3 Ways to Live the Retired Lifestyle Long Before Your 401K Matures

Being smart about how you build your 401K is always a good idea.

Not only are there the obvious long-term benefits of being financially secure even after you retire, but there are also lots of great short-term benefits of putting away a little extra into this important savings account every year.

But setting yourself up for success after retirement doesn’t always mean you have to give up everything you want right now either.

In fact, millions of people around the world are discovering this liberating truth: you can live the retired lifestyle (at least in-part) long before you ever retire.

Who are these people? They’re entrepreneurs. More specifically, they’re bootstrapping entrepreneurs who realize that work is a side-attraction to their daily life—not the other way around.

I happen to be one of them. I choose my own schedule every day. When my son wants to play catch in the backyard, I stop working early—a decision I have never once regretted.

Every morning, I eat breakfast with my family and then go for a nice long jog before working in the yard, showering, studying some French, and getting ready for the day.

I don’t rush into work at 8:00 am to impress my boss. I start my work day around 10:00 am, I take a long lunch and I’m usually done at 5:00pm or before.

I’ve made friends with all the retired people in my neighborhood because we all share similar schedules.

Because I’m extremely focused during the day, I make way more money being self-employed than I ever made with a salary working for someone else—and the future is extremely bright.

You can have a more intentional lifestyle where your passions, ambitions, and personal growth take center-stage (instead of the 50-slide presentation your boss needs done before you go home today).

Here are a few ways to get started yourself:


1. Bring in revenue that doesn’t depend on your day job.

There is nothing more freeing than making money on the side of your day job.

Why? Because it moves the scales of power and decision in your favor—even if just by a little bit.

Imagine if you were making even just an extra thousand dollars every month from a side-business.

You could put away more for retirement. You could take more vacations. You could buy that new motorcycle you’ve had your eye one, yes. All of those are possibilities.

But more importantly, you’ll find you suddenly have leverage—a safety net. Which means you can ask for more at work. Ask for a raise. Ask to work from home 2 days of the week. Ask for that exciting project you really want to tackle. Or ask to go golfing with that new client you just won.

More leverage is the quickest path to changing your lifestyle.

When your boss knows they’re not your sole source of income it changes things. Ultimately, the better you get at building a side-business, the more positive changes will come your way.

2. Start building an asset that will bring passive cash.

In addition to bringing in side-revenue, you should try to build assets that don’t require you to put in a standard workday’s hours in order to collect a paycheck.

In my case, I have spent the last 10+ years learning how to start a blog and make money from it. Today, that asset brings me a substantial amount of income.

For others, building some sort of side-hustle or software-as-a-service business is the best path. Maybe writing a book or creating a course around what you do best could be a nice asset that can work for you as you continue to save for retirement.

Whatever it is, it should (eventually) function without you. Building a business that relies on you in order to run each day is simply just another job.

If you’re worried you’re too far along in life to start building a valuable asset from scratch, remember this adage: the best time to plant a tree was 50 years ago—but the second-best time is today.

3. Set your priorities in order and be willing to sacrifice.

If you truly want to start enjoying a lifestyle that feels a bit more “retired” than your current one does, you’re going to have to adjust your priorities.

Too many people are focused on getting to the next rung on their career ladder, boosting their paycheck by 15%, getting a corner office, or getting their startup acquired.

None of those things lead to living a more free lifestyle—at least not before you’re 65.

That’s not to say you can’t make loads of money along the way (plenty of people manage to make lots of money and still maintain a beautifully flexible lifestyle).

But if your entire focus is to work hard until your 65 when you’ll finally start living, then that’s probably what you’re going to do.

Instead, do well at your day job, but do your best (I know it’s not always easy) to leave work at the office and focus on your side-business, family, and life outside of normal work hours.

Instead of having to have the biggest house and the newest car, find joy in free time, travel, loved ones, hobbies, and other fulfilling activities.

There’s so much more to life than work.

Does this mean you might miss out on a promotion? Yes. I know I most certainly have.

But it also means you’ll be one step closer to the lifestyle you want to enjoy—and if you do it right, you’ll get there long before you’re 65 and your 401K finally matures.




