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Matt Bell

Matt Bell

Managing Editor

Matt joined SMI in 2012. He leads SMI’s content strategy — managing the company’s monthly editorial calendar, writing many of the articles, sourcing content from outside the company, and either writing or overseeing much of what appears on our website. He also represents SMI in various radio guest appearances.

Prior to joining SMI, Matt was an independent biblical money management writer and speaker. He is the author of four personal finance books that were published by NavPress, including Money and Marriage: A Complete Guide for Engaged and Newly Married Couples and The Grad’s Guide to Money (written for high school seniors and college freshmen). He does some outside speaking as well at churches, universities, conferences, and retreats throughout the country. Matt has been involved in stewardship ministry since 1990 when he began serving in the Good $ense ministry at Willowcreek Community Church.

Matt earned an undergraduate degree in Journalism from Northern Illinois University and a graduate degree in Interdisciplinary Studies from DePaul University, where he wrote a thesis about the history and influence of our consumer culture.

Matt and his wife Jude have three children at home. 

Most Recent Articles

Is Real Estate a Viable Alternative to the Stock Market?

Which is a better investment: a home or stocks? The Federal Reserve Bank of New York put that question to a representative sample of adults recently, and it found a surprisingly strong preference for real estate as well as an equally surprising reason.

The setup

In the Fed survey, respondents were asked to imagine that they were advising a young couple that had just received a financial gift large enough to cover the down payment on a house. First, respondents were asked whether they think the couple should use the money to buy a primary residence or invest in the stock market. Next, they were told to imagine that the couple already owns a house that they live in. What advice would they give in that scenario? Should they invest the money in a rental property or the stock market?

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Money Roundup: Of Booms and Crashes, Your Inflation Rate Probably Differs From the CPI, and More

Some of the best investing and personal finance articles from around the web — a day early this week since tomorrow's Good Friday.

We’d love to hear your responses to any of the above. To weigh in, just meet us in the comments section.

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Elevating the Role of Health Savings Accounts

Should you think of a health savings account (HSA) as a retirement account — just like you think of a 401(k) plan or an IRA? According to a new study (PDF) by the consulting company Willis Towers Watson, the answer is an emphatic “yes!” In fact, after contributing enough to a 401(k) plan to receive your employer’s full match, the company believes funding an HSA should be your next retirement savings priority.

At first, I was skeptical. We’ve long counseled people to invest enough in your 401(k) to take full advantage of any match, then, assuming your workplace plan offers a somewhat limited menu of investment options, invest through an IRA. After that, if you still need or want to invest more, go back to your workplace plan.

We’ve written positive articles about HSAs in the past, and have explained how some account holders can really maximize their value (see the Where HSAs Really Shine section of the just-mentioned article), but we’ve never quite equated them with 401(k) plans or IRAs. However, after reading the Willis Towers Watson report and giving it more thought, I think it’s an idea well worth considering.

A little background

In order to qualify for a health savings account, you have to have a high-deductible health insurance policy. Assuming your plan qualifies, the 2021 annual HSA contribution limits are $3,600 for singles or $7,200 for families. Those age 55 or older are allowed to contribute an additional $1,000.

Contributions are tax deductible, earnings are tax-free, and as long as the money is used for qualifying medical expenses, withdrawals are tax-free as well. That’s a very powerful triple tax benefit. No other investment account allows for a tax deduction on contributions, tax-free earnings growth, and tax-free withdrawals. Eligible expenses include Medicare premiums (parts B, D, and Medicare Advantage plans, but not Medicare supplement policy premiums) and long-term care insurance premiums.

Unused HSA balances may be carried over from year to year, and, at some HSA custodians, you can invest the balance. This unique combination of benefits is why some people describe the health savings account as a super IRA.

It’s also why some HSA proponents (including SMI) have long encouraged account holders to try to pay current medical expenses with other funds and build up their HSA balances for their later years. The rules allow people to save receipts for current healthcare costs and reimburse themselves later.

