Roth IRA vs HSA: Which One Should You Fund First?
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Roth is more flexible, HSA is more tax advantages
I appreciate that you aren't dogmatic, and that you are willing to change your mind over time.
Its a trick question, you do both.
Is it true that after a certain age your HSA withdraws do not have to be for "qualified" medical expenses?
Well I must be killing it then cause I'm doing a 401k, a Roth, and am HSA
I never had HSA account. Can I contribute to last year's?
We don't make enough to max out both so we've been splitting between the two, paying for medical bills out of pocket but transferring money out of the HSA and depositing it into the Roth IRA to help top off the Roth IRAs.
Don't forget that the HSA also dodges payroll taxes of you direct deposit into your company sponsored HSA!
Here is the correct order. HSA first. Then fund the roth as best you can. Around March of the next year if you haven't full funded the roth and need funds to do so then draw down some HSA dollars and fully fund last years roth amount by April 15. This still gets you full triple tax and moves it to the more versatile account if you can't full fund both.
Dont forget that you can save all your medical receipts throughout the years, and pull money from your hsa 30 years from now and reimburse yourself, penalty-free. Id wait till later down the road after that HSA investment has really grown before you do that, as long as you can afford to pay out of pocket for those expenses when the bill occurs. Also, dont just let your HSA money sit in the custodian account, definitely invest it. (Lots of people dont know you can do this)
I know you guys have said it before on a different show/ep, but : remember to consider health-deficient individuals. For myself, since I have a congenital heart disease, having surgeries since the age of 15, HSA in itself doesn't mathematically make sense, when an employer sponsored high premium plans are offered, because having a surgery a year (on average) paying those high deductibles offset any benefits from the tax advantage.
Love this question. My current order is:
Roth 401k to match
HSA to max
Roth IRA to max
Remaining to reach my total investment % into Roth 401k.
I never thought about HSAs in that manner, as a triple tax advantage but it truly is!!!