International Markets Surprise, Advanced Charitable Giving & HSA Strategies | Ep 12

Watch or listen to the episode below:

Bill Belichick coaching UNC at 72 serves as a perfect cautionary tale about retirement. When you don't have clear purpose or proper planning, you might find yourself in situations that don't match your legacy or expertise.

But while Belichick struggles with his post-Patriots identity, international markets are having their moment in 2025, delivering returns that have surprised even seasoned investors.

The International Markets Story

Despite constant headlines about tariffs, trade tensions, and geopolitical uncertainty, international markets are quietly crushing US returns this year. Germany leads the pack with gains of 34%, followed by Brazil at 33%, China at 32%, and the UK at 25%.

This performance is particularly striking given the narrative around US trade policy. China, supposedly "target number one" for tariffs, is up almost 30% year-to-date. The disconnect between headlines and market performance offers a reminder that markets look forward, not backward, and often price in risks more efficiently than we expect.

For the past 15-20 years, US markets dominated global returns so consistently that international exposure felt like portfolio dead weight. The 20-year average return differential was stark - US markets averaged around 10.5% annually while international developed and emerging markets hovered around 5-6%.

This created a painful period where diversification seemed like a mistake. But 2025 is demonstrating why global diversification matters. Markets are cyclical, and no single region dominates forever.

Why This Matters for Your Portfolio

The US represents roughly 60% of global market capitalization, with all other countries combined making up the remaining 40%. Completely neglecting international equities means ignoring almost half the investment opportunity set.

This doesn't mean abandoning US equities. Home country bias is natural and even sensible to some degree. Most investors are more familiar with domestic companies, and there are legitimate reasons to overweight your home market.

But maintaining 20-30% international exposure within your equity allocation can provide balance. When cycles turn, as they're doing now, you participate in global growth rather than being locked into a single market's performance.

Advanced Charitable Strategies for Life Transitions

For clients approaching retirement or experiencing irregular income events, advanced charitable strategies can provide significant tax benefits while supporting causes they care about.

Most charitable giving happens reactively - people write checks when they feel moved to support a cause. But strategic giving, particularly during income transitions, can multiply the impact of your charitable dollars.

Donor-advised funds serve as an excellent tool for front-loading charitable deductions. Think of them as investment accounts you fund with a lump sum, receive an immediate tax deduction, then distribute to charities over time.

The use case is clear: someone retiring from a high-income career can make a substantial contribution to a donor-advised fund in their final high-earning year, capture the tax benefit at peak tax rates, then distribute those funds to charities throughout retirement when their income is lower.

For even larger charitable commitments (typically half a million dollars or more), charitable remainder trusts offer sophisticated tax planning opportunities. These vehicles allow you to fund the trust with highly appreciated assets, avoid immediate capital gains taxes, receive income payments during your lifetime, and direct the remainder to charity upon death.

The Health Savings Account (HSA) Strategy Most People Miss

HSAs represent one of the most misunderstood planning tools available. Most people treat them like expensive checking accounts - money goes in, they get a small tax deduction, then they immediately spend it on medical expenses.

This approach misses the HSA's true potential as a retirement planning vehicle. HSAs offer triple tax advantages: contributions are tax-deductible, growth is tax-free, and distributions for qualified medical expenses are tax-free. No other account type offers this combination.

The advanced strategy requires shifting your mindset. Instead of immediately spending HSA contributions, let them invest and compound over decades. Pay current healthcare expenses from other accounts when possible, but keep detailed records of these out-of-pocket costs.

The payoff comes in retirement. The average retiree faces about $250,000 in out-of-pocket healthcare costs over their retirement years. With proper record-keeping, you can reimburse yourself from your HSA for healthcare expenses incurred decades earlier, accessing your accumulated balance tax-free exactly when you need it most.

Planning for Multiple Decades

Whether discussing international diversification, charitable strategies, or HSA optimization, the common thread is taking a long-term perspective that adapts to changing circumstances.

Bill Belichick's situation reminds us that successful careers require intentional transitions. The same applies to financial planning. Markets will cycle between domestic and international leadership. Tax situations will change as careers evolve. Healthcare needs will increase with age.

The most effective strategies acknowledge these realities upfront and position portfolios to benefit from various scenarios rather than betting everything on current trends continuing indefinitely.

Listen to the full conversation on Long Story Short: