[baron_harkonnen]

> outside of throwing any savings I can muster into a vanguard fund,

I know the popular advice for the last decade has been "stock market always goes up! 8% a year!" but do you really believe it's wise to align your future investment strategy with the general well being of the economic.

I'm not saying don't have a 401k (well if you really press me, I will say that), but if all of your savings are directly tied to the market that means that you are most successful when the rest of the market succeeds, but in the case that the market collapses you also collapse. This is leverage, the opposite of hedging.

It has always seemed strange to me that Wallstreet has convinced American's to treat their retirement as leverage rather than a hedge. If the market is doing fantastic, then it's not as important to have savings, and if the market is doing poorly it's important have other means of economic stability.

[majormajor]

> If the market is doing fantastic, then it's not as important to have savings

This makes no sense to me in the context of retirement savings.

You've retired. You aren't capturing part of that market anymore.

The standard wisdom is "switch to lower risk investments as retirement gets closer" which is specifically because the market may turn. But if you're never in the market, you're gonna miss out on a lot of gains before then, unless you're expecting decades straight of poor performance.

[ip26]

I see it as a hedge against inflation. In boom times with soaring markets, there is (usually) considerable inflation. If you ride the market, you probably won't see outsize returns but you won't lose purchasing power to inflation either.

For this reason I frequently wonder whether I should invest HSA funds exclusively in medical stocks. If healthcare gets more expensive, my HSA has probably grown. If healthcare gets cheaper, my HSA might shrink, but that's fine because healthcare is cheap.

[panopticon]

> If healthcare gets cheaper, my HSA might shrink, but that's fine because healthcare is cheap.

Isn't the conventional min/max strategy to not use your HSA for any medical expenses? That is, you just treat your HSA as a traditional IRA and don't touch it until 65+.

[ip26]

The funds in the HSA are to be withdrawn to cover medical expenses.

So, you do leave it in the HSA as long as possible- but ultimately it's all going towards medical expenses eventually, otherwise you lose the tax advantage.

[panopticon]

After 65+ you can withdraw the funds for any reason without penalty. The so "prevailing wisdom" seems to be to not use the HSA for medical expenses and cover those with after-tax money so your HSA can continue to grow.

Of course, this is predicated on being able to cover medical expenses without your HSA.

[ip26]

At age 65, you can take penalty-free distributions from the HSA for any reason. However, in order to be both tax-free and penalty-free the distribution must be for a qualified medical expense. Withdrawals made for other purposes will be subject to ordinary income taxes. -- https://www.wellesley.edu/sites/default/files/assets/departm...

You don't have to withdraw funds from the HSA at time of billing, however. If you spend $1,000 at the ER today, you can take those $1,000 out twenty years from now.

[panopticon]

I was responding specifically to your "otherwise you lose the tax advantage" bit, which is still false. The money still grows with the same tax-advantage as a traditional IRA/401k.

Spending the money on medical expenses at 65 will maximize the value (this actually isn't universally true because IRA/401ks have required minimum distributions which can make holding onto the HSA more valuable), but you still get tax benefits by not covering medical expenses with it as long as you wait until 65+.

I also realized that I meant to say "not use your HSA for any medical expenses pre age 65" in my original comment. Sorry for any confusion.

[autokad]

its neither a hedge nor leverage. It's a place to put your long term money to grow, probably the best place. if by 'Wallstreet' you mean financial advisors, they recommend a mix of assets, not a single asset class in stocks. most people have a mix of stocks, bonds, and real estate.

it use to be 10%, in the late 2000s it got revised to 7%, though many today think it's realistically 5%.

[ac29]

Leverage does have a specific meaning in investing: it means using debt to amplify returns. This means if the market increases by X%, your investments return >X%, and the same in the negative direction. Having the same returns as the market is not leverage.

[ornornor]

Well what else do you propose? The whole system is tied to that: pensions, house values, salaries. If you squirrel away your money under you mattress you probably won’t earn enough money in a lifetime to retire off of it. I don’t see an alternative?

[Slartie]

The thinking behind this strategy is: there is enormous incentive to make the market perform well, which is why society will make the market perform well, with whatever means necessary. The incentive to make the market fail is much smaller (and even those shorting the market do eventually have an incentive for a well-doing market, because the money they make is worthless if it's not spendable for stuff, which depends on a well-doing market).

You can clearly see this play out right now in terms of current worldwide monetary policy: for the sake of a well-doing market, central banks are printing money like there's no tomorrow.

[closeparen]

The sane form of this advice drops the "always" and adds "over sufficiently long time horizons."

[lokedhs]

That's the key. If you are looking at a horizon of 10 years or more, the stock market has always (with some rare exceptions) gone up. That is to say that if you take a random point in time, and look at the stock market 10 years later, you will have a very hard time finding a point where it didn't go up more than inflation.

If you do this exercise with shorter and shorter time frames, more and more points in time will show a negative return.

This was just a long-winded way of saying that I agree with you. Stock markets are good investments, but your horizon has to be long, and that means at least 10 years.