Welcome back to Portfolio Rescue, where, during bull markets, we had questions about leveraged ETFs, and during bear markets, we had questions about bonds and Roth IRAs. So, we'll see if that transition happens. We're still in the latter half, in terms of questions, but we'll see if that changes, because things have been going a little better lately.

Yeah, I'm feeling good. How are we feeling better? Good? Yeah, yeah. Feeling good. You know, it's funny, because everyone says, "Why should the stock market change just because the calendar flipped to a new year?" And look what happened. It worked. That's all we needed to do, change the calendar.

Is this still the Santa Claus rally? I think this is just the New Year's Resolution rally. So, we're going into February. Things are going well. Just remember this feeling the next time stocks are down like 10% in a month. It could happen. Alright, let's do some questions. Okay. Up first today, we have a question from Larry.

"Without getting into the politics of throwing the U.S. government into default, the threat is very real. How about a discussion on how retirees should position themselves to protect their portfolio? Us old guys don't have years to recover from a political sabotage of the markets and the economy. You know old folks read and listen to your stuff too!" Yes.

Fair point, Larry. I think our YouTube audience definitely eschews younger. I think podcasts, if we're doing an over-generalization here, are probably more Gen X. And then, my blog actually does have a decent percentage of baby boomers. How do I know this? Because a lot of them ask me, "How do I print it out on regular paper to read it?" So, that has to be boomers, right?

I would think. Obviously, there's some overlap. Okay. So, obviously, the market doesn't seem to care about the debt ceiling. Now, as of this recording, I got the S&P up almost 9% year-to-date. NASDAQ 100 up almost 17% in 2023. Bonds are also rallying. So, the stock market doesn't care about the debt ceiling debate yet.

I think part of the reason the markets don't really seem to care is because -- we've been through this before. It's basically political theater. I think a lot of it, the debt ceiling stuff, is just, it makes politicians feel important. They use it as leverage. It's a negotiating ploy.

Could we see some crazy politician get into office and take this too far and possibly lead to a default? It wouldn't surprise me with the people that we have as our politicians these days. But I think a default caused by a politician, that's not like some crazy financial crisis.

Be careful there. We have people on Capitol Hill that watch the show. I know. I'm just saying, could someone take it too far in the future? Yes, I think. But that seems like a more of a short-term problem than a long-term one to me. But even if you know how badly a politician's going to screw this up someday, I don't know that you could position your portfolio for it.

So back in the summer of 2011, Standard & Poor's downgraded the U.S. credit rating, right? This is from -- it felt like a big deal at the time. This is from a BBC story at the time. I'm going to read this. One of the world's leading credit agencies, Standard & Poor's, has downgraded the United States' top-notch AAA credit rating for the first time ever.

S&P cut the long-term U.S. rating by one notch to AA+, with a negative outlook citing concerns about budget deficits. Correspondents say the downgrade could erode investors' confidence in the world's largest economy. It's already struggling with debts. Unemployment of 9.1% and fears of a possible double-dip recession. The downgrade is a major embarrassment for the administration of President Barack Obama and could raise the cost of U.S.

government borrowing. This, in turn, could trickle down to higher interest rates for local governments and individuals. That sounded pretty scary at the time. I think a lot of people were worried about that, right? John, let's do a chart on bond returns over the ensuing year. Bonds went nuts after this happened.

Long-term Treasuries were up almost 30%. The AG was up over 6%. Ten-year Treasuries were up over 10%. Now, why did this happen? Interest rates actually fell. And they not only fell a little bit, they fell a lot, and they fell immediately. So, this is the 10-year. You can see, look, it dropped almost immediately from the time they downgraded the credit rating.

It was like 2.6%. It went down to 1.4%. And, okay, how about the stock market? Things did get weird in the stock market in the short term. So, the Monday after the downgrade -- and I remember this period, it was crazy -- the stock market fell 6% in a day.

Right? John, you can do a chart off for a sec here. I'll get back to this one. The day after that, it was up more than 5%. The day after that, it was down more than 4%. And the day after that, it was up 5%. This is back-to-back-to-back-to-back days of down 6, up 5; down 4, up 5.

It was a crazy week. Lewis: Michael Scott would call, "Snip, snap, snip, snap." Lewis: To be fair, at the time, we were going through the European debt crisis. People were worried about a double-dip recession. We were already in the midst of a correction. And the stock market actually bottomed in October.

