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HSA v. Roth IRA
Posted on 5/4/16 at 8:55 pm
Posted on 5/4/16 at 8:55 pm
After contributing to 401k match, would you suggest maxing out HSA first or Roth IRA first? I have seen it both ways and I was wondering if someone could explain the why one over the other.
7
Posted on 5/4/16 at 9:07 pm to LSUDbrous90
HSA, the only savings/retirement account that has the potential to be tax free both on the front and back end.
Posted on 5/4/16 at 9:10 pm to LSUDbrous90
If I had to choose, I would max the Roth. The sooner you can put your money to work, the better. Even if you max the Roth, still contribute some to your HSA because it does lower your taxable income.
This post was edited on 5/4/16 at 9:12 pm
Posted on 5/4/16 at 9:23 pm to LSUDbrous90
Good question, I think the answer is HSA, simply b/c it has all the good properties (slightly smaller contribution max right?) of a ROTH, but it also has the ability to have a tax free health care safety net before the age of 55.... sure seems valuable in this environment.
This post was edited on 5/4/16 at 9:24 pm
Posted on 5/4/16 at 9:45 pm to Zilla
What is the max per year for HSA?
Posted on 5/4/16 at 9:48 pm to dlmast87
quote:
oose, I would max the Roth. The sooner you can put your money to work, the better. Even if you max the Roth, still contribute some to your HSA because it does lower your taxable income.
You can grow your HSA in the exact manner you can an IRA. HSA Bank with TD Ameritrade FTW. Only caveat is this is not without risk if you don't have a good reserve built up. Personally, I think at least one year of deductible should remain in cash.
Posted on 5/4/16 at 10:34 pm to TigerDeBaiter
quote:
If I had to choose, I would max the Roth. The sooner you can put your money to work, the better. Even if you max the Roth, still contribute some to your HSA because it does lower your taxable income.
You can invest a portion of the money in your HSA much like a roth IRA where you distribute the money into different funds.
quote:
What is the max per year for HSA?
Single - $3350
Married - $6650
Another caveat is that the limit I posted above includes employer contributions in that limit so it is pretty easy to reach.
quote:
Personally, I think at least one year of deductible should remain in cash.
That is a good piece of advice. It already requires me to leave $1000 in the account that is not invested.
Thank y'all for the good responses. Like I said I have seen it both ways. IMO they both have their benefits but with being tax advantage on both sides the HSA has to win out. Just see Roth IRA ahead of it a lot and was not sure why.
Posted on 5/4/16 at 10:54 pm to LSUDbrous90
Can I move money from an IRA to HSA each year to pay medical expenses?
Posted on 5/4/16 at 11:06 pm to LSUDbrous90
Generally I'd say Roth. However, if your HSA allows investments with good low cost options then it could be better.
HSA can only be used for medical expenses and Roth contributions can be used as a last resort emergency fund. Things to consider.
The easy answer is to do both if you can. I'd probably max 401k before doing HSA unless there is some matching involved.
HSA can only be used for medical expenses and Roth contributions can be used as a last resort emergency fund. Things to consider.
The easy answer is to do both if you can. I'd probably max 401k before doing HSA unless there is some matching involved.
This post was edited on 5/4/16 at 11:07 pm
Posted on 5/5/16 at 7:54 am to gpburdell
quote:
I'd probably max 401k before doing HSA unless there is some matching involved.
Can you explain why? Assuming HSA and 401k have similar investment options and fees.
Posted on 5/5/16 at 8:38 am to LSUDbrous90
check the fees on investing with your HSA
I have a HealthEquity HSA and the fees are awful
I have a Vanguard Roth IRA, so the fees are generally low
I put more money into my Roth IRA, but my employer does contribute $3k to my HSA, which gets me pretty close to maxing it out
I haven't invested my HSA yet because of the fees and I want to build it up a little further (I've only had it for 2 years)
I have a HealthEquity HSA and the fees are awful
I have a Vanguard Roth IRA, so the fees are generally low
I put more money into my Roth IRA, but my employer does contribute $3k to my HSA, which gets me pretty close to maxing it out
I haven't invested my HSA yet because of the fees and I want to build it up a little further (I've only had it for 2 years)
Posted on 5/5/16 at 10:17 am to LSUDbrous90
quote:
Can you explain why? Assuming HSA and 401k have similar investment options and fees.
It's just a personal preference if I had to choose between the two. There is no right answer. I would rather have a bigger general purpose retirement account (401k, ira) vs a medical only expense account.
I do max hsa and 401k along with roth ira when eligible.
Posted on 5/5/16 at 10:19 am to tigerskin
quote:
What is the max per year for HSA?
$3350
Posted on 5/5/16 at 10:20 am to LSUDbrous90
I don't know if this has been stated, but HSA contributions are also exempt from FICA which makes it especially attractive if you are under the SS annual cap. That's a 7.65% return off the bat not including other tax avoidance possibilities.
I would try to max out the HSA before contributing to a Roth IRA or increasing contributions to a 401k (above employer match) in most scenarios based on that savings.
I would try to max out the HSA before contributing to a Roth IRA or increasing contributions to a 401k (above employer match) in most scenarios based on that savings.
Posted on 5/5/16 at 10:21 am to lynxcat
HSA is my answer.
1. We all are going to have medical expenses
2. Pre-tax contributions
3. No tax on distributions to pay medical expenses
ROTH IRA has phase out limits as well so it isn't available to me.
As a W2 employee, HSA is one of the few good tax havens I have available.
1. We all are going to have medical expenses
2. Pre-tax contributions
3. No tax on distributions to pay medical expenses
ROTH IRA has phase out limits as well so it isn't available to me.
As a W2 employee, HSA is one of the few good tax havens I have available.
Posted on 5/5/16 at 10:28 am to Salmon
Yeah that is understandable for sure. The fees on my HSA are a flat $1.75/month ($21/year). So if there is not much invested then the fees are ridiculous. After this year I will have about 5k in it which is about a .4% fee. Probably will start investing it then.
Posted on 5/5/16 at 2:53 pm to TigerDeBaiter
quote:
You can grow your HSA in the exact manner you can an IRA. HSA Bank with TD Ameritrade FTW. Only caveat is this is not without risk if you don't have a good reserve built up. Personally, I think at least one year of deductible should remain in cash.
Doesn't this depend on who services your HSA? My employer uses a local bank and the investment options are nil....unless I'm missing something.
Posted on 5/5/16 at 3:06 pm to LSUDbrous90
Keep in mind that if you are in a profession that will facilitate progressively increasing income, you will reach an income level where you will no longer to be able to contribute to a Roth. Unless you anticipate more medical maladies than normal, I'd get my money into a Roth while I am still eligible to contribute.
Posted on 5/5/16 at 3:58 pm to lynxcat
quote:
lynxcat
Did you go to Rhodes?
Posted on 5/6/16 at 4:19 pm to LSUDbrous90
quote:
Did you go to Rhodes?
Yes, do we know each other?
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