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2019 Morningstar Investment Conference: Goals-Based Investing Strategies

The first day of the 2019 Morningstar Investment Conference is over, and Wealthy Women Daily’s Charlene Rhinehart took viewers through a vlog of highlights from Wednesday.

Charlene attended the “Tools for Choosing the Best 529 Plans, HSAs, and Target-Date Series” session. Morningstar researchers shared best practices in choosing these three goals-based investments.

Photos by Jim Tweedie, Wyckoff-Tweedie Photography

HSA Plans

“The tax advantages in the HSA plans are unrivaled in the tax code,” says
Leo Acheson, Associate Director at Morningstar, as he shares how fast HSAs have grown. “It’s better than 401 (k), individual retirement accounts, and 529 [college savings] plans. Your contributions are tax-free [and] the growth on your investments and interest is tax-free. You also skip out on payroll taxes such as Medicare and social security. When you withdraw it, it’s tax-free. So, you aren’t paying taxes as long as you spend it on [qualified] medical costs. “

While HSAs are known for being a great tax shelter, these accounts are also a way to save for healthcare during retirement. But you must be covered by a high deductible health care plan to qualify.

During the presentation, Acheson evaluated fees associated with HSA spending and investing accounts and analyzed top HSA plans.

Some items to consider when choosing an HSA is maintenance fees, excess contributions fees, interest, and investment choices and quality.

Homework: Look into the HSA Authority.

529 College-Savings Plans

Next, Madeline Hume – an Analyst at Morningstar – discussed 529 college-savings plans and what distinguishes them from target date funds and HSAs.

Photos by Jim Tweedie, Wyckoff-Tweedie Photography

The first differentiator is the location you reside in. “Unlike HSAs and target date [funds], the state that you or your clients live in may influence which plan is best for you,” says Hume during her presentation. “All 529 plan investors qualify for certain federal tax benefits given that they meet certain rules and restrictions.”

Hume mentions that states may also provide additional tax savings in the form of an income tax deduction or income tax credit.

529 savings plans are also unique because of the shorter time horizon for these investments. Parents are only saving for 18 years for their child’s college education.

Target Date Funds

Target-date funds emerged in the 1990s, and are growing in popularity among investors who seek to save for retirement during their working years while managing risk as they get closer to their “target date”.

The last presenter, Jeff Holt – Associate Director at Morningstar, talked about the use of target-date funds as a retirement strategy.

Photos by Jim Tweedie, Wyckoff-Tweedie Photography

“The strategic equity glide path is the easiest way to stack up different series of target-date funds,” says Jeff Holt. “It simply shows how far an investor is from retirement and how much equity they hold over time and how that compares to the industry average.”

Looking at the quality of underlying funds, performance, and historical information in a target-date series may be quite the task but it’s good to be aware. Morningstar is releasing a new report to assist with that.

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  1. Congratulations on your accomplishment of being named a 2019 Woman to Watch.

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