Preston Lee is the founder of Millo where he and his team help people start freelancing or growing their small business with a focus on a much happier lifestyle. If you’re ready to start exploring how life can take center stage for you, start here.


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HSAs: 3 Cheers for Triple Tax Savings

Here at blooom, we’re huge fans of HSAs, or Health Savings Accounts. No really. We think they’re the best thing since employer matches. While the annual contribution limits may be small—$3,500 if you have self-coverage only or $7,000 for families in 2019—the benefits are mighty. So what’s the big to-do with HSAs, you ask? I have three words for you: triple tax advantaged. Here’s what I mean by that.

  1. Your contributions are pre-tax, which means that your contributions lower your taxable income (and your tax bill) in the years you contribute.
  2. Your withdrawals are not taxed if used for qualified medical expenses, which we all have from time to time and will certainly have in retirement.
  3. Your investment gains are not taxed (again, if used for qualified medical expenses—this is a crucial detail!)

As investment nerds, it’s hard for us to overstate how awesome these benefits are.


Here’s how it works.

Your HSA can be used for any qualified medical expenses, such as annual physicals, glasses, dental care, and much more. Most come with debit cards that allow you to charge your medical expenses to your HSA directly. Alternatively, you can pay with cash or your regular credit/debit card and save your receipt for reimbursement from your HSA at a later date. Here’s an example: before learning about your HSA, you were using after-tax dollars from your checking account to pay for your contact lenses that cost you $50 a week—that money was already taxed at 25% (or whatever tax bracket you fancy). The point is that your tax-free dollars go a lot further!

Although originally intended to help Americans save on ballooning healthcare costs, HSAs can be thought of as a supplemental retirement savings vehicle for many. If you have the cash to pay for your medical expenses at the time that you incur them, you can save your receipts and invest your HSA contributions. Since you won’t have to pay capital gains taxes on HSA money used for qualified expenses, you can let your investments grow over time and get reimbursed retroactively for those past expenses when you actually need the cash.

Side note: If you’re an active blooom client, even though we can’t take over management of your HSA, send us a line if you’d like a recommendation on fund selection—we’ve got your back!


So who’s eligible?

Generally, those with high deductible health plans (HDHPs) are eligible to contribute to an HSA. Here’s the rundown:

HSA 2019 Eligibility Deductible minimum Maximum out-of-pocket costs
Single $1,350 $6,750
Family $2,700 $13,500

In addition to being covered under a high deductible health plan, to qualify you must also:

  • Not be enrolled in Medicare.
  • Not be claimed as a dependent on someone else’s tax return.
  • Have no other health coverage except what is covered under Other Employee Health Plans.

While many workplace insurance plans have their own HSAs for employees to use, you don’t have to have a workplace plan to be eligible. You simply need to be enrolled in a high deductible health plan and meet the above criteria. It’s also worth mentioning here that unlike some other retirement savings vehicles (we’re looking at you, IRAs), your income won’t disqualify you or ever phase you out from being able to contribute.  


How to get set up.

You can set your HSA contributions to come out of your paycheck each month if you use your company plan or you can transfer money over directly from your checking account. As an added benefit, contributions for prior years can be made up until tax day for that previous year, just like with IRAs. Many HSA providers have minimum cash balance requirements—typically $1,000—before you can actually start investing the money.

In most situations, we like to suggest building up and maintaining a cash balance equal to your plan’s annual deductible before you start investing your HSA dollars. This ensures that if you’re using an HSA with a debit card (the most common scenario we see), you always have enough to cover your deductible in an emergency situation without needing to sell any investments. After you hit that deductible equivalent in cash—game on!


Don’t get dinged.  

As with all tax advantaged accounts, there are rules to be mindful of when you’re taking withdrawals. The government attaches some strings when there’s tax savings involved because they want to incentivize you to use those accounts for their intended purpose. In the case of HSAs, there’s a 20% penalty if you withdrawal funds prior to age 65 for anything other than qualified medical expenses.

It’s also worth noting that there are several differences between FSAs, or Flexible Spending Accounts, and HSAs. Perhaps most significantly, FSAs generally operate on a use-it-or-lose basis, whereas the money you contribute to your HSA stays with you year after year—don’t confuse the two!