So, John put this up. This is including that down 6% day to start things. The S&P was up almost 20% a year later. So, the stock market did not really care. Could we see some short-term volatility if we have a prolonged debt ceiling discussion and debate and close to a default?

Sure. Markets could get spooked. But I think that has more to say with the current trends and rates and economic growth and the stock market and what's happening than the political theory in D.C. Maybe people would use that as an excuse. We have a huge rally here, and then the politicians decide they want to do something crazy, and that causes some stock market volatility, and we see some short-term volatility.

Sure. Does that mean you should change your portfolio because of it? No. Short-term volatility in the markets is always going to be a thing. That's always a risk, whether it's political, economic, or otherwise. So, I don't think you change your portfolio because of it. I think you always have your portfolio gauged to figure out that short-term risk.

The other thing to mention here, every time this happens, people complain about how much debt we have in this country. So, John, do a chart on. This is the U.S. debt clock. Now, this looks like a website from 1994. It's still going. You can calculate all this stuff on this debt.

You can see that I highlighted here that U.S. national debt is more than $31 trillion. That sounds like a lot of money. Now, I'm not even going to try to figure out how much the United States is worth in terms of assets, beyond the tax revenue we're bringing in.

I think I've seen estimates that, if you include all the land we own, like federal land and state land, I think the U.S. government owns 25-30% of all land in this country. So, if you really wanted to offset the liabilities with the assets, the United States has a lot of assets.

But, even beyond that, let's look at the interest we pay as a percentage of GDP. So, John, chart on here. This is interest expense as a percentage of gross domestic product. Look back in the 1980s and '90s. It was way higher than it is today. It's going up because rates are going up and debt has gone up.

But, we're still able to service this debt, even with higher rates. And, obviously, the debt was much lower back then, but rates were higher, and GDP was obviously much lower. So, John, throw up the next chart on GDP. This is the latest GDP reading as of Q4 2022. $26 trillion and growing.

And it's not like the GDP is an accumulated amount like the debt is, right? GDP is something that we produce year in and year out. So, this year, it's probably going to be bigger than $26 trillion, if it looks like the economy is on strong footing, which it is.

So, I know that the debt number is scary, but I just think that people have been worrying about government spending forever. This is a cover story from 1972 in time. Is the U.S. going broke? I think as long as the economy continues to grow, federal debt is going to-- That's a good cover.

It really is. And people were scared. This is 1972. I think as long as the economy continues to grow, and federal debt is going to grow as well, as long as the pie gets bigger. And, unfortunately, unless the politicians get rid of the debt ceiling thing, it's always going to be an argument every few years when we get to this.

So, I think you have to get used to it. But I also think that people probably worry too much about government debt and the implications that it could have. I think this is something that we're going to look back at another 10, 20, 30 years, and it's going to be, I don't know, $70 trillion, and people are going to go, "$70 trillion is too high!" I think people just have to get used to it.

If debt is growing, it probably means that the economy is growing as well. And that's a good thing. - Also, can't we just make a giant platinum coin or something? - Sure. Pay it off. Here's the other thing, though. I've seen people say, "We should get rid of all debt.

Just abolish United States debt. Get rid of it. Pay it all off." That debt is an asset to someone else. Retirees, pension plans, who own bonds, who own treasuries, those liabilities that the United States is creating is an asset for someone else. Those T-bills you're earning 4 or 5% on right now, which we're going to talk about in a few questions later here, that's an asset from U.S.

government borrowing. So you take that away, then we don't have any bonds for people. I mean, you have to go further than risk for bonds, different types of bonds, but those are assets, too. - Right. - Let's do another one. - Okay. Up next, we have a question, I think, from Twitter?

- Yeah, someone on Twitter posted this. - Okay. "What's it going to take to right-size the Treasury yield curve from its current inverted state? Isn't that what we're all waiting for, when 10-year and 30-year Treasuries have higher rates than 2- and 5-year? Also, why do we need or want that?

I presume it's because it signals that the markets think long-term returns will be higher than short-term returns, but I'm not entirely clear on it." - So he's staying on the theme that bond questions are coming in hot and heavy lately, still. - Right. This is a question I've seen other people have before, too.

- So, John, give me the chart of the change in yield curve. This is over the past 13 months. The blue curve on the bottom, that's as of 12/31/2021, so 13 months later, the gray curve happens. You can see the bottom curve, it's upward-sloping. So shorter-term yields, 1, 2, 3, 6-month T-bills, are much lower than longer-term yields, 10-year, 20-year, 30-year.

