7 Simple Ways to Make Your Money Work for You in Retirement– December 20, 2021

Posted by Guest Blogger Jared Cox, Senior Associate, Wealth Planner, Sequoia Financial Group, LLC

Much like choosing the correct type of rental car is important to having a successful road trip, choosing the correct vehicles (and allocating to those vehicles in the correct order) for your retirement journey is also important to maximizing your chances of success.

In the spirit of a new year around the corner and new beginnings, we wanted to share some tips on how to prioritize your dollars to help you set yourself up for foundational financial success. Of course, your situation is unique to you, so discuss your situation with your advisers, but below is a good place to start the conversation.

1. Establish an Emergency Fund

Quite possibly the most important first step for directing additional funds is to establish an emergency fund, or, at the very least, establish a plan to build one quickly while taking advantage of the recommendation for step two.

A good rule of thumb is to establish in your savings at least three months of expenses while trying to build up to six months of expenses in combination with some of the other recommended steps. It is very important that this fund be in cash, since the purpose is to protect your ability to maintain your capital in the case of an emergency, which is likely to be your biggest asset for most of your working career.

2. Maximize Your 401(k) Plan Match

Next, take advantage of any employer match being offered in your employer sponsored retirement plan (401(k) or 403(b), for example). This is very possibly one of the best returns on investment you will have access to, regardless of what the employer match might look like.

For example, your employer may offer a match on 100% of the first 3% you contribute. If that is the case, you’ll want to ensure you contribute at least 3%. They might offer a match of 50% of the first 6%, in which case you’ll want to make sure you put in that 6% to maximize your employer’s matching contribution. In these examples (assuming you stay at the company long enough to have the employer contributions vest, which can vary depending on your employer), you would receive returns of 100% and 50% respectively (before taking into account the performance of the underlying investment). This can provide a massive jump-start for your retirement savings.

3. Work on Paying Down/Off High Interest Loans

After contributing amounts that an employer offers to match, consider putting additional dollars toward paying off higher interest loans — such as outstanding credit card balances or student loans with an interest rate higher than you expect to receive from invested dollars.

What is considered “high interest” could be different for everyone, but loans with rates of 6% or higher are likely appropriate ones to begin targeting. Generally, you will want to tackle these debts from highest interest rate to lowest interest rate (widely known as the avalanche method), but there can certainly be psychological benefits to tackling debts from lowest balance to highest balance (widely known as the snowball method) if that will help you stay diligent.

4. Max Out Your Health Savings Account (HSA)

The next vehicle I would recommend, if you have access to a High Deductible Health Plan (HDHP), would be to contribute as much as you can up to the maximum amount to your Health Savings Account (HSA).

For 2022 the limit of employee and employer contributions combined will be $3,650 if your HDHP only covers yourself and $7,300 for a HDHP that covers family. Also note that an extra $1,000 catch-up contribution is available if you are 55 or older. The reason contributions to an HSA should be prioritized at this point is that they are potentially triple tax-advantaged:

  • Contributions made to an HSA are deductible from your income in the year contributed (make these via payroll deduction to avoid federal payroll taxes, if possible);
  • Distributions made for qualified medical expenses are tax-free; and
  • Distributions can be taken after age 65 for any expenses with no penalty.

As a bonus, if you can afford to pay for qualified medical expenses out of pocket instead of from the funds in your HSA, the HSA can continue to grow tax-deferred while you save the receipts to reimburse yourself later.

5. Max Out Your Employer Sponsored Retirement Plan

After maximizing contributions to your HSA, or if you are not covered by a HDHP, the next vehicle of choice is to contribute up to the maximum amount allowed to your employer sponsored retirement plan. Deferral limits on employee contributions for 2022 are $20,500 on the most common retirement plans with a $6,500 catch-up contribution available for those age 50 and over.

But you may have another important choice to make regarding this savings vehicle if your plan allows you to make Roth contributions. Unlike traditional contributions, which do not count toward your income in the year contributed but instead are taxed when distributed, Roth contributions do count toward your income in the year contributed, but there is no tax on qualified distributions (including the growth in the account)! This choice can come down to individual circumstance, but the general rule of thumb is that if you project that you will be in a lower tax bracket in retirement, then it makes sense to make traditional contributions However, if you project that you will be in a higher tax bracket in retirement, or you have a long enough time horizon that the growth in the account will outpace the tax differential between now and retirement, then making Roth contributions may make the most sense.

You may also find that it makes sense to split your contributions between traditional and Roth contributions so that you have multiple choices when drawing down your portfolio in retirement. Note that employer contributions will always fall into the traditional bucket.

6. Look to Other Retirement Plan Options (IRA or Roth IRA)

Once you have reached the deferral limits on your retirement plan, or if you do not have a retirement plan available to you, an alternative vehicle choice is a Traditional IRA or Roth IRA, which have much lower contribution limits ($6,000 for 2022 with a potential $1,000 catch-up contribution available for those age 50 and over).

Roth IRA contributions are further limited if you make over $129,000 and file single on your tax return or if you make over $204,000 and file married filing jointly. The deductibility of traditional IRA contributions may also be reduced if you or your spouse are covered by a retirement plan through work (although you can make non-deductible contributions and later convert those contributions to Roth if it later makes sense to do so).

7. Focus on Other Outstanding Liabilities and Opportunities

If you’ve gotten through steps 1-6 and you have any other outstanding liabilities, now is the time to pay those down to free up cash flow, allowing yourself more flexibility. Once you consider yourself debt-free or if you would rather invest your remaining cash flow than pay off whatever low interest debt you may still have, consider setting aside any remaining excess in a taxable account. There are no contribution limits to a taxable account, funds are accessible at any age and this gives more options when drawing down accounts in retirement.


Now that you have an idea of the right retirement vehicles to use — and when — grab some snacks, pack the cooler, buckle up and get ready to take the road trip of a lifetime.

Jared Cox is a Senior Associate, Wealth Planner, at Sequoia Financial Group, LLC. Contact him at jcox@sequoia-financial.com or visit www.sequoia-financial.com.


Like what you read? Sign up to receive our latest tax, accounting and business blogs and podcasts.

Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.

The  views expressed represent the opinion of Sequoia Financial Group. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While Sequoia believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sequoia’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. Past performance is not an indication of future results. Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Registration as an investment advisor does not imply a certain level of skill or training.