary “Fit” meeting to determine if we would make a good mutual fit.

Remember, financial decisions have long-lasting implications, and working with a professional like the financial professionals of Outside The Box Financial Planning can provide the expertise and guidance necessary to make informed choices that align with your financial aspirations.

As a healthcare professional, you spend your career prescribing treatments and procedures to help patients live healthier lives. But when it comes to managing your own healthcare expenses, figuring out the best financial strategies can feel like trying to read an MRI without any training. That’s where Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) come into play—they’re like financial prescriptions for managing healthcare costs. While they both offer tax advantages, understanding the differences and which one suits your needs will help ensure you maximize your financial health.

Whether you’re a physician, nurse, or administrator, knowing how to integrate these accounts into your financial strategy is crucial. Let’s break down how FSAs and HSAs work, who they’re best suited for, and how they fit into your overall financial treatment plan.

FSAs and HSAs: The Overview

Before diving into the details, let’s start with the basics of how these accounts function:

Flexible Spending Accounts (FSA)

Allows you to set aside pre-tax dollars from your paycheck for eligible healthcare expenses like co-pays, prescription drugs, and medical equipment. The catch is that FSAs have a “use-it-or-lose-it” policy—funds must generally be spent within the plan year or risk being forfeited.

Health Saving Accounts (HSA)

Allows you to set aside pre-tax dollars, but they’re only available if you’re enrolled in a High-Deductible Health Plan (HDHP). Unlike FSAs, HSAs are yours to keep, and unused funds roll over year to year. Think of it like a long-term savings tool for medical expenses today and in retirement.

These two accounts both reduce taxable income, but they have key differences in flexibility, eligibility, and how they fit into a larger financial plan.

FSA vs. HSA: Key Differences at a Glance

Here’s a side-by-side comparison to get us started:

This comparison makes one thing clear: HSAs offer more flexibility and long-term potential, but they aren’t available to everyone. FSAs, on the other hand, can be used with any health insurance plan, making them more accessible for healthcare professionals employed by hospitals or larger organizations with robust benefit packages.

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When an fsa is the right prescription

For many healthcare professionals working at hospitals like Rush or Advocate Lutheran, the default option through your employer’s benefits package may be an FSA. Here’s when an FSA makes the most sense:

1. You Have Predictable Healthcare Expenses

If you know you’ll have predictable out-of-pocket expenses—like ongoing prescriptions, therapy visits, or routine dental work—an FSA can be a great way to pay for these costs with pre-tax dollars. Think of it like scheduling routine lab work: you know what’s coming, so you plan ahead.

2. Your Employer Offers an FSA Match or Incentive

Some hospitals and healthcare networks provide contributions or incentives to encourage FSA participation. If your employer offers a match, it’s essentially free money. Much like taking advantage of employer-sponsored wellness programs, you should seize any financial perks available to you.

3. Your Healthcare Plan Isn’t an HDHP

Not all healthcare professionals have access to high-deductible health plans, especially if you’re working for a large healthcare network that offers multiple tiers of traditional PPO plans. If that’s the case, an FSA may be your best bet for tax-advantaged healthcare savings.

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When an HSA is the Ideal Treatment Plan

If you have access to a high-deductible health plan (HDHP), then an HSA can become a cornerstone of your financial health strategy. Here’s why:

1. You Want Long-Term Savings and Tax Benefits

HSAs are like the “triple threat” of the financial world:

• Contributions are tax-deductible

• Growth is tax-free if invested

• Withdrawals for qualified expenses are tax-free

Think of it like the compound benefits of early preventive care—saving a little now can have exponential benefits later. You can invest unused HSA funds for growth over time, making it an ideal vehicle for healthcare expenses in retirement.

2. You’re Healthy and Want to Save for Future Healthcare Needs

If you don’t expect to have high healthcare expenses in the near term, an HSA allows you to build a financial buffer for when you’ll need it down the road—perhaps in retirement when Medicare doesn’t cover everything. This can be particularly valuable if you anticipate rising healthcare costs over the years.

3. You Value Portability

One of the biggest advantages of an HSA is that it stays with you, even if you change jobs. This makes it ideal for physicians or nurses who may move between hospitals or healthcare systems throughout their careers.

