by Ashley
Open enrollment season is upon us! As I think about electing benefits for the coming year, it really brings up broader financial goals I have for 2025 and beyond.
2024 Benefits Enrollment
In 2024, I maxed out my Health Savings Account (HSA), and kept a Flexible Spending Account (FSA) specifically for childcare. Because my employer also contributes to my HSA, my commitment out-of-pocket was $6,860 for the year. At this point, I no longer use after-school childcare, but I used my FSA for summer day camps. For summer 2024, I had $1,000 dedicated to my childcare FSA.
2025 Benefits Enrollment
Since the HSA cap has increased, I am planning to increase my contributions. For 2025, I will max out our HSA contributions to the tune of $7,110 for the year (again – my employer contributes, as well, which brings me to the max cap).
FSAs are only able to be used for children age 12 and below. While my kids are 12 right now, they will be turning 13 this summer. Additionally, I don’t have any summer camps picked out and the girls are getting to an age that they would rather just sleep in and be at home versus going to a camp (even though they’ve been lucky to do some really cool camps in the past – everything from drama camp to horse camp to sewing camp, etc.).
Also, with my childcare custody schedule, I only have the girls every-other-week, so I have less need for childcare in the summer. They’re gone half the time already as it is. I’m lucky to work mostly from home. The kids can be home alone if needed. And I want to prioritize spending time together as a family when they are with me. For all these reasons, I’ve decided NOT to enroll in a Flexible Spending Account for 2025.
Other Financial Goals
Thinking about and planning for these benefits makes me think of broader financial goals in general. For example, I don’t want to just have that $1,000 I would have had in an FSA come back to me in my paycheck. I’d rather invest it elsewhere.
And in general, my goal is to continue to increase my rate of savings and investing. My pie-in-the-sky goal is to get to a place where my savings and investments amount to approximately 50% of my paycheck. For that reason, my plan is to increase investments in three additional categories: 529 accounts, an optional 403b, and Fidelity Go account. I won’t be at the 50% threshold, but I want to incrementally work my way toward it.
529 Accounts – Pros and Cons
One of my savings goals is to increase the amount I’m saving for each of my kids for college. Currently, each of my daughters has a 529 college savings account where I make a modest monthly investment ($60/month/child x 2 kids). The PROS of a 529 is that the money grows tax-deferred and, if used on educational expenses, can be withdrawn tax-free.
The main CON is that the money in a 529 will incur penalties if not used for educational expenses. For me, this is something I need to carefully monitor. I work at a university with exceptional benefits. If I’m still working there at the time the girls go to college (which is the plan!), their college will be mostly covered as long as they attend an in-state school. While a 529 can be used for education, broadly defined (including trade schools, housing, food, etc.), I definitely don’t want to “max out” contributions because I would fear we’d get into a situation where the money isn’t able to be used and gets penalized when we withdraw it.
This begs the question – should I increase my contributions to my kids’ existing 529 plans, or might it make more sense to open separate mutual funds in each of their names?
Right now my contributions to the 529’s have been very modest ($60/month/child), but I was thinking of doubling this ($120/month/child). Would folks suggest staying on this route, or moving towards a higher-yield savings account and/or mutual funds for the kids? Remember – they are 12 years old currently.
Another option I’ve mentioned in passing – I’d really like to create an official LLC. I already have some light clerical tasks I could use my kids’ help with and if I can pay them from a business account, I could open up a Roth IRA in their names. I love this idea for them, but it does require a bit of hoop-jumping for me in terms of creating the LLC and then dealing with business taxes. Thoughts on this?
Optional 403b
I have 7% of my income automatically invested into my work retirement account. This is matched dollar-for-dollar for the full 7%, so in essence my retirement account contributions amount to 14% of my salary.
On top of that, I have historically invested in an optional 403b retirement account (this is just like a 401k, but for non-profit organizations like the public university where I work). I invest $215 per paycheck. I want to bring that up to $275/paycheck.
