Author Topic: HSA v. RothIRAs in FIRE strategy.  (Read 1452 times)

kite

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HSA v. RothIRAs in FIRE strategy.
« on: April 17, 2017, 02:17:57 PM »
I've contributed the max to an HSA for as long as it has been an option for me.  I haven't needed take withdrawals for medical expenses as these are low enough to pay out of pocket.  I invest as much as possible, leaving only the required 2500 in cash.  The invested portion now exceeds 60,000. 

Is there a balance over which it is wiser to contribute to a RothIRA so that funds can be tapped for any early retirement expense? I understand HSA versus Traditional IRA.  All things being equal, I'd go with the former -- if the expenses weren't Medical, I'd simply pay the tax.  But what about between an HSA and a Roth.  If I can fully fund one and partially fund the other, what is the wisest breakdown?  Does it hold no matter what the balance is in each? 
« Last Edit: April 17, 2017, 02:54:37 PM by kite »

Mother Fussbudget

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Re: HSA v. RothIRAs in FIRE strategy.
« Reply #1 on: April 17, 2017, 02:50:46 PM »
Re-reading the Investment Order sticky post, HSA is better than Roth for the reason you can use the funds there tax-free for any 'medical expenses'.  If you've paid medical expenses out-of-pocket during the years you've had the HSA account, any out-of-pocket expenses can be reimbursed at any time - simply save the receipts (or find them on-line), and withdraw the funds matching up with expenses.   You should also research the Roth pipeline - dollars invested in a Roth can be withdrawn tax free after they've been held in the account for 5 years.  The backdoor Roth could be useful for you as well if you have T-IRA funds you want to convert to Roth to form the 5 year pipeline.  MadFientist has lengthy posts  on ALL these topics on his website MadFientist.com.  Search there for HSA, Backdoor Roth, etc.  And all the best!

Viking Thor

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Re: HSA v. RothIRAs in FIRE strategy.
« Reply #2 on: April 17, 2017, 08:17:10 PM »
The investment order sticky post is great and probably works 99% of the time. I do think if you have almost no annual medical expenses and begin to build a really large HSA balance, but are not at the level you want for other retirement savings, at some point it may make sense to deprioritize building the HSA.

Hard to say exactly what that point is but as an extreme case / hypothetical example if someone had $60k in 401k and $60k in HSA, that would be a good time to focus more on building the 401k.

Very few people are near that point of course.

Kite you have done a great job building the HSA, I don't think I can offer advice on specific number other than encourage you to evaluate and I think you are right that there is a point at some balance level when deprioritizing the HSA makes sense.