Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Another HSA question - order of contributions question
Old 11-09-2011, 03:07 PM   #1
Confused about dryer sheets
 
Join Date: Jan 2011
Posts: 6
Another HSA question - order of contributions question

I just have a quick question and couldn't find the answer when searching.

At least for my particular situation is there any reason I shouldn't contribute first to max my Roth (5,000), 2nd to my HSA (3,100 in 2012), third to single 401k?

I'm self employed with an S-corp and just joined a HDHP and started an HSA although just individually and not under my S-corp at this point. I realize that's only about $8,100 that I'm putting away, but I'm also trying to get some additional savings set aside for some other things at the moment. Ideally I will put more in - I'm really just asking if there is a reason NOT to want to max out the HSA before I would put ANY amount into my traditional 401k?

I'm healthy and plan to probably just pay any minor health expenses out of pocket for the most part.

Secondly, I can't seem to find a benefit to associating my HSA with my S-corp because the HSA is already triple tax advantaged. Are there any?
__________________

__________________
NYCO is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-09-2011, 03:25 PM   #2
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
If you plan on using HSA funds for retirement rather than medical expenses (i.e. you intend to pay much of the deductible and co-pay out of pocket), I'd prefer 401K and IRA contributions be done first, and here's why:

* You can have penalty-free access to 401K retirement funds as early as age 55, but not until age 65 with an HSA.

* With a 401K, you have an option to roll into an IRA and take SEPP if you need access before age 55 -- again, not available with an HSA.

* Early withdrawal penalties are now 20% from an HSA as opposed to still being 10% for a 401K.

* Though usually discouraged, many 401K plans have loan provisions and HSAs do not -- you take it out for non-medical reasons, you pay the taxes and penalties.

And though it's not your situation being self-employed, people who have an employer match on their 401K should absolutely get all of that match before using IRAs or HSAs in most cases.
__________________

__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 11-09-2011, 03:36 PM   #3
Confused about dryer sheets
 
Join Date: Jan 2011
Posts: 6
Quote:
Originally Posted by ziggy29 View Post
* You can have penalty-free access to 401K retirement funds as early as age 55, but not until age 65 with an HSA.
Thanks for the comments. I thought it was 59 1/2 for penalty free withdrawls from HSA which is why I thought of it very close to the same (on that aspect) to a traditional 401k. 4.5 years wouldn't be much, but 10 is. Maybe it is 65.

I just figure my health expenses won't be much until I'm older as long as I live a healthy lifestyle, though I know things come up unexpectedly. I'd have accumulated a large chunk of money that never gets taxed for when I know I will have the majority of my medical expenses later in life.
__________________
NYCO is offline   Reply With Quote
Old 11-09-2011, 05:10 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,863
Depends quite a bit on your tax situation as well. The HSA is probably your most tax-advantaged and should maybe be first in line, barring concerns with withdrawals mentioned above. And if the HSA offers reasonable investment choices for you. But next would be the 401k if your taxes are high now due to other income. If you have no other income, then the Roth might be a good spot, even ahead of the HSA if you can put it in the Roth and still not pay any taxes. Watch out for the Roth 5 year withdrawal restriction if it's a new account. Stuff the rest in the Solo 401k. Might also watch out for any minimum investment amounts if you spread $8k too thin to buy the investments you want.
__________________
Animorph is offline   Reply With Quote
Old 11-14-2011, 08:49 PM   #5
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 1,012
Quote:
Originally Posted by ziggy29 View Post
If you plan on using HSA funds for retirement rather than medical expenses (i.e. you intend to pay much of the deductible and co-pay out of pocket), I'd prefer 401K and IRA contributions be done first, and here's why:

* You can have penalty-free access to 401K retirement funds as early as age 55, but not until age 65 with an HSA.
if your keep track of all you pay "out of pocket" in medical/dental/drug expenses over the years you can withdraw at a later date of your choosing with no tax or penalty owed, that total amount from your HSA.
__________________
jdw_fire is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
HSA and use of VA Services Aeowyn FIRE and Money 0 11-03-2011 06:46 AM
Who is the best HSA custodian? tricky88 Health and Early Retirement 11 09-06-2011 09:18 AM

 

 
All times are GMT -6. The time now is 09:35 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.