Fidelity Go
Finally, this brings me to my Fidelity Go account. This is my first account that’s just plain mutual funds – not tied to a retirement account, 529 account, HSA/FSA account, etc. I started depositing money into my Fidelity Go throughout this past year intermittently. I do not have an automatic withdrawal set up, and just move money over when my budget has allowed it. I’ve averaged investing about $50-100 per month.
I’d like to try to establish this as a more routine investment. And I want to stretch myself. I’m thinking of having an investment of about $200 per month.
Comparison Over The Years
2023 2024 2025 HSA: $5500/year $6860/year $7110/year FSA: $700/year $1,000/year $0 403b $125/check = $3250/year $215/check = $5590/year $275/check = $7150/year 529 $50/month/child = $1200/year $60/month/child = $1440/year $120/month/child = $2880/year Fidelity Go $0 $50/month = $600/year $200/month = $2400/year TOTAL $10,650/year $15,490/year $19,540/year
Investment Portfolio
In whole, the investment portfolio I’ve outlined above sets me up for saving/investing approximately $19k of my take-home income (in addition to the 14% in my main retirement account).
This is a bit of a stretch goal, but one I think I can meet. I’d like to get used to living on less, living below our means, and saving for retirement. My husband is set to retire in 7 years. Although he thinks he’ll probably still work a part-time job after retirement as a way to stay busy and fulfilled, I’m really starting to look toward the future. I realize retirement will be here sooner than we know. And although I still plan to work at that time, I’d love to have a hefty safety net built up in case plans change and we decide to move or I want to retire early, etc. I also mentioned before about an inheritance and plans to eventually invest in real estate with it. Right now, it’s conservatively invested while we wait to see what happens with interest rates in 2025.
I’d love to crowdsource ideas from the BAD community about these investment ideas and strategies. In particular, I’d love feedback on whether this seems like a well balanced portfolio. I’d also like feedback on my thoughts with the kids’ investments (i.e., 529 versus mutual funds versus Roth IRA). What am I not thinking about? Let me know!
Hi, I’m Ashley! Arizonan on paper, Texan at heart. Lover of running, blogging, and all things cheeeeese. Freshly 40, married mother of two, working in academia. Trying to finally (finally!) pay off that ridiculous 6-digit student loan debt!
I prefer to stockpile all extra non-retirement cash into a single brokerage account (with Fidelity) and track the balance allocations in a spreadsheet. This gives me the most freedom to save for shifting priorities and flex to life throwing a wrench my way (like a sooner than expected car or roof replacement) while still planning for emergencies, planned spending, estimated future college costs, etc.
This is a great idea
I think you may be using the wrong acronyms because you cannot have both an HSA and an FSA at the same time.
No, actually. My HSA is for healthcare (Health Savings Account). My FSA (Flex Spending Account) is for childcare, not healthcare. They’re both allowed.
how much do you have in their 529s” its impossible to have an opinion without knowing this
Not a ton – about $10k between the two.
I would keep contributing to at least have 35,000 each (that amount can be rollover to an IRA). 10k divided by two=5k…that is not that much, especially if you do the math on expenses related to college that your benefits (if you are still working there) won’t cover.(computer, books and supplies, lab material, safety equipment, computer softwares, internet access, and abroad programs’ costs)
Also, the penalty, its 10% over the earnings portion. So, yes, it sucks, but it is not that much.
in your case, out of those 10k, your earnings are probably not the entire 10k, but more like 6-7k, that’s a penalty of 600 dollars.
Any amount not used for education can be passed on to a relative, how cool to contribute to the college expenses of your grandkids?
my kids are your kids age, and we regularly save for their 529’s. They know about it, and they know the plan :-). As a mom, there is no better gift than to give my daughters the gift of education and the peace of mind of knowing we are working to cover their education’s plans whatever those are
Thank you for the incredibly helpful reply! It really helps to put numbers on it to put things into perspective!
I have a friend going through that right now, $100K in an unused 529 (athletic scholarship for college). There are workarounds but they are too late for some of them. I would diversify for sure.
