For many couples, it’s brutally difficult to learn how to talk to your spouse about money without fighting – and it’s easy to see why.

Case in point: when I was researching my book, I came across a study conducted by University College London a few years ago that surveyed 15,000 men and women in Great Britain. Researchers found that people are seven times more likely to tell a stranger details about their sex life than they are to tell a stranger their salary.

In a lot of ways, money is the last remaining taboo in our society.

And when we look at the statistics on money and marriage, it shows. According to TD Bank, 40% of millennial couples argue about money at least once a week.

Money is an incredibly hard subject to talk about. And at the same time, we all know that communication is one of the keys to a strong marriage. (If you haven’t heard that communication is one of the keys to a strong marriage, I can’t help you.)

Unfortunately, a lot of the guidance I see from other sources about how to talk to your spouse about money without fighting leaves a lot to be desired. Most of the advice I hear other financial professionals give couples on the topic usually doesn’t go any deeper than platitudes like “you should try to compromise” (shocker), “adopt a team mindset” (useful… not), or “be transparent” (no kidding).

Today, we’re going to go a little deeper and discuss some specific tips on how to set up your financial conversations for success, some specific communication patterns to focus on, and how to structure financial conversations to decrease money fights.

(If you’d prefer to listen to this article, you can get a podcast version of this post here: Money and Marriage Podcast Episode 132 – How To Talk To Your Spouse About Money Without Fighting)

Set the Stage For Success

Back in college, I took a public speaking class. As you might imagine, most of our assignments involved standing up in front of the class and giving speeches every few weeks.

Sometimes, the professor gave us the topic in advance so we could prepare and bring notes. Other times, she would ask us to stand up and give an impromptu talk about a random subject she chose on the spot.

As you might imagine, the prepared speeches were much clearer and more effective than the improvised ones.

Money conversations in your marriage work the same way. If you’re struggling to figure out how to talk to your spouse about money without fighting, doing a little prep work can go a long way toward making the conversations much smoother.

Here are a few specific tips for how to set the stage for your conversations to give you the best possible chance of having a productive conversation with a positive outcome.

Be Proactive – nobody likes talking about money. (Well, almost nobody – yours truly might be the exception to the rule, but that’s what you’d expect from a financial planner!)

Since money is such a tough subject to talk about, most of us put off dealing with financial conversations until we reach a tipping point. And when you’re past the tipping point, it can be much more difficult to have money conversations with your spouse without arguing.

Don’t save your financial conversations for times of crisis. Be proactive with your money talks so that you are regularly checking in with each other. I usually suggest having money conversations about once a month.

By anticipating issues in advance and starting financial conversations before you reach the tipping point, it can be much easier to keep the tone positive.

Choose the Right Time – If you ask or tell me anything after 9:30 PM, the odds of me actually retaining the conversation the next day are very low. I usually have a lot of evening client meetings, so by the time 9:30 comes around, I’m mentally fried for the day.

If you try to have a serious conversation with me at that time, it’s likely to go nowhere. Something I’d normally be amenable to during the day might be a complete nonstarter if you ask me in the evening.

The same is likely true with your partner—and it’s especially true about money.

Find an appropriate time to ask your spouse to sit down and go through your family’s financial plan.

Even better: don’t spring the conversation on them out of the blue; instead, ask them to put some time on their calendar in the next week to start the discussion at a time they agree to.

What’s the Desired Outcome of the Conversation? Begin with the end in mind. One of the best ways to learn how to talk to your spouse about money without fighting is to go into the conversation with a clear goal in mind.

What are you hoping to achieve in your money conversation? Are you looking to cover a lot of ground, or resolve one specific issue?

By answering these questions in advance, you can tailor the conversation to focus on the most important issues at hand. Even better, you can anticipate some guardrails to put on the conversation to prevent yourselves from going too far off topic. Taking these steps greatly reduces the odds of money fights.

Specific Communication Patterns for How to Talk To Your Spouse About Money Without Fighting

Communication issues around money aren’t always a quick fix. But by intentionally focusing on the right communication strategies, you might be surprised how quickly things can start turning around.