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Using FSAs and HSAs Together

In some situations, healthcare professionals can use both an FSA and HSA strategically. Here are two ways you might be able to maximize both accounts:

1. Limited-Purpose FSA (LPFSA)

If you have an HSA, you can also enroll in a Limited-Purpose FSA, which only covers dental and vision expenses. This allows you to preserve your HSA funds for future use while using the LPFSA to cover more immediate out-of-pocket costs for dental and vision care.

2. Dependent Care FSA (DCFSA)

In addition to healthcare FSAs, many hospitals also offer Dependent Care FSAs. These accounts allow you to set aside pre-tax dollars to cover childcare or eldercare expenses. If you’re a healthcare professional balancing the demands of work and family, a Dependent Care FSA can provide valuable savings.

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Choosing the Right Prescription for You

Here’s a simple framework to help you decide whether an FSA or HSA (or both) is right for your situation:

• If you have predictable, recurring healthcare expenses (like prescriptions or therapy visits), an FSA is often the way to go.

• If you have access to an HDHP and want to save for future healthcare costs, an HSA provides flexibility and growth potential.

• If you’re balancing family obligations, consider pairing a Dependent Care FSA with your other healthcare savings options.

Remember, selecting the right healthcare savings account is a bit like personalizing a treatment plan. Just as you consider a patient’s unique needs before prescribing medication, you should evaluate your healthcare plan, financial goals, and lifestyle to determine the best strategy.

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Final Thoughts: Your Financial Health Matters Too

As a healthcare professional, it’s easy to focus on the needs of your patients while putting your own financial well-being on the back burner. But just like scheduling regular check-ups ensures physical health, reviewing your financial options annually is essential to maintaining your financial health.

Whether you decide to leverage an FSA, HSA, or both, these tools can help you manage the high cost of healthcare more efficiently. And just like you encourage your patients to make preventive care a priority, I encourage you to take control of your healthcare savings today—it’s an investment in both your present and your future.

If you need help evaluating your healthcare benefits or integrating these accounts into your broader financial plan, don’t hesitate to reach out. A little proactive planning now can make all the difference down the road—just like the best medical care.

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Partnering with Outside The Box Financial Planning (OTBFP) offers numerous benefits for individuals seeking college planning, retirement planning, small business support, wealth management, and beyond.  As a fee-only fiduciary with a comprehensive approach, unbiased advice,  and transparent fee structure, OTBFP acts as a trusted advisor who prioritizes your best interests. Click here to schedule a complimentary “Fit” meeting to determine if we would make a good mutual fit.

Remember, financial decisions have long-lasting implications, and working with a professional like the financial professionals of Outside The Box Financial Planning can provide the expertise and guidance necessary to make informed choices that align with your financial aspirations.

As healthcare professionals, you've dedicated your lives to caring for others. Now, as retirement approaches, it's time to focus on your own healthcare needs. Just as you meticulously craft patient care plans, it's crucial to develop a comprehensive "retirement health care plan" to ensure your golden years are as comfortable and worry-free as possible.

In this guide, we'll walk you through the intricacies of Medicare enrollment, long-term care planning, and managing healthcare costs in retirement. Think of this as creating a care plan for your future self – one that addresses potential health issues, financial considerations, and quality of life factors.

Avoiding Common Medicare Enrollment Mistakes: Your First Line of Defense

Just as a misdiagnosis can lead to improper treatment, misunderstanding Medicare options can result in inadequate coverage and unexpected costs. Let's examine some common pitfalls and how to avoid them:

Assuming you'll be automatically enrolled:

If you're already receiving Social Security benefits, you'll be automatically enrolled in Medicare Parts A and B. However, if you're not, you need to take action. Don't let this slip through the cracks like a missed medication dose.  On a side note, make sure to discuss optimal Social Security claiming strategies with your financial advisor.

Overlooking Medicare Advantage plans:

These plans (Part C) can offer additional benefits like dental and vision coverage. Evaluate them alongside Original Medicare to determine the best fit for your needs.

Missing Enrollment Deadlines:

Your Initial Enrollment Period (IEP) begins three months before your 65th birthday and ends three months after. Missing this window can result in lifelong penalties. Set a reminder in your calendar, just as you would for a critical patient follow-up.

Choosing the wrong plan:

Just as each patient requires a tailored care plan, your Medicare coverage should be customized to your needs. Don't automatically choose the same plan as your colleague or spouse.

