So, these are pretty awesome, little investment vehicles and I would argue they rival Roth IRAs especially if you are young. This is our first year to be able to use them and not only are they pre-tax and grow tax free but there is a third feature that I rarely see discussed:
You can continue paying your healthcare costs out of pocket instead of tapping into your HSA and reimburse yourself even years later if you keep the receipts. So, if you are lucky enough to have an HSA that also lets you invest the money in equities you can simply use it as another IRA, in effect, and let that money compound now.
Now, you probably want to be pretty conservative if you decide to invest HSA dollars considering the likelihood of having to use them later in life, but if you are young and have access to an HSA you could argue that you should max this first before maxing a Roth.
A simple investment plan with the advent of HSAs could then be the following where 2 and 3 are interchangeable:
1. Invest in 401k up to employer match
2. Max HSA -$3,350 / $6,750
3. Max Roth - $5,500 / $11,000
4. Max remaining 401k's
5. Taxable accounts (consideration for tax free munis to lower tax burden)
I wish these had been around when I started working!
You can continue paying your healthcare costs out of pocket instead of tapping into your HSA and reimburse yourself even years later if you keep the receipts. So, if you are lucky enough to have an HSA that also lets you invest the money in equities you can simply use it as another IRA, in effect, and let that money compound now.
Now, you probably want to be pretty conservative if you decide to invest HSA dollars considering the likelihood of having to use them later in life, but if you are young and have access to an HSA you could argue that you should max this first before maxing a Roth.
A simple investment plan with the advent of HSAs could then be the following where 2 and 3 are interchangeable:
1. Invest in 401k up to employer match
2. Max HSA -$3,350 / $6,750
3. Max Roth - $5,500 / $11,000
4. Max remaining 401k's
5. Taxable accounts (consideration for tax free munis to lower tax burden)
I wish these had been around when I started working!