Here are a few specific strategies to consider when you talk to your partner about finances (or anything else):

Beware the Four Horsemen – Don’t read the apocalyptic-sounding name and shrug this off as hyperbole. (episode 12)

The “Four Horsemen of the Apocalypse,” in our context, doesn’t refer to the biblical end times. Rather, it’s a framework developed by relationship expert Dr. John Gottman.

I did a deep dive into the Four Horsemen framework back in episode 12 of the Money and Marriage Podcast, and it’s still one of the most popular episodes I’ve ever recorded.

To give you an overview of the framework: In his research, Dr. Gottman found that he could predict whether a marriage would end in divorce or not 90% percent of the time by observing the presence of one of these four communication styles, which he dubbed “The Four Horsemen.”

The four horsemen are:

• Criticism: Attacking your partner’s personality or character rather than the problem you are trying to solve.
• Defensiveness: Often the response to criticism, defensiveness involves deflecting blame and avoiding responsibility for the problem.
• Contempt: Often referred to as the most dangerous of the Four Horsemen to your relationship, contempt involves attacking your partner and placing yourself in a position of moral superiority. To treat your partner with contempt is to treat them with disrespect and meanness, either through what you say verbally or through your body language (eye rolls, etc.).
• Stonewalling: Much like defensiveness is often the response to criticism, stonewalling is often the response to contempt. When you stonewall your partner, you withdraw from the conversation and stop engaging with your partner as a defense mechanism.

These are not strictly financial in nature. Rather, each of these four communication patterns should be a warning sign whenever they come up in your relationship – whether it be about finances or not.

If the Four Horsemen are something you’re struggling with, addressing this isn’t just important for how to talk to your spouse about money without fighting, it’s important for your relationship as a whole. Focus your attention here first.

Other Helpful Reminders – I mentioned at the beginning of this post that I find that a lot of the content available for couples on how to talk to your spouse about money without fighting doesn’t go as deep as I would like it to.

And while that is true, it doesn’t mean that some of the commonly-cited advice is incorrect. So, to quickly lay out a few common communication best practices for your marriage, you should seek to:

• Use “I Statements” – When you’re communicating about a sensitive topic like money, try to start your statements with phrases like “I think”, “I feel,” and so on. Doing so helps you to make your point based on expressing your perspective rather than focusing on your partner’s shortcomings. Starting conversations this way tends to decrease confrontation in conversations. This isn’t high school English class where your teacher will cross out the words “I feel” at the beginning of the sentence telling you that adding the phrase doesn’t help you make your point. Focusing on making “I statements” can actually be very beneficial in this context.
• Active listening – When your spouse is speaking, make sure you hear what they are saying. Fully concentrate on your spouse when they are articulating their position, and make sure that your body language shows that you are paying attention. When in doubt, paraphrase what your spouse said after they are done speaking to make sure you heard them correctly.

Above all, I encourage you to talk to your spouse with the goal of understanding their perspective. Understanding something in more detail before trying to find a resolution to a tough decision is never a bad idea. Focus your conversations about money with your spouse on first trying to understand their perspective.

Doing so will help you lay the groundwork for an effective financial conversation.

How to Structure The Conversation

Think about this last section as a toolbox. I’ve listed several different “tools” you can employ to help you structure your financial conversations. Depending on your specific situation, you may need to use one, two, or all of these tools. Pick and choose what is most relevant to your family in the moment.

When in Doubt, Start with the Future – What do you want your lives to look like ten, twenty, thirty years from now?

Usually, I find that couples have (mostly) the same answers to this question. We tend to want most of the same things out of life as our partner – it’s one of the reasons we got married in the first place!

You might have disagreements on the state of our finances today – or we might have financial baggage we need to unpack from our past – but you probably want most of the same things out of your life as your partner in the long run.

Once you’ve gotten clear on what this long-term vision of your lives should be, you can reverse engineer the clearest path to get there from where you are today. Usually, this is a much better way to approach financial decisions than starting with the present.