Neglecting to enroll in Part B:

Some healthcare professionals mistakenly believe they don't need Part B if they have employer coverage. However, if your employer has fewer than 20 employees, Medicare becomes your primary insurance at 65. Failing to enroll could leave you with significant coverage gaps.

To avoid these mistakes, consider working with a Medicare specialist, much like consulting with a specialist for a complex medical case. They can help you navigate the enrollment process and choose the most appropriate coverage.

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Retirement Health Costs: Preparing for Healthcare Expenses Beyond Medicare

While Medicare provides essential coverage, it's not all-encompassing. Just as a comprehensive care plan addresses all aspects of a patient's health, your retirement planning should account for all potential healthcare costs.

According to recent estimates, an average 65-year-old couple retiring in 2022 may need approximately $315,000 saved (after tax) to cover health care expenses in retirement. This figure might seem daunting, but remember – it's an average, and your actual costs could be higher or lower depending on various factors.

Here are some key areas to consider:

3. Hearing aids:

These can be a significant expense and are not covered by Original Medicare. Some Medicare Advantage plans offer coverage for hearing aids.

4. Long-term care:

This is perhaps the most significant potential expense, which we'll discuss in more detail in the next section.

1. Prescription drugs:

   Medicare Part D covers many medications, but you may still have out-of-pocket costs. Consider setting aside funds for potential drug expenses, especially if you have chronic conditions.

2. Dental and vision care:

   Original Medicare doesn't cover routine dental or vision care. Budget for these expenses or consider a Medicare Advantage plan that includes these benefits.

To prepare for these costs, consider opening a Health Savings Account (HSA) if you're eligible. An HSA works like a specialized "treatment fund" for your future health needs, offering triple tax advantages.

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Navigating Medicare and Long-Term Care Insurance

Long-term care is a critical component of your retirement health care plan, much like rehabilitation is crucial in many patient care plans. Medicare provides only limited coverage for long-term care, typically up to 100 days of skilled nursing care following a hospital stay.

For extended care needs, you'll need to consider other options:

Self-funding:

If you have significant savings, you might choose to self-fund potential long-term care needs. This requires careful financial planning and risk assessment.

Medicaid:

As a last resort, Medicaid can cover long-term care costs, but only after you've depleted most of your assets.

Long-term care insurance:

This can help cover the costs of extended care, whether at home or in a facility. When evaluating policies, consider:

• Coverage limitations: Understand what types of care are covered and for how long.

• Integration with Medicare: How will the policy work alongside your Medicare coverage?

• Cost vs. benefit: Premiums can be high, especially if you wait until later in life to purchase a policy.

• Policy options: Some policies combine life insurance with long-term care benefits, providing more flexibility.

Remember, the earlier you plan for long-term care, the more options you'll have. It's like preventive care – addressing potential issues before they become critical can save you stress and financial strain in the long run.

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Budgeting for a Smooth Transition

As you transition from caregiver to care recipient, be prepared for some hidden costs that might not be immediately apparent:

Travel coverage:

Original Medicare generally doesn't cover healthcare outside the U.S. If you plan to travel in retirement, consider purchasing additional travel insurance or a Medicare Advantage plan with travel coverage.

Fitness and wellness programs:

While some Medicare Advantage plans offer gym memberships or wellness programs, Original Medicare doesn't cover these. Budget for these costs to maintain your health and prevent future medical expenses.

Income-Related Monthly Adjustment Amount (IRMAA):

If your income is above a certain threshold, you'll pay higher premiums for Parts B and D. This is particularly relevant for healthcare professionals who may have higher incomes.

Medigap premiums:

If you opt for a Medicare Supplement (Medigap) policy to cover out-of-pocket costs, you'll need to budget for these additional premiums.

To manage these costs effectively, create a detailed budget for your retirement healthcare expenses. Just as you'd create a care plan that addresses all aspects of a patient's health, your budget should account for all potential healthcare costs.

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What You Need to Know as You Approach Retirement

As you near retirement, here are some key points to keep in mind:

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4. Prescription drug coverage:

Review your current medications and ensure they're covered under the Medicare Part D plan you're considering.

5. Provider networks:

If you're considering a Medicare Advantage plan, check that your preferred healthcare providers are in-network.

