HSA investment for person close to retirement?

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HSA investment for person close to retirement?

Post by Kennedy »

If someone is within 5 years of retirement, is the general advice to invest the money for down the road or to use the money to reimburse oneself in real time? This money won't really make a difference either way, but it would be a shame to invest the money and then watch it decline.
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Re: HSA investment for person close to retirement?

Post by grabiner »

Whether the money will decline is independent of whether it is in the HSA; your HSA, IRA, 401(k), and taxable account will all hold relatively steady if invested in bonds, and rise or fall with the stock market if invested in stocks.

If you aren't maxing out your retirement accounts, it is best to reimburse yourself from the HSA, regardless of how far you are from retirement. You can withdraw $1000 from the HSA, and then invest the $1000 you didn't spend out of pocket into your Roth IRA (or an equivalent after-tax amount into your 401(k).) This is better than leaving the money in the HSA, because the gains on the Roth IRA can be spent tax-free on anything in retirement.

If you are maxing out your retirement accounts, then the HSA is additional retirement savings, and you can benefit from keeping the tax deferral. If you withdraw $1000 from your HSA, you will have $1000 more to invest in a taxable brokerage account, which is inferior.
Wiki David Grabiner
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