Investing - Retirement Money Tips

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(2026-05-29 revised) 

Health Savings Accounts are a great deal (only allowed if you have a high deductible health plan). You put money in, tax exempt, let it grow (optional), then pay for healthcare  and Medicare premiums (not Medigap premiums or other health insurance) without ever paying taxes on it. BUT you cannot add any money to it if you are on Medicare. But you can still use the HSA until it runs out. So max it out before you go on Medicare (there are yearly contribution limits). I missed out on using this to full advantage - you must start on it far in advance of going on Medicare.

After listening to much retirement advice, I have moved my retirement investment thinking toward income instead of total return (income plus asset growth). Note that total return is still important because that helps dividend stocks keep up with inflation.

I moved a lot of my assets into SCHD and VYM. These are high dividend index stock ETFs. Corporate dividends are, in general, qualified so long term capital gains rate taxes. The dividends will be tied to corporate profits, which are tied to the economy. If you buy and hold, in general, you will keep getting dividends regardless of the stock price. And you should get dividend growth as the economy and inflation grow.

The best 40/60 (stock/bond) fund for income appears to me to be VWINX (or VWIAX if you can get it - Admiral shares). The stocks are from the same index that VYM uses.

SCHD, VYM, VWINX are down 8-10% for the year (July 2022). Disappointing, but much better than the major indexes. And these are buy, hold, and take the dividend funds, so not much point in worrying about asset price fluctuations.

US Treasury inflation adjusted bonds (I Bonds) look like a very good deal. There is a $10,000 per year limit on purchase. You buy them via www.treasurydirect.gov. But the website reviews are so terrible that I'm afraid to invest in them. The reviews suggest lost accounts and multiple hour phone wait time when trying to address account problems. But that might change.

BUT (2022-07-28) - at some point you may find that with Social Security, IRA required minimum distributions, maybe a pension, that you need an investment for a taxable account that does not add to your taxes. I think that what is best for this is a growth ETF. These two look good - MGK and VUG. They are Vanguard index growth funds for huge and large corporations. They have dividends about half the dividends of an S&P 500 ETF. As the investment grows, you will not pay much in taxes. But the percent cost basis keeps shrinking, so when you sell, you will pay. If you never sell, your heirs will get a free cost basis step up! (That's under current tax law.)

There are a number of reasons to start Social Security payments early (at least age 62) or late (not past age 70) -

• You need money now.
• If you live past about age 85 you will get more money by delaying.
• You will get more money by taking it before the Social Security trust fund runs out (2035?).
• By delaying you get some low income years that are useful for moving TIRA assets to a Roth IRA.
• Take the money now while you are in good health and can use it effectively.
• (2026-04-22) If you don't need the money now, take it and invest it. The dividends could be better than Social Security's inflation adjustment. 
• And one more that I haven't heard, but I think is important. Unlike typical pension or annuity payments or bond interest, Social Security income is inflation adjusted. And the increase is a percentage of the payment, so higher payments give higher dollar adjustments. Delay your Social Security payments for as long as you can to take advantage of this.

Convert your TIRA (pre-tax money) to a Roth IRA (tax-free money) in steps that keep your taxes manageable. Do this while you can control your income tax - before you start Social Security payments (age 62-70), before you start TIRA required minimum distributions (currently age 73). Do it during stock market dips so that you pay less income tax on the transfer. Do it in chunks that keep you in a low tax bracket - transfers are taxed as ordinary income. Do it by TIRA to Roth transfer within a brokerage so that you don't accidentally break a transfer rule. You can transfer assets in kind so that you are never out of the market and there will be no buy or sell fees. Roth transfers do NOT count toward required minimum distributions.