1. Creditable coverage:

   If you're still working and have employer-sponsored health insurance, find out if it's considered "creditable coverage" for Medicare purposes. This can affect when you need to enroll in Medicare without penalties.

2. HSA contributions:

   Once you enroll in Medicare, you can no longer contribute to an HSA. Plan accordingly to maximize your contributions before enrollment.

3. Coordination of benefits:

   Understand how Medicare will work with any other health insurance you have, including employer coverage or VA benefits.

Remember, your Medicare choices aren't set in stone. You'll have annual opportunities to review and change your coverage during the Open Enrollment Period.

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Conclusion: Your Retirement Health Care Plan

Just as you've advocated for your patient's health throughout your career, it's time to advocate for your own future well-being. By understanding Medicare, planning for long-term care, and budgeting for healthcare costs, you're creating a comprehensive care plan for your retirement years.

Don't wait until retirement is knocking at your door. Start planning now to ensure a smooth transition and a healthy, financially secure retirement. Remember, in healthcare and in retirement planning, early intervention often leads to the best outcomes.

Take the first step towards a well-planned retirement today. As a healthcare professional, you've spent your career caring for others. Now, let us help you care for your future self.

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Partnering with Outside The Box Financial Planning (OTBFP) offers numerous benefits for individuals seeking college planning, retirement planning, small business support, wealth management, and beyond.  As a fee-only fiduciary with a comprehensive approach, unbiased advice,  and transparent fee structure, OTBFP acts as a trusted advisor who prioritizes your best interests. Click here to schedule a complimentary “Fit” meeting to determine if we would make a good mutual fit.

Remember, financial decisions have long-lasting implications, and working with a professional like the financial professionals of Outside The Box Financial Planning can provide the expertise and guidance necessary to make informed choices that align with your financial aspirations.

Healthcare professionals often dedicate their lives to caring for others, frequently putting their personal financial and well-being needs on the backburner. Yet, planning for your own financial security is just as essential. Advocate Health, which emerged from the partnership between Advocate Health Care and Aurora Health Care, offers a comprehensive array of optional benefits, including life insurance, Accidental Death & Dismemberment (AD&D) insurance, long-term care insurance, and 401(k) retirement savings plans. These benefits are designed to help you build a solid financial future while also protecting you and your family from unforeseen life events.

We will explore into why it’s critical for healthcare professionals to take full advantage of these benefits and discuss how these options can secure your financial health while offering peace of mind.

1. The Importance of Retirement Planning: Advocate Health’s 401(k) Plan

Planning for retirement is a critical part of financial security, especially for healthcare professionals who work in physically and emotionally demanding environments. Advocate Health offers a 401(k) plan that provides both automatic contributions and matching benefits—an essential tool for building wealth over time.

Company Contributions: A No-Brainer for Your Future

Advocate Health automatically contributes 3% of eligible pay to your 401(k) account, regardless of whether you are actively contributing to the plan. This means that simply by being employed and meeting the eligibility criteria (working 1,000 hours or more during the plan year and being employed on the last day of the calendar year), you can benefit from free money toward your retirement. For healthcare professionals, this offers a straightforward, stress-free way to start securing your financial future.

However, if you were hired after January 1, 2021, you will need to complete a one-year waiting period and meet the 1,000-hour requirement before you can start receiving these contributions. While the waiting period may seem lengthy, it's a great opportunity to plan ahead and fully grasp the benefits awaiting you.

Employer Match: Enhancing Your Retirement Savings

Advocate Health matches your contributions dollar for dollar up to 3% of your eligible pay. If you contribute 3% or more, the organization will match it fully, effectively doubling the amount you're setting aside for your future. And even though the IRS limits your total contributions, you have the option to contribute up to 75% of your eligible pay, boosting your retirement savings.

For healthcare professionals, taking advantage of the employer match is essential because it dramatically accelerates the growth of your retirement funds. By contributing regularly, you're allowing Advocate Health to invest in your future alongside you, creating a stronger foundation for retirement.

Traditional and Roth 401(k): Tailor Your Contributions

Advocate Health offers both Traditional and Roth 401(k) plans, providing you with flexibility depending on when you prefer to pay taxes. If you choose the Traditional 401(k), your contributions are pre-tax, meaning you’ll pay taxes when you take a distribution at retirement. On the other hand, the Roth 401(k) allows you to contribute after-tax dollars, making your withdrawals tax-free during retirement.

