Voiceover: [00:00:00] Welcome to Metcalf Money Moment. The podcast unlock financial clarity and confidence with expert insights to achieve your goals. Hosted by Jeb Graham, Ethan [00:00:15] Hutchinson and Eric Wymore. Each episode offers decades of combined expertise in wealth management. Retirement planning and more. Join us for practical strategies to inspire your financial journey.

Now your hosts[00:00:30]

Jeb Graham: welcome to Metcalf Money Moment podcast. My name's Jeb Graham, here with Eric Wymore and Ethan Hutchison, uh, co-host. How you guys doing today? Doing really [00:00:45] well. Thanks. Glad to be here.

Ethan Hutcheson: It, it's Friday and the weather's okay for now. There you go. The afternoon. They're pretty

Jeb Graham: hot here recently, but uh, it is always nice to do these on Fridays 'cause it's like, you know, we get done with this and we're off to the weekend having fun.

Right? [00:01:00] Absolutely. So. Well, I will say that this is the first podcast that before we recorded it, we already had the name of the podcast, which we're pretty excited about. So what we're the title of this podcast is Executive Edge. Understanding elite employee [00:01:15] benefits. And it's something that, uh, we're pretty excited, uh, to talk about.

And so we, we have a lot of corporate executive clients and I think, um, today what we really wanna focus on is, you know, when you think about a corp corporate executive or a highly compensated employee, [00:01:30] uh, at a big firm, uh, they have their salary, they have their bonus, but so much of what their compensation package is, are a lot of the benefits that are afforded, uh, to these corporate executives.

And so today. Uh, I think what we really wanna do is focus in on some of [00:01:45] those, uh, and maybe talk about, uh, just some of the ins and outs of, of some of 'em. But to give you a few just kind of statistics, is that in 2023, nearly 70% of all Fortune 500 companies, uh, had a deferred [00:02:00] compensation plan for their executives to participate in.

And then 80% of publicly traded companies offer some sort of stock based compensation to their or RSUs, or. Or, uh, or stock options to their executive [00:02:15] team. And then a lot of times, uh, executive benefits can account for up to 40% of more of a, of an executive's total compensation package. So, uh, bottom line is the, the benefits that you get, [00:02:30] uh, from a large company as an executive or as a highly compensated employee can really be a big part of your compensation package.

And it's very important to kind of understand what those are and how they work. So. A few of those that we're gonna go over today. So Eric, in a minute here is gonna talk about, uh, [00:02:45] executive deferred compensation. Uh, and then we're gonna talk about ESOP plans. So this isn't necessarily for, uh, a big publicly traded company, but there's a lot of privately held companies that become ESOPs.

And Ethan's gonna kind of explain some of the ins and outs of that. And then I'm gonna talk about [00:03:00] stock options, RSUs, employee stock purchase plans, uh, and then we're gonna go through 4 0 1 Ks pensions and h HSAs, which are all benefits. Uh, that, that executives have. But, uh, let's get right into talking about, uh, deferred, uh, compensation.

Eric Wymore: [00:03:15] Yeah, absolutely. Thanks again. Um, so what a deferred compensation plan is exactly what it is, uh, or what it, what it says it is. You are taking a portion of your compensation, of your salary, and you are deferring it [00:03:30] to be paid to you in the future. So before we get kind of in the nitty gritty, let's. Kind of picture out a, you know, an individual, a person that's been at a corporate America has, you know, gone up the corporate ladder and now they all of a sudden there may [00:03:45] be some kind of higher level executive and their salary is a million dollars a year.

Right? So outta that million dollars, they're going to make their 401k contributions. The company is gonna make their matches. They're also going to [00:04:00] obviously take the rest of that in a salary. Well. Maybe because of some kind of a strategy or tax strategy, that individual is saying, you know what? I don't need that entire amount this year.

I want to have some of that paid out to me in the [00:04:15] future years. So each plan is a little bit different, has a little bit different mechanics behind it. But for this example, let's say that you, you know, this individual wants to defer 200,000 of dollars of their salary. For future payment. So [00:04:30] that person will probably set that aside or set up that part of the plan sometime in the fourth quarter of the prior year.