I like to compare financial conversations with your spouse to driving a car. Most couples approach money talks by primarily looking backward at what’s happened in the past (looking in the rearview mirror of the car) or dwelling on what’s happening financially today (the data on the dashboard, or other things happening inside the car.)

The rearview mirror and dashboard are important. There’s a reason that cars have them. They give you critical information about what’s happening on your journey. (And this is especially true if you and/or your spouse have financial trauma in your past. There is a lot of value in looking backward to work through these things!)

But if you spend too much time looking out the rearview mirror or at the dashboard rather than focusing most of your attention on the road ahead of you, you’re asking for trouble.

The more you can look at the road ahead of you and focus on your destination, the better.

By starting financial conversations with the future vision for your lives, you are setting you and your spouse up for success in the conversation. If you need help getting the conversation started, I encourage you to schedule a free breakthrough session with me.

Agree on the Scope of the Conversation – If you’ve followed the suggestions in this article, you’ve spent some time thinking through your desired outcome for the conversation in advance. But remember – your spouse gets a vote, too.

At the beginning of the conversation, ask them, “What are you hoping to get out of this conversation?”

Listen to what they have to say, share your perspective, and agree on the scope from the beginning. Doing so can help you both the right boundaries in place in the conversation. Not only will this help to prevent the conversation from going off the rails, it makes it more likely that the conversation will result in a positive outcome.

Set Ground Rules – Don’t go too overboard with this, but it’s a good idea to set some ground rules for your money conversations in advance.

My favorite ground rule for couples when they discuss money is to always approach financial conversations with a “no shame, no blame” attitude.

We’ve all made mistakes with money in the past. We’ve all felt anxious or guilty or stressed about the state of our finances. Be careful about letting the tone of your money conversations trigger these emotions in your spouse.

Focus on what you want your money to do for you in the future. The degree to which your family can adapt a culture of not focusing on shame or blame in money conversations can be a key factor in stopping money fights.

One note – adopting a “no shame, no blame” attitude in money conversations does not mean that you should suppress feelings of anxiety, stress, or guilt about your money. It’s OK to acknowledge these feelings as they arise and work through them together as you chart your path forward. What you shouldn’t do, though, is frame the conversation in a way to make your spouse feel shamed or blamed about the state of your family’s finances, and vice versa.

When in Doubt, Start Small – I find that most couples tend to adopt an all-or-nothing approach to discussing finances.

Either they aren’t talking about money at all, or they try to solve all of their biggest financial problems all at once.

One key way to learn how to talk to your spouse about money without fighting is to recognize when it might make sense to start small.

If you’re struggling to get on the same page with big financial decisions, try narrowing your scope and working on a smaller goal, first.

It can feel counterintuitive to make faster financial progress by focusing on smaller goals, as I discussed in this previous episode of The Money and Marriage Podcast. But I’ve seen tons of couples start to make faster financial progress after focusing on smaller goals first, because the momentum they generate from getting quick wins under their belts tends to give them some momentum.

If you find yourselves wanting to butt heads about money whenever you talk about it, try starting small. Reduce the scope of what you’re talking about at first. Once you get a few quick wins, it’s often easier to have the tougher, bigger follow-up discussions.

Don’t be Afraid to Hit the Pause Button – If one or both of you get to the point in your financial conversations where you’re feeling tired, or you can feel tensions start to escalate, don’t be afraid to pause.

Take a break, step away for as long as you need to, and then resume the conversation. Taking breaks when you need them can be a very important way to de-escalate tough conversations.

Note: there’s a difference between hitting the pause button and hitting the stop button. Don’t shut down difficult money conversations indefinitely.

But there’s nothing wrong with taking a break when you need one.

Follow A Process – Don’t just wing it. Your financial conversations should follow a proven process that focuses on the most important things that will give you the best possible chance of having a productive money conversation.

I share my favorite financial “date night” agenda in chapter 15 of my book, Marriage-Centered Money: Get on the Same Financial Page and Achieve Your Life Goals Together. I encourage you to check out the book and grab your copy for 50% off the listed Amazon price.