This flexibility lets healthcare professionals tailor their retirement savings strategy to fit their financial situation, whether they prefer tax savings now or in the future.

Automatic Contributions and Increases: A Simple Way to Save

Advocate Health makes it easy to build your retirement savings with automatic enrollment in the 401(k) plan at 2%, and automatic contribution increases of 1% each year up to a maximum of 10%. This feature is particularly beneficial for busy healthcare professionals, allowing you to effortlessly increase your retirement savings without having to remember to adjust your contributions manually. You can also increase or decrease your contributions at any time, giving you the flexibility to adjust your savings strategy based on your financial goals.

Vesting and Commitment: Securing Your Employer Contributions

One of the key features of Advocate Health’s 401(k) plan is the vesting process. After three years of service, you become 100% vested in both the employer match and the nonelective annual company contribution. This means that if you stay with Advocate Health for at least three years, you’ll receive the full value of what Advocate Health has contributed to your retirement.

For healthcare professionals who are considering long-term employment with Advocate Health, the vesting process is another strong incentive to stay committed. Each year of service solidifies your financial security for retirement, providing you with a strong foundation for the future.

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2. The Necessity of Life Insurance

As a healthcare professional, life insurance may not be at the top of your mind, but it is one of the most important tools in protecting your family’s financial future. Advocate Health offers both basic and optional life insurance plans that are designed to provide for your loved ones in the event of your untimely passing.

Basic Life Insurance: Protection Without the Hassle

Advocate Health automatically provides basic life insurance coverage to full-time, part-time A, and part-time B employees. The coverage is equal to 1x your base salary, with a minimum benefit of $30,000 and a maximum benefit of $1.5 million. Best of all, Advocate Health pays 100% of the premium, which means you have this important protection without the need for out-of-pocket costs.

If you're a healthcare professional with financial responsibilities like a mortgage, student loans, or dependents, this coverage can help ensure that your family won't be left with a financial burden in your absence.

Optional Life Insurance: Customizable Coverage

If you need more extensive coverage, Advocate Health offers optional life insurance that allows you to customize your plan. You can choose from 1x to 7x your base salary, with a maximum benefit of $1.5 million. This additional coverage can provide peace of mind for healthcare professionals who have significant financial obligations or simply want to provide their loved ones with more substantial protection.

For your spouse or partner, coverage is available from $20,000 to $500,000 in increments of $10,000. For dependent children, you can choose between $10,000 and $20,000 of coverage. The cost of this optional insurance is discounted, making it an affordable way to protect your entire family.

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3. Accidental Death & Dismemberment (AD&D) Insurance: Extra Peace of Mind

In high-stress, physically demanding professions like healthcare, accidents can happen. That’s where AD&D insurance comes into play, providing an added layer of financial protection in case of accidental death or a life-altering injury.

Advocate Health offers AD&D coverage ranging from $10,000 to $250,000, available in $10,000 increments. You can also cover your spouse and children, with spouses receiving 60% of your coverage amount and children receiving 20%. In cases where both are covered, the distribution is 50% for spouses and 15% for children.

This added protection ensures that if you experience a debilitating accident or a tragic loss, your family’s financial well-being is preserved.

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4. Long-Term Care Insurance: Protecting Your Future

As healthcare professionals, you're well aware of the potential costs associated with long-term care. Whether it’s in-home care, assisted living, or nursing home care, the financial burden can be substantial.

Advocate Health offers a post-tax benefit that combines long-term care and life insurance, providing a universal life insurance policy with built-in long-term care protection. This is particularly valuable for healthcare professionals, as it ensures you’ll have financial resources available if you need extended care due to illness, injury, or aging.

This hybrid option not only provides your loved ones with a life insurance payout if something happens to you but also gives you access to funds should you require long-term care. For healthcare professionals, who see the need for long-term care firsthand, this benefit offers peace of mind knowing you're prepared for whatever the future holds.

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Conclusion

As a healthcare professional, you spend your career caring for others, but it’s equally important to care for your own financial future. Advocate Health’s wide range of benefits, including life insurance, AD&D insurance, long-term care insurance, and retirement plans, are designed to provide you with the tools you need to build and protect your financial security.

