TODAY ON REASONED REFLECTIONS:

• Personal finance articles 💰;

• My preferred budgeting app;

• Options after maxing out Roth IRA;

• Quote of the Reflection.

Personal Finance Articles 💰

Time for a bit of R&R

• Don’t rely solely on Social Security and Medicare in retirement

  My Take - Social Security and Medicare are important during your retirement years, but they can’t be your only plan for retirement. Who knows what those benefits will even look like when you do get to retirement! 

• Tips on earning passive income

  My Take - This is a good article if you are looking for tips on earning passive income. I think the best tip is about constantly learning—you’ve got to be able to adapt and learn if you are running your own business. 

• Average retirement balance in each state

  My Take - The numbers seem low to me; however, I suppose there are some outliers on the low end (and the high end too). I would be interested to see what the median retirement numbers look like for each state. 

• How much cash should you have on hand? 

  My Take - Cash is king (or queen)! I think the amount of cash you keep on hand in retirement is unique to each retiree, but these tips are good to think about when determining how much cash you keep on the sidelines. 

• Beware of these financial mistakes

  My Take - Moral of the story: live below your means. I still think there is value in enjoying the present, so get that coffee if you want to enjoy a treat from Starbucks. Just don’t over do it. 

My Preferred Budgeting App

I’ve tried many budgeting apps. The one I prefer the most is EveryDollar from Dave Ramsey. EveryDollar forces you to assign every single dollar a specific job each month – whether that's paying bills, paying down debt, or investing – which reduces mindless spending and creates intentional conscious spending. The free version of the app requires manual transaction entry, but the paid version offers bank syncing that makes tracking expenses even easier. If you're looking for a new budgeting app to transform your relationship with money and gain real control over your spending, EveryDollar is the tool that can help you make that happen.

Reflection No. 10: What To Do After Maxing Out Your Roth IRA

I - Issue: What should I do after maxing out my Roth IRA?

R - Rule: Once you’ve reached the annual contribution limit for your Roth IRA, you can explore other tax-advantaged accounts like a 401(k), a Health Savings Account (HSA), or taxable brokerage accounts. Each option offers unique benefits, depending on your financial goals and tax considerations. Diversifying your investments and savings strategies beyond the Roth IRA ensures continued growth and flexibility in your financial plan.

A - Analysis: Maxing out your Roth IRA contributions is an excellent first step toward securing your retirement, but once you’ve hit the limit—$7,000 in 2024 (or $8,000 if you’re over 50)—you might wonder where to turn next. Fortunately, several other avenues exist to grow your wealth while taking advantage of tax efficiencies.

First, if your employer offers a 401(k), this should be your top consideration. You can contribute up to $23,000 in 2024 (more if you’re over 50—just like the Roth IRA). A 401(k) often—but not always—comes with employer matching contributions. We all love free money, right?! Plus, contributions to a traditional 401(k) are are made pre-tax which lowers your taxable income for the current tax year. You may also want to consider contributing to a Roth 401(k) if your employer offers it, as this works similarly to a Roth IRA by allowing your contributions to grow tax-free. Any employer contributions, however, will be made to your traditional 401(k) regardless of whether your contributions are to your traditional or Roth account.

Second, another great option is an HSA, especially if you have a high-deductible health plan (HDHP). HSAs offer a triple tax advantage:

• Contributions are tax-deductible.

• Growth is tax-free.

• Withdrawals for qualified medical expenses are tax-free.

In 2024, individuals can contribute up to $4,150, and families can contribute up to $8,300. Even if you don’t use the funds for medical expenses right away, you can let your HSA grow and even invest it and turn the account into a supplemental retirement account for healthcare costs in your later years.

Third, a taxable brokerage account is another great option if you’ve maxed out your Roth IRA and 401(k) or are not eligible for an HSA. While you won’t get the tax advantages of retirement accounts, a brokerage account offers the most flexibility. You can withdraw money whenever you need it, and there are no required minimum distributions (RMDs) to worry about in your retirement years, which can be a key advantage for early retirees or those aiming for financial independence.

Finally, consider using additional funds to bolster other financial goals, such as paying off high-interest debt, building an emergency fund, or investing in real estate or other alternative assets. Monetary growth isn’t just about retirement—it’s also about reducing risk and increasing financial security across all aspects of life. By paying down debt, you’ll free up more of your income in the long run, allowing you to save and invest even more in the future.

C - Conclusion: After maxing out your Roth IRA, consider maxing out your 401(k) or contributing to a health savings account or taxable brokerage account. By diversifying your savings strategies, you can continue growing your wealth while optimizing your taxes.

Time to Reflect…

After hitting the contribution limit on your Roth IRA, remember that your wealth-building journey is far from over. By exploring 401(k) options, HSAs, and taxable brokerage accounts, you can find new ways to keep your financial plan dynamic and tax-efficient. Each account type has unique benefits, so tailor your approach based on your financial goals and needs. Whether you’re focused on retirement, building a safety net, or preparing for early financial freedom, diversifying your investment strategy beyond your Roth IRA sets you up for continued growth and flexibility in the years ahead.

Quote of the Reflection

Thanks for reading! That’s all for today, but if you enjoyed this Reflection, the best thing you can do for me is to share it with those in your network. Referrals are the sincerest form of flattery 😀 

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