Now look at the line above it, the gray line, that's as of February 1st. Shorter-term yields, 1 month, 2 months, 3 months, 6 months, are much higher than 3, 5, 7, 10, 20, 30-year Treasury bonds, right? And you can see that upward-sloping curve, that's the normal, that's what we want.

And that makes sense, because why? You should earn higher rates of return when you extend your time horizon and fixed income, because you're taking on more interest rate risk, more inflation risk, more economic risk. More things can happen the longer your time horizon goes, and not always in a good way, so investors typically require higher yields for going further on that risk curve.

And now that it's inverted, that doesn't make any sense, right? Because you're being paid higher yield to take less risk, and the people further on the risk curve are being paid less. So typically, you use the yield curve as a way to gauge the health of the economy, right?

When longer-term yields are higher than shorter-term yields, that typically shows signs of healthy economic progress, right? People think things are going to get better in the future, higher growth potentially, higher inflation, things are going to be better. An inverted yield curve, or narrower yield, signals that things could get worse.

And if you look back at it, it's got like an 8 out of 8 in terms of predicting an oncoming recession. Yield curve inverts, in the next, call it, 6 to 18 months, we get a recession. Today, I think things are a little trickier because of the role the Fed is playing here in the yield curve.

So Cam Harvey is the guy who -- the Duke professor who came up with this signal, actually thinks it might not work this time. So John, he wrote a research piece -- throw this up here real quick -- he gave some reasons why he thinks his own signal, the inverted yield curve might not work, and he talks about the strength of the labor market, the fact that people being laid off, especially in the tech sector, are finding jobs much easier because they're more highly skilled.

Consumers are just in a much better position. The financial sector is much healthier, and they've taken steps because of the regulations to be fine. And obviously, the Fed. The Fed is the one that is increasing short-term rates. And so I guess that explains what's going on in the yield curve.

But what's going to happen to bring it back in line? Well, I think the easy answer just is the Fed. Long-term yields don't seem to believe that inflation is going to be a long-term problem, and so they haven't moved up much at all. So we have 30-year yields that are basically the lowest on the whole yield curve.

So I think a recession would probably help us get back there, unfortunately. Maybe inflation falling a little bit would help, too. But it's basically the Fed lowering short-term rates. That's what's going to have to happen unless inflation continues to -- starts going back up again and long-term rates decide to go up.

It is kind of crazy, though, if you think that. We had 9% inflation, and long-term bond yields didn't go much above 4%. So if that's not going to do it, I don't know what is. So it's basically the Fed. The Fed is going to have to lower short-term rates.

That's going to take us out of an inverted yield curve. Harjes: It all comes down to the Fed. Lewis: Everything does, right? Harjes: Seems like it. Lewis: This is a nice segue into the next one, which I think is kind of related here. Harjes: Up next, we have a question from Matt.

"Everyone is talking about T-bills paying around 4%. But why would you lock up money in T-bills for 2, 10, or 20 years when you have these high-yield savings accounts paying out basically the same while keeping your funds fully liquid? I've researched it and have yet to uncover some catch.

They're FDIC-insured, and the biggest downside I found is that they're typically online banks and don't have physical branches or their own ATMs. So you have to sync up a regular bank account to transfer money, which takes about five minutes. Am I missing something? Why would you purchase T-bills when you can get the same returns with one of these high-yield savings accounts?" This is a good question.

Lewis: We've been getting, actually, a lot of questions like this. Some people say it's crazy to keep your money in a savings account when T-bill yields are actually higher. Some people say it's crazy to go through the process of buying T-bills when savings accounts are easier. That's what this one is saying.

Before we get into that, I need to give some nerdy bond definitions to this person here. Matt, just so you know, you can't call everything a T-bill. T-bills have a maturity of one month to one year. Treasury notes or Treasury bonds have a maturity of two years to 30 years.

The way that it works is, the biggest difference is if you buy a T-bill, you say you want to get $1,000, you put $950 in on day one, and let's say you buy a 12-month T-bill, a year later you're going to get $1,000 at par. You don't actually get those coupon payments like you do from a bond or a Treasury note.

That's the difference. I just wanted to make sure our guy knows what he's talking about here. If he's going to school someone, he knows his T-bills versus T-bonds. That's how that works. The good news is, because of the Fed's actions, these short-term rates are about as attractive as they've been on a relative basis in decades, I guess.