And then when the salary starts getting paid out in the, in the, in, in the current year, a portion of that's gonna be set aside and go into [00:04:45] their and be part of, kind of the part of their 401k or in that employer retirement plan. Um, the cool thing about that is they can actually invest it a lot of times.

Uh, there might be some parameters on what they can invest in, but they might be able to, to invest it [00:05:00] in some kind of a target date fund for when they want to draw it out. Uh, the other unique thing is you set up when you want the funds to start paying you back. So for example, you might say, I would like five years [00:05:15] after I separate from service for this particular deferral or deferred comp to start paying me out.

So. Or, or you might do it three years or you might do it 10 years. It all kind of depends on your current [00:05:30] situation. But I think for, for practical pur purposes, the reason you would do this is because you might have a, a gap or a period of time when you are ending your career or retiring and maybe you wanna retire at [00:05:45] 55, let's say.

And you want to have your deferred comp start paying you at 56, 57, 58, 59 years old, and so on. So one of the reasons that you want to do a deferred comp plan is to defer the tax bill, right? So if you're at a [00:06:00] high tax bracket making a million dollars a year salary, all of a sudden you're gonna retire at 55.

When you have very little income, maybe you retire to a low income state like Texas or Florida. Now, all of a sudden, as you're drawing out that, that. You're starting to make [00:06:15] that payment on that deferred comp plan, you're in a lower tax bracket and it's a, you know, a successful way to defer those taxes.

Um, the, some of the, some of the things to consider before you, you sign up for a deferred comp plan is that that is an [00:06:30] asset that sits on the balance sheet of that business, right? So if that business. Uh, you know, it goes through some financial struggles. Um, it is an asset, it is considered an asset on that business versus your 401k is your [00:06:45] 401k and is not an asset of the business.

Yeah. Um, so it's, it's obviously a plan that you want to consider, uh, certainly as you're climbing the corporate ladder. Uh, certainly a benefit that you want to take advantage of amongst others.

Jeb Graham: Yeah. And those, those are typically gonna be. Uh, [00:07:00] highly compensated employees and executives that, that have access to those plans.

And I'd say even like the example that you just gave, like, so somebody that's making a million dollars a year, they're in the, the top tax bracket, right? So they might be, they're paying 35 plus [00:07:15] percent taxes. So let's say like in that example you give, so they save $200,000 into their deferred comp plan.

Well, they just saved 70 some thousand dollars in taxes, federal taxes that year, right? And then they retire at age 55, [00:07:30] and now they've, they started taking out $200,000 a year, and that's their only income, right? Mm-hmm. So now they're in the 22% tax bracket. So on that bucket of money, they just literally saved about a 15% in taxes.

Right. And that's a, that can be a really [00:07:45] huge benefit, especially for those people, like you said, that wanna retire early. Uh, I think it can be, be huge. So, I don't know, Ethan, when, when we were talking about, we had a couple clients in a couple. Uh, or a week or two ago, uh, that [00:08:00] were part of some organizations around town that had those ESOP employee stock ownership plans.

Eric Wymore: Mm-hmm.

Jeb Graham: Um, which are unique as well, and such a wealth builder for so many people. Yeah.

Ethan Hutcheson: Yeah. These, these are my favorite. I, I'll, [00:08:15] I'll admit it. I love esop. I, I think they're, they're super cool. The way that they, they work and, and, and just the way that wealth is accumulated over time inside of these ESOPs is fascinating to me.

We work with clients all across the [00:08:30] Kansas City Metro and across the United States. Um, you know, some of the main ones we work with are, you're gonna see a lot of engineering firms, burns and McDonald, uh, black and Veatch, uh, construction from Macallan, Gordon JE Dunn. Uh, Shamrock Trading has a big 1:00 AM Stead Rail.

There's a lot of [00:08:45] companies local that have these, so it's really, really fun when we get to look at 'em. And a lot of the times you don't even, I mean, you realize that you have an esop, but it's a defined benefit plan. It's not a defined contribution plan, so you are not physically taking your cash flow [00:09:00] and putting money into these plans.

Um, your company, your privately held company is issuing you shares that vest over time inside of this esop. So employee stock ownership plans, it, it, it is kind of exactly how it sounds, uh, similar to Eric's deferred comp. [00:09:15] Uh, they don't really try to hide anything behind the name, but. Employee stock ownership plans are given to employees of employee owned companies.