It can be challenging to learn how to talk to your spouse about money without fighting… but there are plenty of steps you can take to improve the tenor of your financial conversations in your family.

I encourage you to pick one or two ideas from this article and implement them in your next money conversation. And if you need help, please feel free to reach out and schedule a free breakthrough session.

Data and statistics are the bedrock of any good financial plan. 

I’ve always been a math nerd at heart – it’s why I became a financial planner in the first place. But as the years have gone by, I’ve seen time and time again that data and statistics only get you so far. It can be easy to get so bogged down with data and spreadsheets that you lose sight of the most important pieces of your financial plan – or even use data to draw the wrong conclusions.

Some of the ways that the media, academics, and financial planners talk about money and marriage statistics are really good. Surveys and statistics can highlight really important issues and call peoples’ attention to warning signs before they become a huge problem.

 But in the world of clickbait journalism, Instagram Reels, and sound-byte media, I often see statistics about money and marriage problems used in misleading ways or, more commonly, shared without highlighting important nuances. These sorts of omissions can cause people to draw the wrong conclusions and make financial mistakes… which often make the underlying problems worse.

 Below, I highlight four of the most common financial questions and issues that couples face and reference several statistics and academic research findings that I often see cited in each of these areas.

Unfortunately, I often see people draw false or incomplete conclusions from these data points. As a Certified Financial Planner™ and Certified Financial Therapist-I™ Practitioner who specializes in helping couples get on the same financial page, my hope is that by adding some context based on what I’ve seen work for hundreds of couples, you and your spouse will be able to avoid common missteps.

(If you’d prefer to listen to this article, you can get a podcast version of this post here: Money and Marriage Podcast Episode 129 – Money and Marriage Problems: What the Statistics Don’t Tell You)

Combining Bank Accounts Leads to Better Marriages?

For the past several decades, guidance for couples on whether they should combine their bank accounts after they get married has been muddled, at best. You can find money gurus out there who will tell you that you always need to combine 100% of your finances after you get married, and you can find equally respected gurus who will tell you never to combine any of your money with your spouse.

Which is why this Indiana University study published in 2023 caught my eye.

They studied hundreds of couples over a two-year period, and told half of them they needed to combine all of their bank accounts, and the other half that they couldn’t combine any accounts.

At the end of the two-year period, they found that the couples who combined bank accounts had stronger marriages, fewer money fights, and more confidence in their financial situation than couples who didn’t combine.

What’s even more striking is that they found that this relationship was causal – the act of combining accounts caused couples to be happier and more successful.

When this research was published, the common consensus in the financial media was the obvious one: couples should clearly combine all of their accounts, since doing so strengthens marriages.

What’s the problem with this conclusion?

It ignores one key component of the study: every couple who participated in the study was willing to be told that they needed to combine accounts… and were willing to do what they were told.

In the real world, this isn’t always the case. And if you try to compel someone to combine accounts who has concerns about doing so without addressing these underlying concerns… this isn’t a recipe for success.

When I coach couples through the decision to combine or not combine their accounts in my marriage-centered financial planning process, I always start by trying to understand the reasons why someone might not be interested or willing to combine accounts. Once we explore these reasons, we can pick the account structure for you based on your specific tendencies as a couple.

This almost always involves combining some accounts. But at the end of the day, it’s more important to address the underlying concerns related to this decision and to make sure you’re working together financially. If you’d like help with having these conversations, I encourage you to schedule a free breakthrough session with me.

Marriages aren’t defined by whether your Bank of America account has one or two peoples’ names on it – they’re defined by how you communicate about tough and important topics like money.

The Impact of Debt on Marriages

It probably comes as no surprise that debt is arguably the most common source of financial disunity within marriages based on the hundreds of couples I’ve talked to over the years. And the statistics back this up.

A 2023 survey by Suntrust Bank found that three in five Americans have considered postponing marriage to avoid inheriting a partner’s debt. And once you’re married, the data isn’t much better; the same survey found that 54% of people believe that having a partner in debt could be a reason for a divorce.