So John, do a chart on. This is three-month T-bill yields versus 30-year Treasury yields, right? So you can see the changes over time. Obviously, they've been falling. This is since 1981. So I calculated the difference. So going back to 1980, early 1980s, the average difference between long-term yields, these 30-year Treasuries, and short-term yields, which is three-month T-bills, the average yield has been a little more than 2% higher for long-term rates, right?

Long-term rates have averaged 2% more than ultra-short-term rates. Right now, T-bills yield 1% or more than 30-year Treasuries, which is basically the highest I could find in that time frame. So in over 40 years, this is the highest spread between ultra-short yields and ultra-long yields. So that's pretty good.

So anyone parking their cash in money markets, CDs, savings accounts, and I'm talking online savings accounts here, not necessarily bank savings accounts and T-bills, are being given a gift from the Fed right now. So you don't have to take a lot of risk on your cash right now. So which option is better, an online savings account, T-bills, maybe money market, or CD?

I think they all have pros and cons, and it probably doesn't really matter. T-bills' yields currently are higher than online savings accounts. So we're talking 4.5% to 4.6% for T-bills right now, depending on what month and what duration we're talking. And I've found 3.3% to 3.5% for online savings accounts.

So that's a pretty decent, you can get over 100 basis points more in T-bills. And you can buy those T-bills directly from Treasury Direct, from the government, or you can just buy any of them. Not to brag, but my high-yield savings account is paying 4.03% right now. 4.03%, okay.

That 0.03% is important. Okay, so you're earning 4%. You've told us it's some ... Are you sure this isn't a Ponzi scheme? No. I mean, who knows? But yeah, they're not so far. No, 4% is ... Because T-bills are where they are, that makes sense, right? And as the Fed continues to raise rates, these rates should continue to go ...

Because the Fed just raised another 25 basis points yesterday. So online savings accounts are probably easier to deal with in terms of moving cash in and out of your account. That's, for me, the ease of access, I think, is the biggest thing for me. Both of these yields can and will change.

So if the Fed keeps raising rates, they're going to go up. So again, if the Fed does another 25 basis points at the next meeting, these yields are going to continue to go up. And even if bond yields on the longer end don't move, these are going to have to follow the Fed funds rate, even if they don't follow it one for one.

So you could lock in higher rates with CD yields, because these yields are going to fall if the Fed does decide to cut rates and take us out of the inverted yield curve. These rates are going to fall, too, and probably in a hurry. They're going to go down a lot faster than they went up.

That's for sure. So when the Fed does decide to cut rates, whenever that is, it's going to happen. But as long as you don't have your money sitting in a brick-and-mortar bank earning 20 basis points right now, I don't think it really matters all that much. If you have T-bills or online ...

It's probably not that much of a difference. Yeah. Years ago, my PNC account, a couple years ago, was like 0.01%. It was like what the savings was getting. Especially if you're buying an ETF, there's a T-bill ETF, you're not locking your money up in that. You're not necessarily locking it up.

Even if you buy the actual bonds, you can still sell them at a premium discount. To be clear on that, that's something I don't quite understand. Is the yield on that ETF going to be the same as what the actual T-bills would be yielding? Or will there be a spread?

It's going to be pretty close. Depending on the day you buy the actual T-bill, it might be a little more or less. But the T-bill yields right now on those ETFs are pretty close. I would just say enjoy this while it lasts, because the situation where short-term rates are way higher than long-term rates, it simply can't last.

The Fed can hold on for a while, but that's not normal. So I'd say just enjoy it while it lasts. Good advice. All right. Let's do another one. Up next, we have a bit of a bummer, but it's a good question I think a lot of people can relate to.

It's from a longtime listener. I'm not going to name them because of the topic. This question is, "My mother recently told me a story about a family friend. Let's call her Anna. Anna and her husband were well off, fully paid off house, and about to enjoy their golden years.

No kids and a sizable nest egg. Anna's husband, probably due to some kind of dementia, began to compulsively gamble. Anna knew next to nothing about the family finances, as her husband had done a good job managing the books for their entire marriage. He gambled everything, from their retirement funds, to jewelry, to the title of their car.

Long story short, they lost everything, and he disappeared. She ended up dying alone in a cheap nursing home paid for by Medicaid. My parents are getting up there in age, and I wonder what kind of safeguards I could help them put in place in case something happened to them mentally.

