re: HSA Tax Deduction

quote:

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Because it's the only savings vehicle that's tax advantaged on the front-end and the back-end.

You're saving and growing (brokerage option) money for health related expenses over time instead of back-loading them.

I'm in my 20's and on the HDHP with an HSA. The way I see it: (a) max out of pocket is similar so the same risk to me exists, (b) the monthly HDHP premium + the HSA contribution is similar to the monthly PPO premium so the cost is similar, (c) if the costs and risks are similar, I prefer the growth, tax deduction, and savings offset for later in life instead of the sunk cost of the PPO premium.

After age 65, you can withdraw funds for any reason without the 20% penalty (if not used for medical related expenses income taxes will apply) so it in affect becomes a way to boost traditional IRA contributions by 60.00%. I welcome the tax deduction for saving that I intended to do in the first place.

If you do use it for medical related expenses, then income taxes do not apply and the government funded 25% or 28% or 33% (or whatever tax bracket you're in) of that expense.

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Makes sense.

Right now, my company fronts us roughly 35% of the HDHP deductible straight into our HSA on Jan 1st of every year. I contribute enough each month to cover the remainder of the deductible (65%) for the year.

I just would hate for me to put even more of my monthly income into the account, only to have a non medical related emergency arise and not be in a good position financially to handle it.

Once I get my vehicle paid off, I will probably do what everyone else is recommending and max it out, but for now, I think I'm comfortable with the balance of my budget that goes to HSA and the portion I keep for non medical emergencies.

Good info in this thread though.