Prioritizing your HSA.

To put in perspective how beneficial these accounts are, our general recommendation is that savers work on funding their HSAs after they’ve met their employer match, started an emergency fund, and paid off all non-mortgage debt. You heard it here—we think your HSA should be funded before your IRA or your 401k (beyond getting that sweet, sweet employer match) and certainly before funding a brokerage account.

Now that you’re up to speed on the HSA basics, find out if you’re eligible to contribute to one and consider taking advantage of the rare opportunity to lock in those triple tax savings.


Written by Laura Wittmer, blooom Financial Advisor


The information is provided for discussion purposes only and should not be considered as advice for your investments. Blooom does not provide tax advice. Consult a tax expert for tax-specific questions.

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How to Tackle the To-Do of Rolling Over Old 401ks

We get it. 401ks are a drag to deal with. 🙂

I’m a fan of making lists. Not only do I have a weekly task list that lives in my old school bullet journal, but at any given moment I always have at least a handful of more niche lists in my virtual notebook that reflect the various projects and goals I have going on in my life. It makes me feel centered and in control; if a task is on the list, then it is already halfway to being done, right?

Well, that’s what I try to tell myself. But the truth is, there are sometimes tasks that end up on my list for an absurd amount of time. Usually these are the things that I think will be especially hard or annoying, but with the added bonus of not having a firm deadline to complete them. So they keep getting bumped to the bottom of the list, week after week (after week).

One of the worst offenders by far was the task of dealing with my previous employer’s 401k after I started with blooom. It went on the list right away – I knew it was something I needed to look at – but then it consistently got pushed off for more ‘pressing’ concerns. It stayed on the list for a year and a half before I finally bit the bullet and called my old record keeper (Fidelity) to start the process of rolling over the account. But once I picked up the phone, I had it checked off the list in less than ten minutes! Over a year of procrastination just to avoid a ten minute phone call? Yeah, it was a little embarrassing.


You’re not alone.

But I’m not alone: ING DIRECT USA found in a survey that more than half of American adults had left a retirement account at a previous employer, and that 30% did so just because they were unsure about the rollover process. We assume that rolling over a 401k will be a long complex process, and we don’t feel equipped with the knowledge to make the right decision. But then inaction becomes the decision, and that can prove costly.


Simply put: If you’re no longer receiving the employer match, you may want to roll over.

401k accounts can be very expensive, so once you’re no longer receiving the other benefits inherent in these types of accounts – such as the match from your employer – it often makes more sense to roll them into a less expensive IRA (Individual Retirement Account), or into your new employer’s 401k if you have access to one. A rollover simply means moving the money from your old account into a new one in such a way that isn’t considered a withdrawal and is therefore not a ‘taxable event’. Straight up withdrawing the money from an old account is typically the worst of the options you have, as not only will the money be taxed, but it could also incur a 10% penalty.

So what should you do with your old retirement account then? Yes, it may only be a ten minute phone call, but you still have to know what to say when you call, right? Since we’re talking lists, here’s a handy checklist to help you get started:


Old 401k To-Do List

  • Check out the fees you’re being charged in your old retirement account. It might take a phone call or digging through plan documents to find, but having that information will help you better compare your options.
  • If you don’t have access to a new 401k, paying more than 0.1% on your old account is generally a good indication that rolling into an IRA may be a good choice for you.
  • If you do have access to a new 401k, first check to see if it allows rollovers. Most plans will, but some don’t.
  • If your new 401k does allow rollovers, compare the fees between the two, as well as the funds available. When it comes to the fund list, you’re looking for cheap index funds that cover a variety of asset classes.
  • Consider convenience: fees and fund options are important, but there’s also something to be said for the convenience of having a single retirement account. It means less accounts to manage now, but also becomes even more appealing in retirement when RMD (Required Minimum Distribution) starts to come into play and will affect each account individually.
  • If you do choose to rollover the account, make sure to request a ‘Direct Rollover’. This will ensure that the account is transferred without being considered a withdrawal.

Still need help, or not sure where to find some of the information listed above? Connect your most recent 401k to blooom, become a member, and we can help straighten out all the confusion.

At the very least, add “fixing your 401k” to your list: I promise it’ll be easier to cross off than you think!


The information is provided for discussion purposes only and should not be considered as advice for your investments. Blooom does not provide tax advice. Consult a tax expert for tax-specific questions.


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A Slow Warm Up

Q1 2019 PastCast

Here’s all you need to know. (If you’re in a rush.)

  • Fear and market sell-off in December is a distant memory
  • Best start to the year for stocks since 1998
  • Brexit may never happen…or it might, but the impacts are impossible to predict
  • US economy continues to grow, although the pace slowed due to several unique factors including the longest government shutdown ever
  • Latest market jargon: “Inverted Yield Curve”
    All this really means is there may be an increased likelihood of the economy slowing down in coming years. “Typical” market behavior. Close to retirement? Here’s why you shouldn’t worry.

Let the good times roll!

It seems like just months ago we were talking clients off the cliff as the market seemed to be collapsing on a daily basis. That’s because it WAS just months ago, as 2018 closed out the year as the worst for the market since the crash in 2008. As we stated in our last PastCast, short-term market swings should be ignored by smart long-term investors. Paying too much attention can tempt investors to make very bad decisions with their hard-earned money.

So, what happened?

Just as investors began to panic and the sell-off of stocks accelerated, good economic news and the fresh start to a new year seemed to flip investor sentiment like a light switch. In a down year like 2018, where most investors experienced losses instead of gains, additional selling (usually by large institutional and high net worth investors) tends to pick-up toward the end of the year. Investors are trying to lock in losses that will help offset gains or reduce their taxable income for the year. In addition to that, we had a major mid-term election and a shift in power in D.C. Political gridlock seemed to spiral out of control as a result, and began what ended up becoming the longest government shutdown in US history. Yay us!

Unfortunately, the fear and panic caused by the widespread selloff toward the end of 2018 sent a lot of long-term investors to the sidelines (hopefully not you!), right as the market was hitting a bottom. What followed was the best January for US stocks in three decades, the best quarter for stocks since 2009, and the best start to any year for stocks since 1998. These past two quarters are a fantastic example of why trying to guess what the market is going to do in any short-term period is a losing game in nearly every example of a market decline throughout history.  

What’s this “inverted yield curve” everyone’s talking about?

While the first few months of 2019 have been terrific for the stock market, anxiety seems to be building among bond investors, thanks to a slightly alarming economic indicator known as the “inverted yield curve”. Here is what a normal yield curve looks like:



And an inverted one…


Though it sounds complicated (and looks complicated) there’s a pretty simple explanation to what we’re looking at here. “Yield” is just another term for “interest rate” essentially, and maturity is the length of time until the investor gets their money back. If interest rates on bonds are predicted to fall in the future, it means investors are anticipating a slowing economy. The reason this is particularly alarming now is that just about every single time this has ever happened, a recession has followed within two years. Sounds like a reason to dump your stocks, right? Per usual, our stance is a hard NO. It’s important for you to keep several things in mind with this:

Reasons NOT to panic:

  1. The economy and the stock market are not one-in-the-same and historically speaking, even if we are in for a recession (we always are at some point), recessions have occurred anywhere from 8-24 months following an inverted yield curve, so it’s anyone’s guess exactly if/when a recession may occur this time. Meanwhile stock market performance often does not align with economic performance and short-term pullbacks have provided fantastic investing opportunities for patient stock investors in every single case throughout our history.
  2.  If you’re closer to retirement, this is why diversification is so important. Keep in mind that only a portion of your portfolio is dedicated to US stocks, while the rest is there to help you weather any potential upcoming storms in the stock market.

What’s next… Keep calm and carry on.

  • While the Brexit circus across the pond had several key deadlines pass without any real resolution, global markets largely shrugged off the chaos. Depending on how this all gets sorted out, markets around the world may see significant volatility, or renewed upside. Either way, this is not something long-term investors should be focused on.
  • Trade talks continue between the US and several of its largest trading partners, including China. A looming deal/no deal between the US and China will certainly impact markets, but global diversification of your portfolio will help mitigate any short-term volatility. This will likely provide further opportunities for long-term investors that stay focused on what really matters – tuning out the noise and focusing on the bigger picture.
  • 2020 Election season is starting to heat up. Get ready for more political gridlock, dramatic debates, and tons of talk about how unique this election is compared to others. It may seem that way now, but they ALWAYS do. Remember this – there is hardly anything our stock market and economy have not been through already. Severe recessions, a Great Depression, multiple World Wars and costly ongoing international conflicts, political scandals and the resignation of a President, terrorist attacks, long periods of inflation and mortgage rates over 20%. We could go on and on…

Yet, the major market indexes like the Dow and S&P 500 currently sit just below all-time highs…To quote Warren Buffett, “All (of the above events) engendered scary headlines; all are now history”

Fun Fact! The average investor’s portfolio declined nearly 10% in 2018, amid market turmoil. Meanwhile, the S&P 500 index only declined about 4% for the year. (According to this article.)

The lesson? Investor portfolios tend to underperform the overall market year after year. That’s because investors are constantly making investment decisions based on emotion and the short-term. (According to this article.) In other words, market timing. History has shown that being patient, ignoring scary headlines, and focusing on maintaining your disciplined long-term approach to investing, is the most consistent recipe for investing success.


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Tax Benefits of Your 401k

Though benefits of saving for retirement may seem years away, there are some shorter-term positives that could have you doing a happy dance.

Saving money for your retirement has obvious long-term benefits. You’ve probably been lectured ad nauseum about how saving today will help your future self, and, while you may tire of hearing the message, it does make sense. Depending on how you view your time in retirement, it may mean not going to a full-time job, thus, not receiving a full-time paycheck. So the money you save today in your workplace retirement account will be there for you to use and to live on in those wonderful golden years. Super.

But, focusing on something that seems like it won’t come around for eons is frustrating. In the wise words of Janet Jackson, ‘What have you done for me lately?

I’m not trying to take away from the obvious long-term retirement savings benefits of being able to eat, have shelter and, hopefully, do things to enjoy those years in retirement. Those things are great. But there are also some possibly not-so-obvious nearer-term positives to retirement saving that should get you on your feet and boogying to the beat of the 401k contribution sound today. (Okay, I’ve been told that ‘401k contribution’ is not a musical genre, but it just felt right.) What I’m trying to say is that you don’t have to wait decades to reap the benefits of retirement contributions. There are some benefits to enjoy in the short term.


Pre-tax Contributions

Using an employer-sponsored retirement plan, like a 401k, to save for your retirement may allow you to take advantage of something called pre-tax contributions. Why is this a good thing? Pre-tax contributions are pulled out of your paycheck before Uncle Sam gets his income tax share, which may lower the amount of your wages in which you are subject to federal and state income tax. Depending on your situation, that may equate to paying less income taxes. [Sweet dance move here] In 2019, 401k contributions are deductible up to $19,000. If you’re age 50 or older you can add an additional $6,000 to that number for a total of $25,000 in deductible contributions. (If you’re contributing to a Roth 401k, it has different tax implications you’ll want to check out.)


Tax Deferred

Another advantage – postponing the taxes paid on any earnings in your retirement account. If you have a regular taxable investment account or a savings account, every year when you do your taxes you have to include any interest you’ve earned that tax year from those accounts. With your workplace retirement account it’s considered ‘tax deferred,’ meaning, you don’t pay taxes on the earnings until you take the money out of the account.


Retirement Saver’s Credit

And ANOTHER advantage – the Saver’s Credit. Depending on your adjusted gross income, you may be eligible to take a tax credit for your contributions to either a workplace retirement account or an Individual Retirement Account (IRA). To see if you’re eligible for this additional tax credit check out the IRS site for more information.

So while the long-term benefits of retirement savings may get all of the love (and the lectures), there are additional benefits that you can enjoy in the moment. So get out your dancing shoes and cut a rug in honor of those contributions. You’ve earned it!



Blooom does not provide tax advice. Consult a tax expert for tax-specific questions and to determine how retirement contributions may affect your personal situation.

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