So they might start from a succession plan conversation where a business owner, [00:09:30] uh, might hypothetically have, you know, a large capital gain inside of this business. They wanna sell and retire. How do they do that tax efficiently? They can sell that company back to the employees, uh, and then kind of defer capital gains taxes and things of that nature for the business owner [00:09:45] along the way.

Um, they're very unique in the fact that they provide, uh, a very, very good retention benefits to employees as well. So if you have an ESOP plan and you've been there for five years, let's say the ESOP's $250,000, then you're there for 10 years. That ESOP's, you know, north [00:10:00] of a million. And then you get to the 20 and 30 year employees that are there and they've got, they might have a $600,000 401k and they have a $5 million ESOP that is kind of parked alongside that 401k plan.

It's kind of like they blink. And now they're [00:10:15] worth $5 million because they've been so entrenched in that, in their work from day to day, that over time that ESOP just continues to grow. Um, they're, they're. In insanely efficient as far as, uh, growing those. Although we have seen, and Jeb, we [00:10:30] were talking about this yesterday, uh, one of the common ones we work with, we saw a little dip in their esop.

So you're not always gonna be making money in these, these things. They're kind of dependent on the profitability and the growth of the organization. Um, so it's really nice 'cause you're, you're [00:10:45] a stakeholder alongside with all your other employees and you want these things to grow. Mm-hmm. How do these work in retirement?

So they're qualified accounts. So when you do retire, or let's say you just, you, you move companies, you go elsewhere, you, you are entitled [00:11:00] to your vest, your vested portion of your ESOP balance. It's a qualified account, so it would roll over into an IRA or some sort of pre-tax qualified account as well.

So there's not really in very good tax benefits to them other than, you know, you're, you're [00:11:15] accumulating a lot of wealth very quickly. Inside of a lot of these ESOP plans,

Jeb Graham: and it defers those taxes, I guess would be the benefit. And, um, like, so to define what a qualified plan is, so that would just mean that basically it's coming out pre-tax, anything you're given is [00:11:30] pre-tax, gross tax deferred, but then you gotta pay the taxes on it when you take it out.

And that's, um, you know, we haven't, we haven't seen any Roth ESOPs yet, but maybe someday that'll happen, huh?

Eric Wymore: Yeah. Where you, where you, I

Jeb Graham: mean, that'd be, that'd be awesome. Yeah, that'd be a pretty great deal, [00:11:45] wouldn't it?

Ethan Hutcheson: Yeah, yeah, that'd be great. But even then, you know, we see, we see folks, you know, retiring at age 50 and they might have 5 million in an ESOP and 500,000 in a 401k.

Keep in mind, that's all pre-tax, right? Um, there's some cool things you can [00:12:00] do, like the Rule 72 T, uh, if you wanna retire at 50 and start drawing. We've talked about that before on the podcast. So, yeah, even though it might look really glaring at the end of the day, this large tax. P uh, tax, you're gonna have to pay over time.

Yeah. If you can [00:12:15] set that up, you know, at 72 T and really draw that out over time, it's simply just like a 401k.

Jeb Graham: It's a good problem to have. Right. It's one of those where, and it really is amazing, some of these companies that have ESOPs around town, like you've got a couple of companies that have what you would [00:12:30] consider like rank and file employees, right.

That make a, a good living, but they're not high earners by any means that end up with millions of dollars in these things. And it's just such a cool benefit and, um. And so anyway, uh, it, it's neat to see, and they're great clients for [00:12:45] us to work with because there's a ton of good things that we can do, uh, for those people as they exit, as they retire, as they exit the company and try to figure out what to do with those dollars.

So, and the ESOPs

Ethan Hutcheson: are all for privately held companies? Correct. So you're not gonna get an ESOP at Oracle or stuff like that? That's right. [00:13:00] That, but. Public companies have other things like stock options than RSUs. Yeah. So Jeff, why don't you to talk to us about those?

Jeb Graham: Yeah. So that, that was where, um, you know, to, to Ethan's point where you've got privately held companies that have ESOPs.

You know, we talk about executives, uh, [00:13:15] that work for, and this isn't necessarily just executives. There's a lot of, uh, publicly traded companies that have stock benefits for, for employees at all levels. Right. But when you really think about the executive benefits and higher earner benefits. Um, well, well, I would say in general, from [00:13:30] stock plans at publicly traded companies, there's really three main ones, right?