For instance, how do I make sure they won't get cleaned out by a Nigerian Prince email scam?" This is something that you don't really think about. Longevity is a huge risk in retirement, but people don't think about the fact that you could have huge cognitive decline. Part of that could be because some sort of brain problem.

You have dementia, Alzheimer's, or something, and that's something you have to think about. To me, this is very much a financial planning question, more than anything. Let's bring in a financial planner. Kevin Young has been on the show before. Hey, Kevin. How's it going? Hey, Kevin. Hey, guys. Thanks for having me.

My sister-in-law was recently telling me a story about someone in her family who skimped and saved, didn't take any risks their entire career, worked for 40 years at the same company, saved six figures, was ready for retirement, and the first week they retired, handed their money over to someone who turned out to be a scam artist and took their life savings.

Unfortunately, the people with the biggest targets on their backs for some type of scam is people with the most money. The people with the most money tend to be older people. These are risks that you don't really think about in terms of people worry about interest rates and all the other stuff, people, debt defaults, and recessions, and all this other stuff.

This is a true problem for a lot of people. As your faculties decline with age, it's much easier to get taken advantage of. Kevin, what are some ways to, if you're looking at your parents and saying, "Listen, I just want to make sure that we keep them safe and their money safe.

How do we do that?" What are some safeguards we can put in place? This is a really tough situation to hear about. It's hopefully avoidable for a lot of people. There are some aspects to this. That's obviously a very extreme case, but even in a less extreme case where the money just isn't being managed properly.

Maybe the person, "Okay, well, my husband or my wife has always taken care of this, and as time goes on, you think everything's still being done properly, but oops, the person in charge of it hasn't switched you out of being 100% equities in 20 years." Maybe that worked out really well, but it's not going to work out so well into the teeth of a 2022 if you're retired.

As little as the portfolio just being managed properly out to this obviously very extreme case of the money being all gone, there are a couple of things you can do at increasing levels of security. The first thing they could do for your parents is if they've got a brokerage account, an industry-wide thing now is something called a trusted contact.

That's somebody that could be yourself, it could be a family member, somebody you trust that is just privy to the very basics of the account. The person would have no control over the account. They can call up and make any changes. But for me as an advisor, if I have a client that calls me up and asks me to do something kind of out of character, let's say they're living on $10,000 a month and they call me up and say, "I need $100,000 right now.

Wire it right away." If that person's son is on the account as a trusted contact, I might call the son and just say, "Hey, got this request from your mom and just seemed a little out of character. Is everything okay?" They can't stop the withdrawal, but that might be somebody who can just sort of put out a speed bump and call and make sure everything's okay.

And that way as the advisor and certainly as a loved one, you're aware of what's going on. Well, that to me sounds like another form of diversification. So we talk about the perils of concentration in portfolio investing. We've had a lot of people come to us and say, "I've been managing the finances my whole career.

I want an advisor because I want the rest of the family to understand that something's going to be okay if I get hit by a bus or I keel over or I get dementia or whatever it is." So I think that, to your point, it's kind of diversifying the people involved in the account and maybe just opening up the lines of communication to other people.

Yeah, exactly. I talk a lot about, and I stole this line from one of our other advisors, Paul, but we talk a lot about eliminating a single point of failure. And in some cases, that might be working with somebody that is all by themselves in an office. I've seen it before where somebody has an accountant and the accountant dies suddenly and he never had an assistant.

Nobody has any clue where his files are. It's a huge mess. Similar to, "Hey, my dad always managed the account and now he's gone and nobody knows the passwords. Nobody knows where the money is," et cetera. So eliminating that single point of failure is really important. The next layer of protection you could do is if your parents are good with it, either they can have power of attorney on each other's accounts or they could name a sibling, somebody else, again, somebody who is responsible.

The power of attorney takes the trust of- Not to brag, I'm the power of the attorney for my parents and my in-laws as well because I'm the finance guy. There you go. And probably Michael's accounts too. So the POA is a step above that trust of contact. That person actually can make changes to an investment portfolio.

They can stop a withdrawal. They can take money out, in and out, et cetera. So that person you definitely want to make sure is somebody that is of sound mind and is accountable. The next level of that is sort of the same thing, but it would just be a trust.

If you don't have somebody in the family or you don't want to take on that burden yourself or put that on your mom or your dad or vice versa, you can hire a corporate trustee. You could either hire a corporate trustee or again, have somebody that you trust do it.