Having seen couples in a myriad of financial situations figure out how to handle debt as a family in a way that doesn’t lead to divorce, I can say that a) these statistics don’t surprise me, and b) I wish that they survey had asked a few follow-up questions to give the data a little more nuance.

In my experience, engaged and newlywed couples with debt – particularly if one spouse has most or all of the debt – focus too much on whose name the debt is in and who makes the payments on the debt, rather than the impact the debt will have on your future.

If your partner has a lot of debt, the “easy” answer in the short term is to say that your spouse’s debt is their own problem to deal with . . . but the problem is that their debt will have an impact on you. Even if you’re not the one paying down the debt yourself, your quality of life as a family will be impacted by your spouse making debt payments.

Maybe the impact is more in the short term – your spouse might not be able to cover “their share” of living expenses or go on vacation. In other cases, the impact is more long-term; if your spouse is struggling with debt for years, it is likely to impact your retirement goals.

If you have a healthy and otherwise happy relationship, this shouldn’t be a deal breaker (as long as your spouse is taking their debt seriously and making a good-faith effort to deal with it).

The faster you can come to terms with the idea that your spouse’s debt will impact you one way or the other, the easier it can be to find a solution for how to handle your debt that makes achieving your family’s goals as easy as possible.

The statistics show that debt has a hugely negative impact on marriages, and this is undeniably true in most cases. But, it doesn’t need to be – if you’re able to get on the same page with handling debt and implementing a plan together. If you want help getting this conversation started, you can book a free breakthrough session with me at any time.

Financial Infidelity: More Common Than You Might Expect

Usually, we use the word “infidelity” when discussing someone who cheats on their significant other, whether that be physically or emotionally. Financial infidelity doesn’t literally involve cheating, but it involves the same sense of secrecy.

Financial infidelity involves engaging in any financial behavior that is expected to be disapproved of by one’s romantic partner and intentionally failing to disclose this behavior to them.

The secrecy involved with financial infidelity can be incredibly detrimental to marriages in the long run – particularly if the issue isn’t corrected. And unfortunately, the data shows that financial infidelity is more common than you might expect.

A study conducted by researchers at the University of Southern Mississippi in 2018, subsequently published in the Journal of Financial Therapy, found that 27% of people admitted to keeping a financial secret from their partner, and 53% of people reported behaviors associated with financial infidelity.

Here’s the interesting thing about these two statistics: they indicate a certain degree of denial about being in financial infidelity.

To paraphrase the results, when survey respondents were given a list of acts of financial infidelity and asked if they had ever done one or more of them, 53% of people said “yes”. But when asked if they had actually committed financial infidelity, only 27% of people said yes.

Simply put, about half of the people who are engaging in acts of financial secrecy actually realize that it’s a problem. Financial infidelity has gotten more publicity over the past few years but I don’t see enough people highlighting this disparity.

It doesn’t help you to know that financial infidelity can lead to problems in your marriage if you don’t know how to identify whether you’re actually engaging in financial infidelity behaviors!

My biggest advice to help you discern whether these patterns are challenges in your own family: consider the degree to which secrecy plays a role. Periodically buying a lottery ticket or betting on a sports game isn’t necessarily a problem if it’s not an addiction and if everyone knows that it’s going on. But if you’re intentionally hiding gambling from your partner… that’s a different story.

Money Fights Are Common Sources of Marital Stress… But They Aren’t Inevitable

There are no shortage of data points that suggest that money can be a toxic factor in marriages:

• A TD Bank study in 2019 found that 40% of millennial couples argue about money at least once a week.
• The same TD Bank study found that 29% of divorced Baby Boomers and 41% of divorced Gen Xers ended their marriages due to financial disagreements.
• A study by Ally Bank in 2018 found that money was the topic that caused the most stress for couples.
• A landmark study in the Family Relationships Journal in 2012 found that financial disagreements are the number one indicator of a future divorce.

All of these statistics are true; money fights are common, pervasive, and harmful to marriages.