You've got restricted stock units, which we see a lot. Uh, you have stock options, which we see some, but not quite as much as restricted stock units. And then you have, uh, what's called an employee [00:13:45] stock purchase plan, uh, in a publicly traded company. Um, so, so big difference between all three of those. And I think, uh, the, the one that we really wanna focus on the difference of is gonna be the restricted stock units.

Uh, and the stock options because they, those are [00:14:00] two very different plans. Uh, but I think people get those two confused sometimes. Uh, and if you're gonna do like a quick analogy of the two, if you think of an RSU, you can think of that as a gift of shares from a company. I. Once you actually earn them.

Okay. [00:14:15] And when you think about stock options, think about a coupon to buy shares at a set price in the future. Okay? So let's talk about these restricted stock units. And we get these a lot. Uh, we're a company, let's just say you work for x, y, Z corporation, and [00:14:30] at the end of the year they say, Hey, we're gonna give you a bonus of restricted stock units.

So maybe it's gonna be $20,000 of restricted stock units. So you get that $20,000. Granted to you, and they might vest, and I say the typical vesting schedule we [00:14:45] see with restricted stock units is gonna be three years. So basically you get it, you kind of have ownership in that stock, but you don't actually own that stock until it vests three years from then, and then the year that it vests.

You're on the hook because it's a gift and [00:15:00] it's basically income. You have to pay ordinary income tax on the value of those restricted stock units. So, um, but there, uh, it's a great benefit because you actually own the stock in a restricted stock unit, and then basically you can hold it [00:15:15] as long as you want.

So when you get the stock, you can hold it for one day or you can hold it for 20 years. And then basically whenever you sell it, you have to pay the capital gain. On the difference between the day, you know, the value that you were gifted [00:15:30] it at and what you sell it at. So that's, that's a restricted stock unit.

And then when you're talking about stock options, it works kind of similarly because they grant it to you at a certain time. I. But then a lot of times it could be three years later, five years later, [00:15:45] um, they have a, so, so when they grant it to you, that's at the strike price. Okay. So let's just say it's $20 a share today.

You get that and that's the strike price. And then you have. Uh, and a time period when you can exercise it. So let's say it's three years from now, you [00:16:00] can then exercise it and they give you a three year window to exercise it. So basically somewhere between year three and year six, you need to exercise that.

So again, back to that example, it was worth $20 of a strike price. And let's say five years later that [00:16:15] same stock is worth $40. Well, now you have a, basically a gain of when you exercise that you make the $20 of gain on that stock. So. And that too is going to be ordinary income in the year that you, you do that because that is [00:16:30] income.

You can then hold that stock as well and then sell, sell it later, you know, after you've exercised it, um, down the road. So, so stock options, RSUs are, are gonna be a little bit different. Um, but they're both great benefits. And then [00:16:45] here's the, the next one, which is the, uh, employee stock purchase plan. This is the one that I would say is, is typically.

Um, available for almost everybody in the company if you wanna participate in it. But think about like in an employee stock purchase plan, think about, uh, [00:17:00] your 401k where you just set up a percentage of your salary that you're gonna put aside every, every paycheck and you're gonna buy into your 401k.

Well, same thing in an employee stock purchase plan. The difference is it's not pre-tax. So you're putting in post-tax dollars, and typically what you're doing [00:17:15] is you're buying shares of stock. Uh, and you're, you're buying them at a discount. So let's just say it's a hundred dollars for x, y, z stock. You're purchasing that every two weeks.

Well, you might be buying that a hundred dollars share of stock at at 85, [00:17:30] 80 $5 or, or 15% discount. And then typically you have to hold that for a certain amount of time, which a lot of times call it six months or something like that. And then you can sell it. So you, so if you sell it, uh, you've, you've made an instant 15% profit, right?

Because you got to buy that at a [00:17:45] discount. So. Um, I would say the, the, the thing to be wary of, of all these plans, restricted stock units, stock options, employee stock purchase plan, is you have to be very careful, especially if you're a highly compensated executive, not to get too concentrated in, in that stock.

