So, the prime directive flowchart ("How to handle $) says to increase 401k contribution to at least 15% before considering HSAs. Assuming you have access to an HSA, and assuming your HSA has decent investment options, are there any downsides to prioritizing it over a 401k?
- HSA money is truly tax free if used for medical expenses (this can include medication, massages, and even condoms)
- funds can be used at any point for medical expenses (not locked away)
- during retirement, you can withdraw from an HSA and it's treated as taxable income (essentially making it the same as a traditional 401k)
- (edit from comments) Plus you save 7% on FICA taxes, which means essentially guaranteed 7% return instantly
Are there any downsides I'm missing? It's basically a 401k account with added benefits and flexibility. As long as you budget for medical expenses and increase overall retirement contributions accordingly, why should we not max this out before a 401k?
Edit: after the employer match of course
Submitted May 19, 2019 at 07:11PM by Joeliolioli http://bit.ly/2Hvk9v3