Ouch, that’s a lot of money! I have a fraction of that amount in our 529s. But the point is well taken!
it can be used for educational expenses: computer, books and supplies, lab material, safety equipment, computer software, internet access, and abroad programs’ costs)
it can be roll over to an IRA
it can be used by a relative.
529’s are the best invention since sliced bread IMO
tell your friends to get creative and they will find a way to get that money used in a great way.
529’s can also be used to pay for room & board, an important thing to consider becasue most university employee benifits are for tuition only, not room & board! Where we live (Massachusetts) room and board on campus at UMASS is around 15K a year.
Maximizing your 403(b) contributions is one of the most effective ways to secure a strong financial future. By doing so, you’re not only taking full advantage of pre-tax income to reduce your current taxable income but also setting up a significant foundation for retirement with compounded growth over time.
How much money do you need for retirement and what does your retirement look like to you?
Some questions to ask yourself:
1.) Will you want to move to a lower cost-of-living state or country?
For example, “As of 2024, Mississippi holds the distinction of having the lowest cost of living among U.S. states. The state’s cost of living index is 83.1, indicating that expenses are approximately 16.9% below the national average. This affordability is largely due to housing costs, which are the lowest in the nation; the median price for a single-family home is $157,828, and the average rent for a two-bedroom apartment is $991.”
2.) Will you want to travel more? I’m not saying regular trips to Europe, but it could include that, but do you want to visit all of the national parks or enjoy weekends away regularly.
3.) Will you want to work a little bit to stay busy?
4.) Will you want to provide your children with big milestone financial gifts like a wedding, set up costs for their first apartment, home purchase…
There are a lot of what ifs and my wealth manager said it’s important to reevaluate these goals and plans every 5 years.
This is a good exercise to go through. How did you find your wealth manager? My husband and I have met with a couple financial planners (is that the same thing?), but haven’t found one I feel like is worth the investment. I handle our investments myself and feel like I’ve been doing a good job of it. I’d have a hard time paying someone’s fee to do basically the same thing I do for myself with a fraction of the fee through self-managed fund portfolios.
I’m not a financial manager, just a nerd hobbyist, but I thought I read that a mutual fund in the kids’ names is not a good idea as it would count against them for financial aid.
oh wow, this is really good to know. I’ll definitely look into this further!
so a couple of thoughts… you can set up custodial/minor accounts with fidelity. It will give you a place to put money for your kids (college, car, future house down payment, etc.). I have a 529 that I don’t want to put any more money in….so I make my kid put 1/2 his earnings (dogwalking) and birthday gifts in there.
I think we are about the same age. I feel like life is getting MORE expensive as my child ages, you might want to do some real budgeting in terms of future expenses, phone/cars/insurance etc. Everything is more expensive these days (cars/houses/clothes/food)!
We do have a financial planner. Worth the money in my thoughts. It was a lightbulb moment when I realized that they are NOT there to beat the market, but more to save you over time from the market dips as well. Don’t go with anyone that wants to sell you an annuity. Don’t go with anyone who does not CLEARLY spell out how they make their money. They also have forecasting tools that are amazing (like 100 different market scenarios and how your money will fare.)
Finally, There is a retirement theory that there are the “go-go” years (where after you retire you might actually spend MORE money than you do now), the “go slow” years (things level off), and the “no-go” years (things get very slow). There is a LOT of budgeting involved. (a search will give you plenty of podcasts/you tube info).
Make sure you are not being to frugal. You don’t want to “rebound”. You are in a very different situation than the other blogger here. Also, I hate to be morbid, but you don’t want to save crazy money to then have a life event change everything.
Wow! You’ve given me a lot of food for thought! Thank you for taking the time to leave such a detailed message! This makes me feel like we need to go and interview a few more financial planners before just throwing the towel in on that idea!
I am not American and have no kids so all this confuses me – BUT you have some solid advice here to work with. It seems like your kids healthcare is covered and the goal is to ensure they do have money for college if they choose to go that route! But to make sure they incur no penalties at the same time, yeesh.