And we've, [00:18:00] we've run into that many, many times, uh, where we have somebody that's worked at the same company for a long time. They've had all these stock benefits, and then all of a sudden they wake up one day and 60 or 70% of their money is in that company stock. And so now they've got this big. Risk if that [00:18:15] stock does poorly.

And they also do amazing if the stock does great, by the way. So there, there can be positive sides to that, but I think the school of financial planning would say, you don't wanna put all your eggs in one basket. You wanna make sure to diversify, uh, that stock over time. But those are great benefits. [00:18:30] Um, you know, that, that, uh, that you can get.

And then, you know, I think that the next thing that we were really wanting to talk about was some of the more. Uh, common benefits mm-hmm. That are available to all employees, right. Such as 4 0 1 Ks, pensions, [00:18:45] HSAs, and stuff like that. So, so yeah. Absolutely. Let's talk a little bit about 4 0 1 Ks.

Eric Wymore: Absolutely.

This is the bread and butter, right? This is what, how everybody gets to, to, to start saving for the, for retirement, and that's in their 401k. Um, and I'm gonna go over a little bit on the ma [00:19:00] uh, on, on the, on the limits of 401k. So if you're. Under 50 years old, you can put away defer $23,500 in the, uh, in the year 2025.

Uh, if you're 50 years or older, [00:19:15] you can add another, an additional $7,500. There's also a super ketchup clause. I'm, I'm, we're not gonna get into that one here. Uh, today, we've talked about it on previous, uh, podcasts, but, uh, keep it kind of high level today. So if you're [00:19:30] over 50 years old, 50 years old, 50 years old or older, you can put away $31,000 into your 401k, uh, as a, as a, uh, contribution.

Um, there's also, [00:19:45] if you're over, uh, 50 years old, you actually can put away. 77,500 total in there, in, in, in an after tax situation. So lemme break that, break that down [00:20:00] for you. You're able to put $31,000 of your own money in, then the company match. Then you're actually able to do some kind of an after tax situation, uh, contribution into your 401k plan, as long as that total amount [00:20:15] is less than $77,500 if you're 50 years old.

Why would you want to kind of consider, why would you want to consider doing an after-tax contribution, uh, to into your 401k? Well, with a lot of major [00:20:30] corporations, they allow you to do an after-tax contribution into that, that 401k, and then immediately you can convert it to a Roth. Uh, a lot of plans, we'll call this some kind of mega backdoor Roth, uh, plan.[00:20:45]

So again, let me run that. That's

Ethan Hutcheson: where we have, sorry. That's where we have confetti that blows up in the background. The mega backdoor. It's mega. Exactly.

Eric Wymore: So again, you know, if you, if you make, you know, $300,000 or so a year and you're contributing, you know, you can [00:21:00] contribute $31,000 if you're over 50, um, you know, say the company matches $12,000, well, that total number is $43,000 that you're putting into your 401k the max.

Is 77 [00:21:15] 5, and that allows you to put another $34,500 into an after tax, uh, after tax portion of your 401k plan. Call up. You know, if you're with Fidelity, you call up Fidelity and say, Hey, as soon as this hits [00:21:30] the plan, my after tax contribution, I want you to convert it to a Roth and put it in the Roth part of the 401k.

Now, all of a sudden, you are literally contributing 30 some thousand dollars. Um, into a Roth IRA each year. [00:21:45] Obviously you gotta pay the tax on it when you get the income, when, because of the income, it's earned income when, when you earn it from your salary, but then that money will grow tax to tax free and you're able to withdraw a tax free when you're mm-hmm.

You know, 59 and a half [00:22:00] or into retirement. It's a phenomenal situation that most individuals that work at a large corporation have access to and they absolutely need to take a look if they're able to.

Jeb Graham: I agree it, those, those are, um, those mega backdoor roths, when you think about putting [00:22:15] that much money, uh, into a Roth IRA over time, and I know just based on using our e-money and our financial planning software, especially if you're younger, but I would say even in your forties and fifties when we run that plan of them putting that in a Roth versus a [00:22:30] traditional, even high earners, a lot of times the plan looks so much better with the Roth just because even if you're 50.

The chances are you're gonna live till you're 90, right? Mm-hmm. And so that's 40 years of that thing growing tax free. And it just, the compounding, I think [00:22:45] people, uh, underestimate the power of that over time and not ever having to pay taxes on that, let alone when your kids inherit it or whoever it is that's gonna inherit it, inherit it on a tax, tax-free basis.