And basically you just put the assets in a revocable trust. I'm making this way simpler and sound easier than it actually is and probably less expensive. But having that trustee there to make those decisions and make sure that things are being done properly is a good way to go.

That's just a legal document drafted up by an attorney? Yep, exactly. And you would need an attorney to do a POA as well. So an attorney would probably be a very good person to talk to about this kind of stuff and figuring out ways to protect assets from a variety of potential issues.

And then the last thing being, and I'm kind of talking my book here, but a fiduciary advisor. This again, serves two purposes. One is you're removing that single point of failure just from an asset allocation perspective, to say nothing of the extremes of the money was misused. But I know in our case, if something like this starts to happen and the advisor sees odd behavior or sees things that don't look quite right, we have safeguards in place as a firm, as do good fiduciary advisors across the country.

They will go to their compliance officer and say, "Hey, something's up. What are the steps we need to do to make sure that this is all okay?" That all goes back to making sure again, having a good trusted contact, having people in place to help you out with these things.

I do think the first step could be, I agree with you on all those. Outsourcing is the big one, obviously. But just having a conversation, I think money is such a taboo subject. Most people probably don't have those conversations with their kids or vice versa with their parents. Taking that first step and having the conversation, saying, "I want to be involved.

I want to help," just in case something does happen to one of you or both of you. I think simplicity is the other thing. If you just reduce the number of accounts that you have, don't have accounts all over the place, maybe reduce the number of holdings. If you have fewer funds in your portfolio, I think the simpler the better in terms of the plan and the process.

I think all that stuff can help too, so it's easier if someone else does have to take over. But yeah, it's scary to think about this stuff, but people my parents' age, they've got two or three different friends from college that they've known their whole lives who are now in nursing homes because of some sort of Alzheimer's or dementia.

This is the kind of thing that you'd never want to see happen to someone you know or love, but it's a real possibility. Yeah, and a lot of people, you're right. A lot of people, I feel like my parents' generation, and I'm generalizing here, so I apologize if I offend anybody, but it's not a generation that really talked about money a lot.

Oftentimes, bringing that third party in, whether it be a trustee or a financial advisor, can just help to make those conversations a little less emotional. Yes, right. Yeah, even outside third party that can look at it objectively, I agree, because if you keep it in the family, it can make things tough.

Yeah, I'm sure whatever emotional issues or cost of setting something like this up, I'm sure this person in the example would have gladly spent that either emotional or actual capital to ensure that this didn't happen. It seems like in a lot of cases, people wait until it's almost too late, where it's a really awkward or difficult conversation to have.

Someone's already having cognitive decline, and so it's kind of like trying to get someone to give up their keys to their car when they're no longer fit to drive. Yeah, it seems like this works so much easier if someone has the forethought to go ahead years in advance and say, "Okay, just in the event something were to happen, I want to go ahead and make sure that this is taken care of," because otherwise it becomes kind of a messy situation, it seems like, or has the potential to become one.

Right. I've already said it. If I decline cognitively, Michael cannot day trade anything in my portfolio. It's all target date funds. That's it. Roger in the chat said that he wanted to make you his POA. All right. Bring it, Roger. All right, let's do one more question. Last but not least, we have a question from Alex.

Is the HSA underrated and underdiscussed as a retirement vehicle? The 2023 family max is $7,750. If you use HSA funds for non-healthcare expenses in retirement, those funds are treated like a 401(k). No penalty, but you pay income tax. In 2023, a maxed out 401(k) in HSA is over $30,000, a significant sum for tax-deferred retirement investments.

The HSA allows you to supplement your 401(k) contributions by another 34%. Obviously, HSA funds used for health-related expenses come out as tax-free as well, which is a huge bonus. But I've never heard anyone discuss the HSA as a second 401(k), given its tax treatment in retirement. Would love to hear your thoughts.

This is what they call a leading question. I have to be honest, I don't utilize an HSA, and for the simple reason that it feels like I have too many accounts already. But I know that there are people who ride or die for these things. So, Kevin, what are your thoughts?

My wife has one, so I'm an expert. Okay. I'm just kidding. I don't understand. Ben, you have a bunch of kids. I have a bunch of kids. The HSA is, forget for a retirement vehicle, they're great for young families too. Because as we know, even if you've got great health insurance, that deductible has got to get hit.

