Poll

Which one would you choose?

Roth
1 (5.3%)
HSA
18 (94.7%)

Total Members Voted: 19

Author Topic: Funding Roth vs HSA  (Read 3280 times)

fiveoh

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Funding Roth vs HSA
« on: January 19, 2016, 08:21:53 PM »
If you had 11k to invest would you fully fund 2 Roths(married) or put 3200 in an HSA(max for an individual) and 7800 in the Roths?  15% tax bracket.   

MoonShadow

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Re: Funding Roth vs HSA
« Reply #1 on: January 19, 2016, 08:29:48 PM »
Definitely fully fun the HSA first.  Not only is it easier to get that money back out for near term expenses (the principal of economic substitution applies well here), there is a high chance that the funds will still be tax free if withdrawn in retirement as well as tax free going in.  That is not true with either a tIRA or a Roth.

MoonShadow

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Re: Funding Roth vs HSA
« Reply #2 on: January 19, 2016, 08:31:48 PM »
And if you are married, why wouldn't your HSA contribution limit be $6550?  Mine is.  And your $3200 number is outdated even for a single.

fiveoh

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Re: Funding Roth vs HSA
« Reply #3 on: January 19, 2016, 08:33:51 PM »
And if you are married, why wouldn't your HSA contribution limit be $6550?  Mine is.  And your $3200 number is outdated even for a single.

My wife has a different non HSA plan from her work.  I couldn't remember the exact number, I thought it was around 3200.  Just looked it up and you are right its 3350.  Close enough.  Thanks for the reply!   

MoonShadow

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Re: Funding Roth vs HSA
« Reply #4 on: January 19, 2016, 08:44:19 PM »
And if you are married, why wouldn't your HSA contribution limit be $6550?  Mine is.  And your $3200 number is outdated even for a single.

My wife has a different non HSA plan from her work.  I couldn't remember the exact number, I thought it was around 3200.  Just looked it up and you are right its 3350.  Close enough.  Thanks for the reply!

If your wife's non-HSA plan would cover you also, without a deduction (I think), then you are not eligible for an HSA anyway; and the question is moot.  Be careful, the IRS doesn't seem to like HSAs, and will deny you the tax benefits if possible.  You cannot be covered under her plan in any fashion.

fiveoh

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Re: Funding Roth vs HSA
« Reply #5 on: January 19, 2016, 09:00:53 PM »
And if you are married, why wouldn't your HSA contribution limit be $6550?  Mine is.  And your $3200 number is outdated even for a single.

My wife has a different non HSA plan from her work.  I couldn't remember the exact number, I thought it was around 3200.  Just looked it up and you are right its 3350.  Close enough.  Thanks for the reply!

If your wife's non-HSA plan would cover you also, without a deduction (I think), then you are not eligible for an HSA anyway; and the question is moot.  Be careful, the IRS doesn't seem to like HSAs, and will deny you the tax benefits if possible.  You cannot be covered under her plan in any fashion.

I'm not sure what you mean, "without a deduction".  The cost to add me to her plan is way higher than having my own.  We have done this for a few years now.  Past years we have fully funded both the Roth and the hsa for myself but this year we probably won't be able to.


MoonShadow

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Re: Funding Roth vs HSA
« Reply #6 on: January 19, 2016, 09:17:08 PM »
I intended to say contribution, as in additional cost to your wife, taken out of her check.  I think that you would be fine, considering you haven't been covered by her recently.

That said, yes, do the HSA first; then as much of the Roth IRA's as you can afford, in that order.  The HSA is magic, if you look at it as a retirement account for your health needs.  Pay your actual medical bills out of pocket as much as you are able as well.

nobody123

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Re: Funding Roth vs HSA
« Reply #7 on: January 20, 2016, 08:26:50 AM »
I fully-fund my family HSA through work, avoiding the payroll taxes of that amount and getting a company match to boot.  I don't max out our Roths as part of my normal every-paycheck savings, so when I have medical expenses, I withdraw from the HSA and put the cash into my Roth.  Essentially, I get to move some tax-free money into my Roth to grow tax-free forever.  Best of both worlds.

fiveoh

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Re: Funding Roth vs HSA
« Reply #8 on: January 20, 2016, 09:14:38 AM »
I fully-fund my family HSA through work, avoiding the payroll taxes of that amount and getting a company match to boot.  I don't max out our Roths as part of my normal every-paycheck savings, so when I have medical expenses, I withdraw from the HSA and put the cash into my Roth.  Essentially, I get to move some tax-free money into my Roth to grow tax-free forever.  Best of both worlds.

Good idea.  Thanks for the suggestion!

Thegoblinchief

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Re: Funding Roth vs HSA
« Reply #9 on: January 20, 2016, 11:37:47 AM »
No brainer. HSA is the single best tax deal ever as long as you have access to halfway decent options for investment. If you don't, switch providers or do an in-service transfer 1/year to one that does.

boarder42

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Re: Funding Roth vs HSA
« Reply #10 on: January 20, 2016, 11:49:35 AM »
always HSA first.  but if you have one through your work you should strongly consider payroll deduct to bypass FICA as well.