Put extra money in HSA or Taxable account?

[fiveoh]

I can’t make up my mind on this so I figured I'd get some other opinions.  Just came in to a little extra money and I’m trying to decide whether to put it in my HSA or a taxable investing account.  We already max IRA’s and 403b, and my employer contributes $1200 a year into my HSA.  My goal is to retire as early as possible and I feel like putting more money into the HSA is not helping that.  However, there is the tax benefit from it…. And that’s why I can’t make up my mind.

[salmp01]

Having a large HSA account could help with early retirement.  If your HSA account is with your employer just make sure you can take it when you leave.

[tannybrown]

And check with the HSA provider about fees if you leave employment.

[Lars]

I would recommend the HSA over a Taxable account. From the perspective of an aspiring future retiree, I see them as a traditional IRA with separate contribution limit and penalty free early withdrawals for medical expenses. There two big considerations for me -

Reduced taxes - Reduced income and possibly SS taxes on contributions, tax deferred growth and no taxes on medical expenses on withdrawal

Reduced Access - Although access is reduced compared to taxable, the HSA can be used as a bucket for medical expenses (except premiums). With medical being a lumpy expense, I think this simplifies planning withdrawals via rollovers (ROTH pipeline) or early withdrawal techniques while retaining tax savings.

Personally I max out my HSA before my 401k type accounts.

[madfientist]

I would definitely max out the HSA.

You will most likely eventually spend that money (sadly) so you might as well allow it to grow tax free.  You will also lower your taxes for the current tax year so you can use that money that you were going to have to spend on tax and you can invest that money in a taxable investment account.

If your HSA has enough money in it and you feel comfortable increasing your deductible, you can save some money on your insurance premiums for the rest of your life by increasing your deductible now.  The savings from the lower insurance premiums can then be invested in a taxable investment account!

[fiveoh]

Thanks for the replies!  HSA it is. 

[Nephi]

I would definitely recommend maxing out the HSA. Here's an article I read recently about more efficiently using your HSA as a retirement account. Basically, you can use the HSA in such a way as to have tax-deferred contributions, gains, and withdrawals. More details in the article: http://www.fivecentnickel.com/2010/02/22/using-your-hsa-as-a-retirement-investment-vehicle/

[Nephi]

Also, I'd look closely at what investment options are available in your HSA and what fees are incurred. Currently I have mine with a local credit union with zero fees. When I have enough money in there to make it worth the fees, I am considering changing to hsaadministrators.com so that I can invest in Vanguard funds. I've heard that a lot of HSA accounts don't have very good investment options so definitely check that out.