And if you've got money set aside that comes out of the paycheck every couple of weeks, it's a really nice thing to have as a father of three little kids who visit doctor's offices as a sport, apparently. But to the question around using HSA as a retirement vehicle, I've got a graphic I wanted to throw up.

John or Duncan, perfect. Thank you. One thing to think about is just that people have it in their minds that retirement is, "Oh, healthcare, the government's going to take care of me. It's Medicare. No problems." I don't really have to think about it. Out-of-pocket medical expenses in retirement are a real thing.

They're not insignificant. Yes, you get your Part A theoretically free. Again, it depends on where you are with tax brackets. But that basically covers if you're in a car wreck and need to go to the hospital. It doesn't cover much else. Then you've got your Part B premium, then you've got your Medigap, then you've got your prescription drugs.

All that can add up to $13,000, $15,000 a year for a married couple. All of a sudden, you start to think, "Well, $15,000 a year." And even before this recent bout with inflation that we've all been living with, if you looked back pre-last year, the things that were inflating the highest, healthcare was one of them.

Healthcare and education and childcare, which is great. But for a retiree, having a bucket of money that you can say, "Hey, this bucket of money is going to be specifically for my healthcare." I think mentally and emotionally, that makes a lot of sense and gives people some comfort knowing that, "Hey, if there are out-of-pocket costs, I'm not dipping into my 'real' retirement funds." Obviously, it does seem like one of the biggest selling points here is just flexibility.

If you need to spend it on healthcare, you can, and it's tax-free dollars. If you want to carry it over and use it for that extra retirement boost, you can too, and that's not a bad option. Yeah, exactly. It is flexible. Obviously, the triple tax-free aspect of it, getting a deduction, the money grows tax-free, and then when you pull it out for healthcare needs, it's tax-free.

That's wonderful. To this person's point, if you don't use it for healthcare issues, yeah, you could use it for retirement. My only pushback on that would potentially just be around why you wouldn't fund other types of accounts, whether it be a backdoor Roth. If you're already maxing your 401(k), it probably means you make too much to do a regular Roth, so maybe a backdoor Roth, or maybe just putting in a regular taxable account that, down the road, you're going to pay long-term capital gains on instead of ordinary income, which you would on the HSA if not used for healthcare.

Now, even though I bad-mouthed politicians earlier, if someone wants to make me the financial retirement czar, I would just say, "Let's just make these rules generalized to all retirement accounts. Put the HSA, and the 401(k), and the IRA together, and the Roth, and just put it all together. Give them all the same rules.

Give everyone the same contribution limit. Let's make it easy." I'm getting roasted in the comments here for not having an HSA. I just want people to know here, I have a SEP IRA, too, so I'm taking advantage of as many tax deferrals as I can. If I fill that bucket up, maybe I'll look at an HSA sometime.

- Also, you have a Roth for each of your kids, right? Because they help out with your work. - Yeah, right. Something like that. - They're holding the boom above their head. - Right, right. - But I can definitely see the benefits of the HSA. It makes sense. My daughter had to get braces this year.

Could you do dental out of this, too? Does that count? - Yeah, yeah. Maybe you can tell, this side of my face is a little puffy because I just had a tooth extracted on Tuesday morning. I'm sure that's going to go over the yearly limit on our health care.

- Should I use some tax-free dollars to pay for my daughter's braces? - Yeah. I got my HSA ready to go for that bill. - The only catch, if there is a catch, is that you just have to have a high-deductible insurance plan, right? - Correct. Yep, yep. Exactly.

High-deductible health care plan. - See your tax return, Duncan. - I wasn't kidding. My wife does have one, so I know a little bit about them. - Yeah. High-deductible health care plan. Again, I think if you're a young person starting a family, I can't recommend them enough because having children, the actual act of having children is extremely expensive.

Raising them is expensive. Doctors are expensive. You never know what's going to come down on you. It's a great thing early in life, and if you don't need it, and some of that money compounds for 35 years, you're in really great shape. - All right. Great questions today. We appreciate everyone who always writes in.

It is kind of nice. We get a total diversification of questions. It's always something new that people are keeping us on our toes, right? - They're great questions. I love these. - After this week, I'm anticipating a bunch of TQQQ and biotech questions for next week. - Yeah, but those are all coming from you, Duncan.

- That's true. - So, remember, hit that subscribe button. Idontshop.com for compound needs. Compounded friends tomorrow. Tune in, and we will see you next week. - See you, everyone. (upbeat music)