By taking full advantage of these benefits, you’re not only securing your own future but also providing your loved ones with financial protection. Whether it’s planning for retirement or preparing for unforeseen life events, Advocate Health’s benefits offer healthcare professionals a comprehensive package to meet their needs. Take the time to understand these options and make the most of what’s available to you—your future self will thank you. If you need help in understanding your these employee benefits, we here at Outside The Box Financial Planning are here to help. 

Partnering with Outside The Box Financial Planning (OTBFP) offers numerous benefits for individuals seeking college planning, retirement planning, small business support, wealth management, and beyond.  As a fee-only fiduciary with a comprehensive approach, unbiased advice,  and transparent fee structure, OTBFP acts as a trusted advisor who prioritizes your best interests. Click here to schedule a complimentary “Fit” meeting to determine if we would make a good mutual fit.

Remember, financial decisions have long-lasting implications, and working with a professional like the financial professionals of Outside The Box Financial Planning can provide the expertise and guidance necessary to make informed choices that align with your financial aspirations.

As a health professional, you're likely no stranger to long hours, demanding schedules, and the rewarding but challenging nature of your work. But while you’re busy taking care of others, it's crucial not to overlook taking care of your financial future. Understanding the ins and outs of Individual Retirement Accounts (IRAs) is a vital part of this process. Two popular options, the Roth IRA and the Traditional IRA, offer different advantages depending on your financial situation, tax bracket, and retirement goals. Here's what you need to know to make an informed decision.

Roth IRA vs. Traditional IRA: What’s the Difference?

When it comes to retirement savings, Roth and Traditional IRAs are two of the most common options. Both are designed to help you save for retirement and offer tax advantages, but they differ in how and when you receive tax advantages.

Traditional IRA

Contributions are often tax-deductible in the year they are made, which can lower your taxable income. However, you will pay taxes on withdrawals during retirement, including both contributions and earnings. This option is often appealing if you expect to be in a lower tax bracket during retirement.

A Traditional IRA allows you to contribute pre-tax income, which can lower your taxable income in the year you make the contribution. Taxes are then paid when you withdraw the money in retirement.

Roth IRA

Contributions are made with after-tax dollars, meaning you won't receive a tax break in the year of contribution. However, your withdrawals during retirement are tax-free, including the earnings on your contributions. This can be beneficial if you expect to be in a higher tax bracket in retirement or if you anticipate your investments will grow substantially.

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income limits and eligibility

As a health professional, your income level might be a deciding factor in whether you qualify for a Roth IRA. For 2024, the income limits for contributing to a Roth IRA are as follows:

Single Filers

You can contribute the full amount if your modified adjusted gross income (MAGI) is less than $153,000. The contribution limit phases out between $153,000 and $168,000.

Married Filing Jointly

The full contribution is allowed if your MAGI is less than $228,000. The phase-out range is between $228,000 and $243,000.

There are no income limits for contributing to a Traditional IRA, but if you or your spouse are covered by a retirement plan at work, the tax deductibility of your contributions may be limited based on your income.

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tax considerations for health professionals

For many health professionals, income tends to increase over time, especially as you gain experience and possibly move into higher-paying positions. This is an important factor to consider when choosing between a Roth and Traditional IRA:

If you’re early in your career and expect your income (and tax bracket) to increase, contributing to a Roth IRA could be advantageous. You pay taxes on the contributions now while you’re in a lower bracket and enjoy tax-free withdrawals in retirement.

If you’re at or near your peak earning years, a Traditional IRA might be more beneficial. The immediate tax deduction can help reduce your taxable income now, with the expectation that you'll be in a lower tax bracket after you retire.

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Required Minimum Distributions (RMDs)

One key difference between Roth and Traditional IRAs is the requirement for minimum distributions:

Traditional IRA:
You are required to start taking minimum distributions at age 73 (starting in 2024), regardless of whether you need the money. These distributions are taxed as ordinary income.

Roth IRA:
There are no required minimum distributions during your lifetime, making it a flexible tool for estate planning or for those who want to leave a tax-free inheritance to their heirs.

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Maximizing Contributions

As of 2024, the contribution limit for both Roth and Traditional IRAs is $7,000 per year ($8,000 if you’re age 50 or older). Given the nature of your profession, where incomes can vary greatly based on specialization, location, and experience, it's wise to maximize your contributions when possible. 