To be honest, I always thought of that idea — funding an HSA but using other money to cover current medical expenses — as a nice option, but one that only applies to people who are especially wealthy. After all, for most people, after paying their health insurance premiums and making HSA contributions, there isn’t another bucket of money readily available for such expenses. But the Willis Towers Watson study is making me reconsider the idea.

A new perspective

The Willis Towers Watson study begins by pointing out how expensive healthcare is likely to be for most people in retirement. Depending on which type of Medicare plan is utilized, the company estimates that a married couple retiring today at age 65 will spend $300,000 to $350,000 over the course of their retirement on healthcare expenses, and that doesn’t include the cost of long-term care.

The company says that entire cost could be covered tax-free with a health savings account, if people began funding an HSA early enough (starting at age 40 would allow for all retirement healthcare costs to be covered as well as a portion of current expenses), and if they covered many “routine, predictable, and moderate” healthcare expenses with non-HSA money.

Of course, those are some significant “if’s”! Still, the Willis Towers Watson study is helpful in prompting some new thinking about HSAs.

Not an either/or decision

In the past, I saw 401(k) plans and IRAs as true retirement accounts and had some general thought that carrying some HSA money into retirement would be helpful in covering some medical expenses. However, as the Willis Towers Watson study encourages, the more specific you can make an estimated retirement budget (including healthcare costs), the more you can see the value of an HSA.

Many people have learned to estimate their overall retirement expenses, figure out how much they need to invest each month right now in order to get there, and make those monthly contributions. By the same token, Willis Towers Watson encourages people to be more intentional about estimating future healthcare costs, figure out how much they need to invest each month right now in order to get there, contribute that much to a health savings account, and invest the money.

Even if you’re over 40, and even if you need to use most of your HSA funds for current healthcare costs, investing a portion for future costs will be beneficial.

Recommended action steps

  • Read the Willis Towers Watson report.
     
  • If you’re not using a high-deductible health insurance plan paired with an HSA, consider doing so. (Here are Morningstar’s recommendations for the best HSA providers for savers and investors. It’s noteworthy that Fidelity is Morningstar’s top choice since it is also SMI’s top recommended broker. Opening a Fidelity HSA would enable you to use any SMI strategy to manage that account. The SMI Funds and SMI Private Client also allow for the use of HSAs, with Private Client able to manage balances using a custom blend of SMI strategies).
     
  • If you are using an HSA and are not contributing the maximum amount you’re eligible for, consider increasing that amount. (According to the Employee Benefit Research Institute, just 13% of HSA users contribute the max.) 
     
  • If your healthcare expenses are such that you can build and maintain a balance in an HSA, look for a custodian that allows you to invest the money.
     
  • Keep in mind that you lose eligibility to contribute to an HSA once you enroll in Medicare, but you can continue using an existing HSA balance to pay for qualified medical expenses.

Do you have a health savings account? If so, are you investing the balance?

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9 Steps to Make the Most of Your 401(k)

In 1980, corporate benefits consultant Ted Benna was helping a company change its employee bonus plan into a deferred profit-sharing plan. Knowing the change might not be popular with employees, he scoured the tax code in search of ideas. He found an obscure provision in Section 401(k) that allowed workers to set aside a portion of
their salary on a pre-tax basis. That alone couldn’t compete with a cash bonus, so he came up with an incentive: a company match. Today, the 401(k) plan is the most prevalent workplace retirement program — along with its close cousins, 403(b) and 457 plans — with 68% of full-time workers having access to such plans.

As common as they have become, 401(k) plans have an image problem. They come under regular media criticism for their fees, complexity, and perhaps most of all, their inability to deliver guaranteed retirement income. Many people, it seems, long for the “good old days” when employers provided retirees with a gold watch and a reliable stream of pension income.

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A Company, Its Stock, and Its Shareholders: a Primer

As is true in so many areas of life, there are aspects of stock market investing that may not be fully understood, even among experienced investors. When something dramatic happens in the market, for example, news accounts continue to use video or photos of dejected (or perhaps exuberant) traders on the floor of the New York Stock Exchange. But why do we even have floor traders in this day and age when most trading takes place electronically?