What drives me crazy about the way we talk about this, though, is that it can cause people to treat money as an inevitably bad thing for your marriage. And that simply isn’t true.

The data doesn’t lie – money is a huge source of stress, arguments, and disunion in marriages. But it doesn’t have to inevitably be this way.

It’s easy to look at the research about how money impacts marriages and start drawing false conclusions. “If money is something that so many couples fight about, maybe it’s best if we don’t talk about it at all.” “If managing money together causes couples to fight about money, maybe it’s easiest if we stick to what we know and keep our finances separate.”

Here’s the thing, though: the opposite is true, too.

Money can be a bad thing for your marriage if you don’t work on it together. But if you can learn how to get on the same financial page and manage money effectively with your partner, you won’t just have better financial outcomes (although you likely will have better financial outcomes!)

You’ll strengthen your marriage as well.

(My book, Marriage-Centered Money: Get on the Same Financial Page and Achieve Your Life Goals Together, gives you the step-by-step playbook to help you make this a reality! Use this link to buy the book for 50% off its listed Amazon price!)

Money Can Either Weaken or Strengthen Your Relationship. You Get to Choose Which. 

Every couple has their own unique money histories, perspectives, attitudes, and values. Data and research about best practices in the field of money and marriage can provide a helpful perspective to guide your financial decision-making as a couple… but it’s important to apply these data points in the correct context.

By implementing a financial game plan for your family that both considers key research and data and specifically tailors these best practices to your family’s situation, you are much, much more likely to use your money to create the lives you love – together.

And if you ever need help getting started, you can book a free breakthrough session with me to help you get on the same financial page.

What are the best strategies to use to save for retirement?  In this video and in the summary below, I respond to a few questions sent to me regarding the “right” ways to save for retirement.  Specifically, we discuss these three questions:

• Presuming that a 401(k) alone won’t be sufficient to fund your retirement, what are the “next best” places to put your retirement money?
• Pre-tax vs. Roth retirement accounts- what’s the best option to choose?
• How much do you really need to save for retirement?

(Bill’s Note: The video below was originally recorded as a Facebook Live broadcast on November 26, 2018.)

The Three Tiers of Retirement Savings

Not all retirement savings accounts are created equal.  If your goal is to save aggressively for retirement, you’ll likely need to make some decisions about where you should be putting your money for retirement. 

I like to think about retirement savings accounts in the context of three different “tiers” that you should contribute to, in the following order:

Tier 1: Employer-Sponsored Retirement Accounts

If you have access to a retirement plan through your work, this should almost always be your first priority to save for retirement.  Typically, these accounts are structured as 401(k) accounts (for private sector workers), 403(b) accounts (for non-profit and education workers), or 457 accounts (for government employees).

If you don’t have access to a 401(k), 403(b), or 457 account through your work, you should skip to Tier 2, with one caveat.  If you are self-employed, there are a myriad of other retirement account options you could set up.  We’ll discuss these in more detail another day.

Assuming you do have a 401(k) or similar account at your job, there are several things you should consider:

• If your employer matches your contributions, you should, at a minimum, contribute enough to receive the full match.  This is the closest thing to “free money” that you’ll ever get, so take advantage of it!
• One of my favorite strategies to help people find ways to save more for retirement is to increase your 401(k) contributions by 1% every time you get a raise at work. You won’t notice the money you’re “missing” from your paycheck, since your paycheck is going up, anyway!  But you’d be surprised how big an effect thee gradual changes can have.  By the time I left my corporate job at PwC before starting my own business, I was contributing 12% of my paycheck to my 401(k), simply by following this strategy.
• Most employer-sponsored retirement accounts are pre-tax accounts.  In other words, you don’t pay income tax on the money you contribute to these accounts (and in return, the money will be taxed when you withdraw funds from these accounts during retirement).  But “Roth-style” 401(k) plans have become increasingly common in recent years, which work the exact opposite way- you pay income taxes on your contributions today, but can withdraw the money tax free in retirement. If you have access to a Roth 401(k), you should seriously consider utilizing it.  More on Roth accounts in a bit.
• Finally, make sure you know the maximum contribution you’re allowed to make to your retirement accounts every year.  For 2019, the max you can contribute is $19,000 per year (assuming you’re under the age of 50).  Typically, the IRS raises this limit each year (it was $18,500 in 2018, for example.)