For those who earn too much to contribute directly to a Roth IRA, a Backdoor Roth IRA might be an option. This involves contributing to a Traditional IRA and then converting those funds to a Roth IRA. This strategy can be complex, so it’s important to consult with a financial advisor to ensure you’re following the correct procedures.

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Health Savings Accounts (HSAs): A Complementary Strategy

For health professionals with high-deductible health insurance plans, a Health Savings Account (HSA) can complement your retirement savings strategy. HSAs offer triple tax benefits: contributions are tax-deductible, growth is tax-free, and withdrawals are tax-free when used for qualified medical expenses. After age 65, you can withdraw funds for any reason without penalty (though non-medical withdrawals are taxed as income, similar to a Traditional IRA).

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Which Is Better for Your Retirement Plan?

Deciding between a Roth IRA and a Traditional IRA depends on several factors, including your current and anticipated future tax situations, retirement goals, and income levels.

1. Current vs. Future Tax Rates:

• Roth IRA: Ideal if you expect your tax rate to be higher in retirement than it is now. By paying taxes on your contributions today, you can avoid potentially higher taxes on withdrawals in the future.

• Traditional IRA: May be better if you anticipate your tax rate to be lower in retirement. You get a tax break now and pay taxes at a potentially lower rate later.

2. Income Considerations:

• Roth IRA: Useful if your income is above the contribution limits for direct Roth IRA contributions. Even if you exceed the income limits, you can still use a backdoor Roth IRA strategy to fund your account.

• Traditional IRA: Contributions are deductible up to certain income limits, which can provide immediate tax benefits if you qualify.

3. Retirement Timing and Needs:

• Roth IRA: Offers more flexibility with withdrawals and no RMDs, which can be beneficial if you plan to continue working part-time or have other sources of retirement income.

• Traditional IRA: Requires RMDs starting at age 73, which can be a consideration if you prefer not to manage additional mandatory withdrawals.

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Selecting the right plan for you involves evaluating your current financial situation, future tax expectations, and retirement goals. For health professionals, a Roth IRA might offer greater flexibility and tax-free growth, especially if you anticipate higher income or tax rates in retirement. However, a Traditional IRA provides immediate tax benefits and could be advantageous if you expect to be in a lower tax bracket when you retire.

Ultimately, working with a financial planner can help you navigate these options and tailor a retirement plan that aligns with your unique circumstances. By considering your income, tax situation, and retirement goals, you can make an informed decision and secure a comfortable and financially stable retirement.

If you’re unsure which IRA is right for you, or if you need assistance with retirement planning, don’t hesitate to reach out. A financial planner can provide personalized advice and help you craft a strategy that meets your needs and supports your long-term financial goals.

With Outside The Box Financial Planning, you can trust that you’re working with a fiduciary, Certified Financial Planner™️ practitioner focused on your financial well-being. We provide tailored advice on retirement planning, asset management, tax strategies, and beyond, helping you navigate potential obstacles with confidence.

When it comes to financial planning and insurance, there’s a crucial component that tends to fly under the radar but is absolutely essential for those with significant assets: umbrella insurance. As a health professional with a high net worth, you've probably spent countless hours helping patients protect and improve their physical well-being. Similarly, umbrella insurance acts as a safeguard, protecting your financial well-being and ensuring that the wealth you've worked so hard to build remains secure.

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Think of umbrella insurance like the extra padding you might wear during a high-intensity workout. Just as that padding provides added protection against unexpected injuries, umbrella insurance provides an additional layer of financial protection beyond the limits of your standard auto, property, and liability insurance policies. For those with substantial assets, especially if you have over $1 million in assets (and considering inflation, aiming for coverage around $1.5 million is even more prudent), this type of policy is not just beneficial but essential in our increasingly litigious society.

Let’s dive deeper into why umbrella insurance is a crucial part of financial planning for health professionals.

Coverage Limits vs. Potential Risks

Imagine you’re treating a patient with a seemingly minor injury, only to discover that the underlying issue is much more severe. Standard auto and property insurance policies work similarly; they come with coverage limits that can quickly be exhausted in the event of a severe accident. For example, if you’re involved in a multi-car collision with significant property damage, the Illinois state-required minimum coverage for property damage of $20,000 might barely scratch the surface of the actual costs. This is where an umbrella policy steps in, covering the excess and protecting you from having to dip into your personal savings or sell off assets to cover the remaining expenses.