Perhaps we’ll get to that question in the future. In the meantime, this article is about the often-misunderstood relationship between a company, its stock, and its shareholders.

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The Many Temptations of Money and Other Points to Ponder

Take-aways from a tumultuous year

"One of the big lessons from 2020 is that risk is always present, even if we don’t always feel it. Things were smooth sailing until they weren’t. The other big lesson is that survival is the name of the game. It’s not about maximizing returns. It’s not about beating the market. It’s about staying the course. And you can only stay the course if you have a course to stay on.”

– Michael Batnick, in a 3/18/21 post on his blog, The Irrelevant Investor, about what investors should take away from last year’s experience in the markets. That includes the importance of having a strategy you can live with in good times and bad. Read more at bit.ly/3salGvh.
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Money Roundup: The Future Looks Brighter, Whether Inflation Concerns are Warranted, and More

Some of the best investing and personal finance articles from around the web.

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Is There a Best Time of Day to Make Trades?

With SMI increasingly using exchange-traded funds (ETFs) in our strategies, we receive a decent number of questions about how to buy and sell such funds. They’re not quite as easy as working with traditional mutual funds where, as long as you’re investing the required minimum amount, you can buy in the exact dollar amount you want. At most brokers, ETFs only trade in full share amounts, which means you have to do the math to figure out how much you can buy, dividing the dollar amount you’d like to invest by the ETF’s share price. (At Fidelity, that’s no longer necessary because ETFs now trade in fractional shares).

For those who’ve gotten acclimated to trading ETFs, another idea to consider is that some times of the day may be better for making trades than others. Perhaps you’ve heard that it’s best to avoid trading ETFs for 30 minutes after the market opens and 30 minutes before the market closes, when volatility may be higher and bid-ask spreads wider, meaning you may end up paying more for a fund than necessary.

Vanguard, which has long considered such rules to be “best practices for ETF trading,” recently took a closer look and found them to be only half true. “The data seems to suggest that ETF investors have reason to avoid trading early in the morning, but the data do not show any reason to avoid trading at the close,” according to Jim Rowley, Vanguard’s head of investor research.

The company analyzed nearly 170,000 bid-ask spreads of 166 U.S. fixed income ETFs during 78 intraday intervals over the course of more than three years. “We found that spreads tend to begin each day at a high point, fall throughout the morning, and then remain generally flat through the end of the day,” Rowley said. And that held true during times of calm and times of high volatility, such as the first quarter of 2020.

Vanguard’s research looked at spreads in five-minute intervals throughout the day, finding the widest spreads in the first five minutes of trading, but also notably elevated spreads until late morning. The company said that volume tended to increase toward the end of the day, but bid-ask spreads did not.

While Vanguard’s research focused on fixed income funds, it covered a wide spectrum of such funds, from government bonds to high-yield “junk” bonds, and the company seemed to suggest that its findings apply to ETFs generally. 

What’s SMI’s take on this “timing” research? We’ve always encouraged our members to make trades on a timely basis. That means when a strategy update comes out that requires a trade, you should make that trade within a day or two of the announcement. How much might it improve your returns to avoid making trades soon after the market opens on a particular day is difficult to know. But the research seems compelling enough to suggest that not trading during the first portion of the morning is a good idea. And as SMI has long suggested, if you’re buying or selling an ETF whose spread is more than a few pennies, using a limit order may be worthwhile.

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Money Roundup: Interest Rates May Matter Less Than You Think, 5% is the New 4%, and More

Some of the best investing and personal finance articles from around the web.

We’d love to hear your responses to any of the above. To weigh in, just meet us in the comments section.

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How College Financial Aid Really Works

For many families with college-bound children, how to pay for college can become one of their greatest financial challenges, both in practical terms (coming up with the money) and emotional terms (deciding on the “right” schools). Making it more difficult is a lack of clarity about how much it will cost to attend a particular school and some misperceptions about the amount and type of aid that will be available.

We dealt with a lot of this in the March newsletter (see Navigating the College Admissions Process), which drew on the findings of Jeffrey Selingo in his helpful book, Who Gets In and Why. But there were a couple of important points that we didn’t have the space to cover.

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