But, as the three questions at the beginning of this post strongly implied, 401(k) savings alone typically aren’t sufficient to completely fund your retirement.  So, after setting up your 401(k) contributions, what should your next step be?

Tier 2: Individual Tax-Advantaged Accounts

As you have probably noticed, a key component of optimal retirement savings strategies includes managing taxes on your investments and retirement income.  As a result, you should always look for tax advantages in your retirement savings strategies, whether they’re traditional accounts (no taxes now, but you pay taxes during retirement) or Roth accounts (pay income taxes now, grow and withdraw the funds tax free in retirement). 

There are several different options available to you in Tier 2.  And my favorite one might surprise you.

Health Savings Accounts (HSAs)

Outside of a 401(k)/403(b)/457, HSAs are my absolute favorite way to save for retirement.

Why?  Because HSAs are essentially the last complete tax shelter that exists in America.

When choosing between a Traditional or Roth IRA, you pay taxes on your contributions at some point; whether it’s today or during retirement, your money gets taxed eventually.

But as long as you use the funds in your HSA for qualifying medical expenses, the money you contribute and invest in an HSA is never taxed.  Presuming your HSA account allows you to invest the money in your account, this can be an incredible savings vehicle for retirement.

This probably isn’t a shocker for you, but one of the primary challenges in preparing for retirement is making sure you have enough cash on hand to support your medical bills as you get older. With the rising cost of medical care, using an HSA to save for these retirement expenses is an incredibly efficient way to prepare for this.

Of course, there are a few qualifiers here:

• You’re only eligible to open and fund an HSA if you have a high-deductible health plan. And if you do, you need to make sure you have a sufficient emergency fund to meet your deductible if you want to use your HSA for long-term investing.
• The maximum contributions you can make to an HSA are relatively low.

HSAs are commonly overlooked as a retirement savings vehicle… but they really shouldn’t be.

NOTE: HSAs and Flexible Spending Accounts (FSAs) are not the same thing.  You should not be using FSAs to save for retirement, because you need to use the money in FSAs each year or it goes away.  Conversely, you are allowed to accumulate money in an HSA.

Traditional/ Roth IRAs

In 2019, you can contribute $6,000 to either a traditional or Roth IRA (up from $5,500 in 2018). Although, it’s worth noting that you have until April 15, 2019 to make that $5,500 contribution to your IRA for the 2018 tax year!

There are several questions you need to answer to determine which is the right type of account to use. Here’s how to decide which one to contribute to:

Can you deduct a traditional IRA contribution?  We’ve already established that “traditional” retirement accounts allow you to deduct your contributions from your taxable income this year.  But here’s the catch: if you have a 401(k) or similar account at work, you likely can’t deduct your IRA contribution on top of that.  The rules are somewhat complicated, and you should seek professional advice to verify your ability to deduct your IRA contributions.  But, this should be the first question you answer before making your decision.

Are you eligible to contribute to a Roth IRA? “Making too much money” is generally a good problem to have.  But, it can make you ineligible to directly contribute to a Roth IRA.  The table below shows the income restrictions on making direct Roth IRA contributions. 

Two caveats about this:

1. These income restrictions do not apply to Roth 401(k) plans.  So, if your employer offers one, it is worth considering regardless of your income levels.
2. You technically can still get money into a Roth IRA utilizing a Roth IRA conversion strategy. This is a very complicated process and it’s important to make sure you do it the proper way to avoid trouble with the IRS, so you should seek professional help before attempting this on your own.

When will your tax rate be higher: now, or during retirement?  This is the fundamental driver of the Traditional-or-Roth IRA decision.  Simply put, you want to pay taxes when you’re in a lower tax bracket.

