Another Great Retirement Savings Vehicle

When we speak to clients about retirement there are two common themes, will I have enough saved and what impact would medical expenses play on my results.  In an effort to increase savings for retirement and mitigate some portion of future medical expenses we are encouraging clients to look into the Health Savings Accounts (HSA).


The HSA provides four benefits:

1. Contributions to the account are tax-deductible

2. It allows you to save money completely tax-free

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2015 ended the year much like 2014 in the equity markets in many ways.  While the returns of major market indices were very different from 2014, the results of a globally diversified investor felt similar. Disappointing returns of globally diversified investors relative to the S&P 500 Index feel all too common place in these markets.  However, we believe that now is not the time to abandon diversification and that the last few years have been anomalies rather than a new normal.


The chart above focuses in on the last three years where the S&P 500 has outperformed almost all other asset classes.  However, when we look back at longer periods of time we see that this is not normally the case.  There have been many opportunities over the past 15 years to add value to investor returns through global and multi asset class allocation mandates.  While it is difficult to accurately predict that this trend will not continue into 2016 given the last few years, we do have a few points to make against it.

Following the 2008 financial crisis the US began multiple iterations of quantitative easing programs in which the Federal Reserve promoted expansionary monetary policy through the use of zero interest rate policy and government bond purchase programs.  The rest of the world did not follow suit until more recently with the Bank of Japan and European Central Bank (ECB) developing their own in early 2015. The US Federal Reserve actions prompted a currency shift that has led to a flow of assets into the US and dollar-denominated assets.  This flow propped up the higher quality and more liquid US assets (Treasuries, Large Cap US Stocks, and Real Estate).

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Planning Through Your Employee Benefits

Free gourmet food and snacks that never-end, complimentary on-site gym memberships, and free on-site daycares are just a few perks that employees at Google get to enjoy. Now not all of us have these types of perks offered to us, but many employers do offer other benefits packages to attract and retain top talent. The problem is that many employees don’t take full advantage or understand their options. This makes understanding your benefits and their effect on your personal finances especially important.


The benefits listed above are all considered fringe benefits under IRS regulation and may be considered taxable to you. On the other side of the coin there are particular benefits that are tax qualified or tax exempt. The following list covers a few important benefits that your employer may offer and provides some info on how each perk can affect you:


Group Medical Insurance

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Tax-Free Retirement Savings with a Roth IRA

One of the best retirement tools available today is the Roth IRA. The Roth IRA allows you to make contributions in after-tax dollars with no income tax on growth or distributions in the future. However, like most qualified retirement vehicles, there are income limits that prohibit high income earners from contributing. The income limits on contributions range from $116,000 to $131,000 for single filers and $183,000 to $193,000 for people who are married filing jointly (for 2015). If you are above these amounts you are not eligible to make a contribution.

In 2014 the IRS provided an opportunity for individuals who would otherwise be ineligible for a Roth IRA contribution, to utilize after-tax contributions to their 401(k) plans as a way to contribute to a Roth IRA. The IRS clarified how pre-tax and after-tax balances in an employer’s 401(k) or other retirement plan can be allocated to traditional and Roth IRAs. The benefit, is that a taxpayer can roll just his or her after-tax plan assets to a Roth IRA tax free, and roll the pre-tax assets, including the earnings on the after-tax monies to a traditional IRA. This became effective on January 1, 2015.

Each 401(k) plan is different and must allow for after-tax contributions. For 2015, the maximum contribution to a 401(k) plan is $53,000 plus the $6,000 catch up. This includes all contributions from the employee, matching contributions from your employer and any after-tax contributions. Assuming an employee contributes the maximum on a pre-tax or Roth basis of $18,000 and then receives an employer match of $7,200, there is an additional $27,800 that can be contributed to the plan on an after-tax basis. You can immediately rollover this amount to a Roth IRA using an in service distribution.

We reached out to our 401(k) plan administrator and although plan sponsors have called about this option not many have implemented it. At Heller Wealth, we have revised our 401(k) plan to allow for after-tax contributions because we see this as a significant opportunity. We recommend that you reach out to your HR department or 401(k) provider to see if this option is available. If the option is part of your plan, we recommend you consider utilizing this strategy to boost your retirement savings. 

Don Hertling is the Vice President of Financial Planning for Heller Wealth Advisors. If you would like to discuss Roth IRA opportunities, please contact Don at  This email address is being protected from spambots. You need JavaScript enabled to view it. .

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The Emerging Markets Dry Spell Continues - but is there a light at the end of the tunnel?

August was a particularly tough month across nearly all asset classes, as stocks were down anywhere from 6-10% for the month depending on which market you’re looking at. Past experience shows us that volatility and market draw-downs are relatively common, particularly if you parse performance on a month-to-month basis. The true test for long-term investors comes when there are bad multi-year periods. One specific asset class fits the bill on this one: the emerging markets.

Since coming off their highs in late 2007, the emerging markets have a total return of (-24.3%) through the end of August – that’s a (-3.5%) per year return for nearly the past 8 years. In the same period, the S&P 500 is up around 5.5% per year since the last cycle peaked. A few obvious questions come to mind when looking at this data:


1. Why would an investor allocate any money to emerging markets when they have been lagging for so long?

2. Why would a diversified investor continue to hold emerging markets during this type of environment?

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