Wealth Management

Three financial New Year’s resolutions

Contribute to an HSA or FSA, earn the full employer match on your 401(k) and stop trying to time the stock market.

3.5 min read

Summary

  • Avoid trying to time the stock market. Despite high valuations, history shows that missing the market's best days can significantly reduce your returns.
  • Maximize your workplace retirement plan and IRA contributions to benefit from employer matching, compounded growth and potential tax advantages.
  • Save on healthcare expenses and taxes by using Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). HSAs offer triple tax benefits, while FSAs reduce taxable income and cover a broad range of eligible expenses.

Starting the year on the right financial foot

’Tis the season for eating better, for going to the gym more and for reaching out to old friends. But before finalizing 2025’s New Year’s resolutions, consider adding a few financial vows to your list. Getting your finances in order could prove more beneficial than eating lots of kale.

Here are three money resolutions to consider:

1. Stop trying to time the stock market.

Yes, stocks look pricey right now. As Niladri “Neel” Mukherjee, TIAA Wealth Management’s chief investment officer, indicates in his 2025 Market Outlook, the S&P 500 index traded at a price-to-earnings ratio of 22 times earnings in December 2024, well above its 10-year average of 18. (A P/E ratio is a valuation gauge that compares a stock’s price per share to its earnings per share, providing insight into whether the stock is cheap or expensive.) Yet as tempting as it may be to wait for valuations to come down, history shows that picking the proper reentry point is hard and that there’s a high cost to getting it wrong. From 2004 to 2023, the average annual return of the S&P 500 was 9.7%, but the returns fell to 0.7% for investors who missed out on the market’s 30 best days.

2. Get the most out of your workplace retirement plan and individual retirement accounts (IRAs).

Contributing as much as possible to your 401(k) or equivalent plan is one of the most important steps you can take toward securing your financial future. If you can’t afford 10% to 15% of your pretax salary, aim to contribute up to the amount of your employer’s match. For example, if your employer is willing to match each dollar you contribute up to 3% of your salary, you’re missing out on free money if you’re not contributing at least 3%. Assuming a 7% average annual return, a $2,400 employer match for a 25-year-old would be worth over $50,000 by the time she turns 70. And that’s just from one year’s match.

This year, the contribution limits for IRAs are $7,000 for those under age 50 and $8,000 for those over 50. As with workplace retirement plans, the case for contributing the full amount is built around the power of compound interest. Assuming a 7% annual return, $7,000 contributed today would be worth nearly $38,000 in 20 years. There are tax advantages too. If your income is less than $150,000 (or less than $236,000 for married couples filing jointly), you are likely eligible to contribute to a Roth IRA, for which all growth and income is tax-free and all withdrawals are tax-free too (so long as they’re made after you turn 59½). If you opt for a traditional IRA, your contributions may be tax deductible depending upon your income level, and you won’t pay taxes on gains or income until you retire, when withdrawals are taxed at regular income tax rates.

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3. Save on healthcare expenses and taxes by opening a health savings account (HSA) or flexible spending account (FSA).

Speaking of tax breaks, you may be missing out on some easy ones if your employer offers HSAs or FSAs and you’ve yet to take advantage. HSAs are dual savings and investment accounts available to individuals enrolled in high-deductible health insurance plans. The money you contribute can be spent on copayments, insurance deductibles and other out-of-pocket medical expenses. What makes HSAs especially attractive is they are triple tax-free. You won’t pay income taxes on any dollars you contribute. The HSA money you invest will grow tax-free (i.e., no taxes on interest, dividends or capital gains). And any money you withdraw is tax-free so long as it is spent on qualified medical expenses. Indeed, HSAs’ tax benefits are so great that TIAA Institute research fellow Adam Leive, an assistant professor and health economist at University of California, Berkeley, believes many participants would be better off not tapping the money at all until retirement (or tapping as little as possible).

“To reap the full tax benefit, you need to keep the money in the HSA, invested for the long term, so that it can grow,” says Leive. Assuming you have the financial means to do so, he says the most efficient way to use an HSA during your working years is to pay for as many out-of-pocket medical expenses as possible with after-tax dollars, thus allowing your HSA contributions to grow with the stock market. Then, you can start using the HSA money in retirement for qualified medical expenses, which include Medicare premiums and assisted living costs.

Unlike HSAs, FSAs don’t double as retirement savings accounts. All FSA money must be spent in the year contributed (though some employers do offer a one- or two-month grace period). That said, FSAs do offer an easy way to save on taxes.

FSAs are funded with pretax money, which reduces your taxable income. Moreover, the list of eligible expenses is quite broad—well beyond co-pays and traditional medical expenses. FSA-eligible expenses include everyday purchases such as antacids, bandages, contact lens solution, contraceptives, exercise equipment, pain relievers and sunscreen. So, if you’re in the 32% tax bracket, for example, spending FSA money at your pharmacy is a bit like having a 32% off coupon every time you shop.

Personalized financial vows

For additional suggestions on steps you can take this year to improve your financial health, please schedule a meeting with your TIAA advisor. Don’t yet have an advisor? Schedule an appointment.

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The TIAA group of companies does not provide tax or legal advice. Tax and other laws are subject to change, either prospectively or retroactively. Individuals should consult with a qualified independent tax advisor and/or attorney for specific advice based on the individual’s personal circumstances.

The TIAA group of companies does not provide tax or legal advice. Tax and other laws are subject to change, either prospectively or retroactively. Individuals should consult with a qualified independent tax advisor and/or attorney for specific advice based on the individual’s personal circumstances.

This material is for informational or educational purposes only and is not fiduciary investment advice, or a securities, investment strategy, or insurance product recommendation. This material does not consider an individual’s own objectives or circumstances which should be the basis of any investment decision.

Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity and may lose value.

Advisory services are provided by Advice & Planning Services, a division of TIAA-CREF Individual & Institutional Services, LLC, a registered investment adviser. TIAA-CREF Individual & Institutional Services, LLC, Member FINRA, distributes securities products.

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