EOY Investments - Roth or HSA? (New Guy!)

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MoreProspectory
Posts: 2
Joined: Thu Nov 07, 2019 12:20 pm

EOY Investments - Roth or HSA? (New Guy!)

Post by MoreProspectory » Thu Nov 07, 2019 12:29 pm

Hey all, I'm new to the Forum so this is my formal "Hello" post.

I wanted to ask a question regarding EOY investment account allocation. I changed jobs recently (more $$ :sharebeer :moneybag ) and I'm looking at how I want to allocate my retirement investments for myself/daughter prior to the end of the year. Given the roller-coaster ride of a year, I have not maxed out my Roth contribution for 2019, or HSA.

Given that I can invest in either, and that I may not be able to max out BOTH this year, of the two, which is preferable to apply additional investments to prior to the end of the year? I am aware there is a grace period for prior year investments the 1st part of every calendar year, but I'm curious whether it makes more sense to apply as much investment as possible into the HSA (this is the first year I've ever had access to one) or to focus on the Roth first.

As I've learned more about my HSA, it seems this account has more utility and versatility over the long-run than the Roth, so it should be maxed first and then the Roth. Would ya'll agree? Or, am I missing something?

Thanks in advance!

Also, this is an either/or question, so the response "you should max both!" while true, is unhelpful in this situation. :wink:

EDIT: Should Add I'm in TX (no state Inc. tax)
Last edited by MoreProspectory on Thu Nov 07, 2019 3:36 pm, edited 1 time in total.

Silk McCue
Posts: 3307
Joined: Thu Feb 25, 2016 7:11 pm

Re: EOY Investments - Roth or HSA? (New Guy!)

Post by Silk McCue » Thu Nov 07, 2019 2:03 pm

Welcome to Bogleheads!

Fulling funding the HSA with a plan to never use the funds until you retire is the right answer given your constrained question. Getting as much into your 2019 Roth by April 15, 2020 is the next.

Knowing whether you should be using a Traditional IRA to reduce taxes at this point instead of the Roth is unknown as we know very little about your financial situation.

FYI - trying to set parameters around responses never works here. Neither can you avoid follow-up questions because many posters have wrong assumptions or aren't aware of other options that can't be exposed without probing. :) Just ignore what bugs you and thank folks for the help when it is all said and done. You can learn much here and receive great advice. I have.

Cheers
Last edited by Silk McCue on Thu Nov 07, 2019 2:41 pm, edited 1 time in total.

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teen persuasion
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Re: EOY Investments - Roth or HSA? (New Guy!)

Post by teen persuasion » Thu Nov 07, 2019 2:24 pm

Some of each might make sense. Contributions to HSA would net you a tax break, especially if you can contribute thru payroll (then no FICA on HSA contributions, too).

If you are eligible for EITC, the reduced AGI and w2 income will get you a larger refundable credit (and possibly state credit). If your income is in the right range, a contribution of up to $2k to the Roth IRA could get you up to $1k in a nonrefundable retirement Saver's credit.

So save some to HSA to reduce taxes + increase refundable credits, put tax refund in Roth IRA for more reduced taxes. Kinda circular/recursive. If incur any medical expenses, withdraw from HSA to make up Roth IRA contribution if the only way to find funds (but only up to expenses incurred after HSA opened).

Really investigate YOUR tax details - this only works in a narrow income range with the right other details (filing status, # of kids, etc.)

surfstar
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Joined: Fri Sep 13, 2013 12:17 pm
Location: Santa Barbara, CA

Re: EOY Investments - Roth or HSA? (New Guy!)

Post by surfstar » Thu Nov 07, 2019 2:26 pm

BOTH!

HSA for sure

Then fund Roth by 4/15/20

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FiveK
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Re: EOY Investments - Roth or HSA? (New Guy!)

Post by FiveK » Thu Nov 07, 2019 2:46 pm

See Prioritizing investments and Investment Order for exactly this type of question. After reading those - is it clear or clear as mud?

Topic Author
MoreProspectory
Posts: 2
Joined: Thu Nov 07, 2019 12:20 pm

Re: EOY Investments - Roth or HSA? (New Guy!)

Post by MoreProspectory » Thu Nov 07, 2019 3:39 pm

Thanks everyone! And the link to the posts about investing order and prioritizing is excellent and confirmatory. Great resource.

Also, dig your avatar FiveK. I saw the ring nebula through a 25" telescope last Spring. Amazing!

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