Nearly Half of Millennials Take This Huge Risk | Nasdaq

Thanks.

I have an “action figure” Ben Franklin. You press his chest and he gives you pithy sayings from the 18th and 19th Century. One is: “An ounce of prevention is worth a pound of cure.” He was talking about fire fighting. Did you know Ben was a moving force (sometimes with others) for fire departments, libraries, etc. The variety of his interests is demonstrated by his discovery of the gulf stream.

Anyways, young folks are invincible. Just ask them, they will tell you.

However, the Motley Fool article was misleading. A statement describing the actual study results said: “About the same percentage of millennials (49%) have put off having a medical procedure, compared to 41% of baby boomers.” NO, the question asked was not “postponed medical treatment”. INSTEAD, the actual question was about whether you would “put off having a medical procedure”. The former sounds like a diagnosed medical condition where medical treatment was delayed due to financial constraints, while the actual question would include that, yes, but also lasix, preventive and diagnostic procedures.

YES, people of all ages should develop a saving habit. NO, because too many Americans of all ages (including retirees) live paycheck to paycheck or social security check to social security check, those folks should not save by earmarking specific monies for expenses that may never arise. Here, obviously, we are talking about someone who has no assets. Similar to those of us who have accumulated savings, we all hear the salesperson’t pitch to fund: A kid’s college savings account, a 401(k) for retirement, an emergency account for income dislocation/variability, a vacation account, regular periodic living expenses, a new car, a home, etc., etc.

Great example of a specific use savings account MISTAKE is Maurie’s recommendation to save in a FSA, which, of course, is subject to “use or lose” requirements at the end of each plan year.

People forget the large role taxes play in inhibiting our ability to save. If you earn $100, maybe you will have $65 or $70 after taxes (federal, state, local, FICA and FICA-Med). Instead, to become a savvy saver, look to leverage programs that provide tax incentives to save (that make saving easier), programs that include employer financial support (let them carry some of the burden on their bigger shoulders), programs that allow for tax free liquidity (loans) and programs that allow for tax preferences when monies are actually used – if only by giving a person the opportunity to time the payout to minimize taxes.

Best option may be to start with your 401(k) or 403(b) plan. Contribute pretax (so that the federal and state income tax withholding goes into your account). If you contribute $100 pre-tax, and if the employer match is 50%, you get $50 of the employer’s money. So, after that contribution, your account balance is $150, but your net pay declined maybe only $75 (the other $25 are federal and state income tax withholding you DELAYED). So, yes, your employer matches the withholding taxes you did not pay today. Then, if your plan has a loan feature, you can typically borrow up to 50% of your vested account balance, and, yes, you again get to include the withholding taxes you delayed paying in calculating the amount you could borrow. If you’ve recently joined the plan, the correct plan design would allow you to borrow the entire $100 (if your account balance was less than $10,000) plus the $50 employer contribution if it was vested on the first day. Most plans use a $1,000 minimum, but well designed plans allow for loans of smaller amounts to address financial emergencies (and they may waive an loan fees, too)! Later, you might consider tax diversifying your account with Roth 401(k) contributions or an in-plan Roth conversion.

For comparison, had you taken the money after taxes into your paycheck, you would only have ~$75 for emergencies.

The calculations are different when it comes to Health Savings Accounts. If you are eligible, yes you should contribute. Very few folks will save in a Health Savings Account more than they will need in terms of current year and future out-of-pocket medical and long term care expenses, COBRA and long term care insurance premiums, Medicare Part B and Part D premiums, etc.

Since many HSAs have employer contributions, too, the best option for preparing, for saving, may be to contribute to both the HSA and the 401(k)/403(b) – and do it when first eligible, before medical and other needs crop up.

Don’t be foolish too.

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