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.
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"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)
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