If you expect your tax rate to be higher in retirement than it is now, you should pay taxes on your income now and withdraw it tax free in retirement by using a Roth IRA.  If, on the other hand, you expect your income (and income tax rate) to be significantly lower when you retire, a Traditional IRA is probably the right choice for you.

However, this is more complicated than it appears at first glance.  Remember, we’re not looking to compare your tax rate today with what your tax rate today is for your expected retirement income level.  You need to think about how tax rates will change between now and when you retire to make this decision.  Which, given that your retirement date is likely decades from now, is notan easy task.

My personal belief? Particularly after the passage of the Tax Cuts and Jobs Act in late 2017, today’s income tax rates are at all-time lows.  Which makes me inclined to believe that tax rates are likely to be higher when we retire, making Roth IRAs a great option for young people today.  That’s just my opinion, of course; I don’t have any more of a crystal ball to predict the future than you do.  But, particularly if you’re close to exceeding the income limits, you should seriously consider a Roth IRA.

How much flexibility do you need?   One final thing to consider: Roth IRAs are much more flexible than traditional IRAs.  While I don’t typically recommend that you withdraw money from your retirement accounts before retirement, you should know that you can withdraw your contributions to your Roth IRA at any time, without penalty. (As long as your investments haven’t gone down significantly in value of course- you can’t withdraw something that isn’t there!)  You can’t withdraw the investment earnings in your Roth IRA without paying a significant penalty, but you canwithdraw your contributions. 

Make Non-Deductible Contributions to Traditional IRAs

Even if you can’t deduct your traditional IRA contributions, it’s a strategy worth considering.

Even though you won’t be able to deduct a $6,000 (2019 maximum) contribution to a Traditional IRA now, and you’ll pay taxes when you withdraw the money in retirement, there’s still one tax benefit you can take advantage of:  between now and when you retire, you won’t be taxed each year on the investment earnings in your account. 

You might be losing the “primary” benefit of a traditional IRA if you can’t deduct the contributions, but at least you’ll save on taxes every year between now and when you retire by sheltering your investments in this type of account.

Tier 3: Regular Investment Accounts

You should be investing your retirement savings into something.  Which means that once you’ve run out of retirement account options, your final option is to invest in a regular brokerage account.

There are no tax benefits to holding this type of account.  The money you put into this account is after-tax money, your investment earnings will be taxed every year, and you’ll be taxed when you sell your investments.  But, the primary challenge in saving for retirement is making sure your money grows at a faster rate than inflation.  By investing your money as opposed to keeping it in a savings account, you give yourself the best possible shot to make sure that happens, even if there aren’t specific tax benefits for doing so.

What Shouldn’t You Use to Save for Retirement?

In a nutshell: you shouldn’t use permanent life insurance or annuity products to save for retirement. 

I’ve written at length before about why I hate permanent life insurance as an investment vehicle for retirement.  It might come with tax benefits, but the costs of these products far outweigh the benefits for the vast majority of people. 

And for young people, annuities are even worse. Until you’re at least 50 years old, you shouldn’t even consider purchasing an annuity.  And even then, there are still probably better options for you.

I’ll probably do a whole separate article about why I dislike these products.  But until then, if you’re contemplating using life insurance or annuities as a retirement-savings vehicle, you should seek advice from a third party who doesn’t sell these products for a livingto make sure it’s the right fit for you.

How Much Do I Need to Save For Retirement?

Unfortunately, there’s no generic answer I can give to this question.  Everybody’s retirement savings needs are different, so you should work with a financial planner to develop a retirement plan specific to you and your vision for your life to answer this question.

Simply put, the way you want to live in retirement significantly impacts the math on how much you need to save.  Consider two different families:  one of whom wants to purchase a vacation house on the beach when they retire, and the other wants to sell their primary house, downsize to an apartment, and buy an RV to travel the country.

Which person will need more money to support their vision for their life in retirement?  All other things equal, the first one.

You need to develop your own retirement savings plan to determine how much you need to save.  If you want to learn more and get this process started, I encourage you to book a free breakthrough session with me so we can discuss more and start developing your plan of action.