It's

Eric Wymore: absolutely, and again, it does take an extra step. Um, we've [00:23:00] walked many clients through it, um, and be more than happy to walk anyone else through it.

Jeb Graham: Yep. So, so that, so what Eric was just talking about is a defined contribution plan that's 401k. Right. There's also a defined benefit [00:23:15] plan. Everyone's heard of the old, uh, pension plan or the defined benefit pension plan, and I actually saw a statistic that says, well, only 4% of private sector employees have a defined benefit pension plan anymore.

That number is significantly higher [00:23:30] among senior leadership teams because there's things that are called. Um, that are called, uh, executive Supplemental Retirement plans or SERPs. Right. So, so there are still these pensions out there, but uh, the old school way was, companies used to basically, you didn't have a [00:23:45] 401k, didn't have a defined bene or contribution plan.

What they would do is they'd put money away in a pension plan, and then once you retired, you know, you basically got a salary for the rest of your life based on that pension plan. And over the years in the private [00:24:00] sector, that's kind of faded away for. Uh, you know, for your average employee, there's just not that many of them out there anymore.

Uh, but what we will say is for executives, you know, they have those big cert plans. Uh, and then in the, in the public employees, when you're talking [00:24:15] about public school teachers, people that work for any government, municipality, the federal government, well, pension plans are still very prevalent there, and they're a huge part of people's retirement.

And by the way, they're clients that we love to work with, right? Because when you have somebody that retires with a pension, a lot of times [00:24:30] they don't even need. To use a lot of the money that they've saved in, in retirement plans. But what I will say is if you've got a pension, so say you're a public employee or if you're, uh, you know, a, an executive that has a cert plan and, and or if you're one of [00:24:45] those 4% of people, you know, I was actually just talking to a client yesterday that works for Johnson and Johnson.

They still have a, a pension plan. He's a sales person, they still have a pension plan. We go, we went over it and I'm like, man, that's a really good deal because he is got a, he's got a 401k and he is got a pension plan. [00:25:00] Uh, but if you're one of those people that do that is fortunate enough to have a pension plan, it's important to realize that when you get ready to, to take that pension, uh, in the future, there's a lot of options on those pensions.

And it's really important, in my opinion, to meet with a financial advisor to go through 'em. [00:25:15] Because a lot of them have lump sum options, you know, where basically you can take either all or a portion of your benefit in a lump sum and roll it to an IRA to take ownership of those dollars and to get control over them.

Uh, and then you also go down the road of having, uh, what they call [00:25:30] joint and survivor benefits. So say you're, you're a married couple. Well, if you take the single life benefit on a pension, that means if you die four years later, your spouse is left high and dry without anything. Right. Because, because you just only.

Took the highest level benefit for [00:25:45] yourself. Um, whereas they also have what are called joint and survivor benefits. So, uh, if you have, you know, you might be able to take. You know, if your pension was $5,000 a month, you might be able to take $4,000 a month. And that actually survives both you and your spouse.

Meaning if you [00:26:00] die three years in, your spouse still gets that benefit for the rest of your life. So I guess the bottom line there is if you do have a pension, congratulations. 'cause not a ton of people do it, it's an awesome benefit to have. But when you do get ready to take that pension, it's really important to meet with a [00:26:15] professional, go through the all, all the options and make sure that you know what you're doing there.

So.

Ethan Hutcheson: Last one I have, um, is gonna be the health savings accounts. So HSAs, um, Jeb said something earlier, I think Eric also said, you know, all, there's some of these [00:26:30] things we're talking about that are available to, you know, highly compensated individuals. And then some of these are, are kind of just run of the mill employee benefits that a lot of companies have, but not everyone might take advantage of.

And a health savings account is, is one of them. And I'm gonna throw confetti in the background [00:26:45] after I say this, but they're, they're triple tax exempt. Boom, boom. So you're gonna have, you, you, you, you, you put the money in. It does, it's, it's, the contributions are tax deductible when the money grows inside of that.

HSA, if you [00:27:00] invest it, uh, it grows tax deferred. And then when you pull that money out for qualified medical expenses, like a doctor's visit, or you can even get, uh, laser surgery on your eyes and they'll, they'll, you can use your HSA for that now. So. Those qualified medical [00:27:15] expenses, you don't pay taxes when you pull the money out of there.