Protection Against Lawsuits

In your career, you might have seen how a small misstep can lead to significant consequences. The same applies to financial liabilities. If your standard insurance policy’s limits are exceeded, you become vulnerable to personal lawsuits. For instance, if an accident results in damages that surpass your coverage limits, you could be held responsible for the remaining costs, which might include hefty medical bills, vehicle replacement costs, and legal fees. Umbrella insurance ensures that these additional costs don’t come out of your pocket.

Cost-Effectiveness

Despite its comprehensive coverage, umbrella insurance is surprisingly affordable. Think of it as investing in a premium pair of running shoes: the upfront cost is minimal compared to the comfort, support, and injury prevention they provide. With premiums as low as $300 annually for a $2 million policy, the peace of mind and financial security umbrella insurance offers are well worth the investment.

Adaptability to Changing Circumstances

As a health professional, you know that the body’s needs change over time, and what worked for your patients a decade ago might not be sufficient today. Similarly, as your circumstances evolve and your assets grow, it’s crucial to reassess your insurance needs regularly. What might have been adequate coverage in the past could fall short due to inflation, increased asset values, or changes in the legal landscape. Umbrella insurance provides the flexibility to adjust your coverage limits accordingly, ensuring you remain protected against unforeseen liabilities.

Comprehensive Risk Management

Incorporating umbrella insurance into your financial planning is like having a comprehensive treatment plan for a patient. It’s not just about addressing immediate concerns but also about safeguarding long-term well-being. For high net worth individuals, umbrella insurance not only protects personal assets but also shields future earnings and helps preserve long-term financial goals. Whether you’re facing liability claims from accidents, property damage, or legal disputes, umbrella insurance offers a crucial layer of defense.

A Practical Example

An umbrella insurance policy can be a lifesaver for a working-class family by providing additional liability coverage beyond their standard home and auto policies. For instance, if a family member is involved in a car accident that results in significant injuries to others, the costs might exceed their auto insurance limits. An umbrella policy would cover the excess amount, protecting the family from financial ruin and ensuring their assets and future earnings are safeguarded.

The Peace of Mind Factor

As someone who helps others achieve physical well-being, you understand the value of peace of mind. Umbrella insurance provides that same peace of mind in the financial realm. Knowing that you have an extra layer of protection allows you to focus on what you do best without constantly worrying about potential financial setbacks. It’s like knowing you have a trusted colleague who always has your back, ready to step in when things get tough.

Taking Action

So, how do you go about securing umbrella insurance? The process is straightforward. Start by assessing your current assets and potential liabilities. Speak with a financial planner or insurance agent who can help you determine the appropriate level of coverage based on your specific situation. Remember, the goal is to ensure that your coverage is comprehensive enough to protect all your assets and future earnings.

In conclusion, while retirement planning often focuses on aspects like long-term care and life insurance, neglecting the importance of umbrella insurance can leave high net worth individuals exposed to substantial financial risks. Just as you wouldn’t neglect a crucial part of a patient’s treatment plan, don’t overlook this vital component of your financial strategy. Umbrella insurance extends your coverage beyond the limits of standard policies and shields you against lawsuits, making it an indispensable part of a robust financial plan. By investing in adequate umbrella coverage, you can protect your assets, mitigate potential liabilities, and secure your financial well-being for the future.

In the world of financial planning, think of umbrella insurance as your financial safety net. It’s there to catch you when unexpected events threaten your financial stability, allowing you to focus on living your life and pursuing your passions with confidence. Just as you advise your patients to take preventive measures for their health, take this step to safeguard your financial health by consulting with a financial advisor like the financial professionals of Outside The Box Financial Planning. Your future self will thank you.

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Partnering with Outside The Box Financial Planning (OTBFP) offers numerous benefits for individuals seeking college planning, retirement planning, small business support, wealth management, and beyond.  As a fee-only fiduciary with a comprehensive approach, unbiased advice,  and transparent fee structure, OTBFP acts as a trusted advisor who prioritizes your best interests. Click here to schedule a complimentary “Fit” meeting to determine if we would make a good mutual fit.

Remember, financial decisions have long-lasting implications, and working with a professional like the financial professionals of Outside The Box Financial Planning can provide the expertise and guidance necessary to make informed choices that align with your financial aspirations.