Um, how do you become eligible? You've gotta be enrolled in a high deductible health plan. You cannot be on Medicare. You cannot be claimed as an in, as a dependent on someone else's tax returns, and you cannot be covered by a non [00:27:30] uh, um, uh, high deductible health plan. I gotta look up the limits. I'm going to run off my cheat sheet here because they change change every single year.

Um, so an individual can put up to $4,300 into their HSA and A family can put up to 85 [00:27:45] 50, so $8,550 in your HSA. A lot of companies also will contribute as well. I, I know there's a ton of companies in the KC area that on January 1st. As part of the employee benefit, if you're enrolled in an HSA, that company will put [00:28:00] $1,000 inside your HSA on January 1st.

So if you're not taking advantage of that, that's a free $1,000, uh, that you could definitely be taking advantage of. So those are, those are unique. Um, the best part about 'em, I know with the FSA, um, if you, if you [00:28:15] don't use it, you lose it. Well, with an HSA, it's portable and it rolls over into the next year.

But also if you leave a company that you're at and you have dollars in that HHSA, that can come with you as well. So that company doesn't own the HSA, it's your account, um, that you own. [00:28:30] A lot of times we see people fund these things very aggressively and then they deplete 'em at the end of the year very aggressively as well.

So what we encourage people to do is if you're gonna fund these things and, and you want these to start growing, invest the dollars that you put in there. Maybe leave $500 in cash so you can [00:28:45] swipe your HSA debit card. But if you're going to Walgreens to buy Advil or Robitussin for your sick, you know, toddler, don't use your HSA pay for that out of pocket.

Let that HSA grow. And then later in life when you need it for surgeries or [00:29:00] MRIs or things of that nature, you can pull funds out of that HSA tax free and, and use those. Don't nickel and dime yourself over time by using it for small, uh, prescriptions. Um, a, a small little nuance that I, I've heard before.

People don't wanna put money into an HSA because they're [00:29:15] like, well, when I'm in retirement, I'm gonna be on Medicare. Um, my premiums are low. Uh, most surgeries that I need in retirement are gonna be covered by Medicare, so I'm not gonna use the HSA. Well, if you fund that HSA healthy over the course of your lifetime or [00:29:30] working years.

When you turn age 65 and you know you, you want to pull, let's say you have a hundred thousand dollars in your HSA, you can pull money out of that for non-qualified medical expenses. You're just gonna pay ordinary income tax on that distribution. I. So it's kind of a [00:29:45] double-edged sword. You work, you work, you save, you defer all those taxes.

You don't really wanna take 'em out and pay taxes on that, but you can, uh, it's not, you know, advised, we don't tell people to use an HSA as an IRA, but you're, you don't get locked up into that thing. You can still access those [00:30:00] dollars.

Jeb Graham: Yep. Nice. That's a great benefit to have and the triple tax exempt. I mean there's just not, it's the only thing out there.

I remember there we had a guy that used to work in our office years ago and he would talk about that and man, he would get so excited about triple tax exempt and it is, it's a pretty neat deal 'cause [00:30:15] not, I don't know too many people that love paying more taxes than they have to. And anything you can do to get that tax break is, is awesome.

So great. Guys, this has been a super, uh, informative. And I tell you what, if you're, if you're an individual out there, an executive that has questions on your benefits [00:30:30] plan, uh, we would love to visit with you. And, uh, I think this has been super productive. Half hour, and this is Metcalf Money Moments podcast signing off.

Voiceover: Thanks for tuning [00:30:45] in to Metcalf Money Moment, the podcast. We hope today's episode provided valuable insights to help you unlock financial clarity, confidence, and peace of mind. For more expert advice and resources, visit metcalf partners.com. Until next [00:31:00] time, make every money moment count.

Disclaimer: Jeb Graham, Ethan Hutchinson and Eric Wymore are registered representatives with and securities offered through LPL Financial Member FINRA SI PC Investment advice offered through W [00:31:15] CG Wealth Advisors, a registered investment advisor, W CG Wealth Advisors and Metcalf Partners Wealth Management is AR separate entity entities from LPL Financial.

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