ruralavalon wrote:I see many help threads where investing priority is a main issue, and possibilities like HSAs, debt payment & the backdoor Roth enter the picture. It might it be clearer and more helpful if the wiki page "prioritizing investments" were revised to use a single priority list, such as:
"Investors who are able to place their investments in several different kinds of accounts (such as taxable accounts, 401k, or IRA) need to decide which ones to prioritize. In order to maximize the tax efficiency of a portfolio . This is a general account funding priority that often works well for many people (all points will not apply to everyone):
1) contribute to the work-based plan (401k, 403b) enough to get the full employer match (the match is like free money, your best possible investment),
2) pay off high interest debt (a guaranteed high return, the next best thing to free money),
3) contribute to a health savings account (HSA) if available (unlike many other tax deductions, there are no income restrictions to contribute to an HSA),
4) contribute the maximum to an IRA, traditional or Roth, depending on eligibility and personal circumstances,
5) contribute the remainder of the maximum employee contribution to the work-based plan,
6) contribute via the backdoor Roth technique,
7) contribute to taxable investing,
8) non-deductible IRAs or annuities."
I think I correctly followed the priority order from Ch. 10, Bogleheads' Guide to Retirement Planning. I am not really sure about the order of 6 & 7, are they about equal perhaps. Also 3 & 4 about equal priority perhaps?
Keep the explanatory paragraphs that follow, add two more short explanatory paragraphs about HSAs and backdoor Roths, and under"See Also" add links to the wiki pages on HSAs and backdoor Roths also possibly a link to the wiki entry on "401k - Expensive or mediocre choices".
Sorry for the delay. Thank you! The wiki has been revised: Prioritizing investments
I left out your comments about order priority for 6 & 7, 3 & 4 as I thnk readers will prioritize them on their own. Or, do you think a statement should be added?
I also didn't know what to explain about HSAs or backdoor Roths and left that out, as the linked wiki articles provide the explanations. Or, do you have something specific in mind?
If you want to discuss in detail, start a new thread in the Investing - Theory, News & General
forum and post the link here. I can also split these posts into a new thread if you prefer.
Looking at the discussion thread you referenced on HSAs I now think there is no real question that # 3 HSAs comes ahead of # 4 IRAs, because of additional tax deductions. HSAs defer both income and FICA taxes (IRAs defer only income, not FICA, taxes), and HSA money is never taxed if spent on medical care.
For an explanatory paragraph on HSAs I had in mind something very similar to your note -- "Use of an HSA requires participation in a IRS qualified high deductible health plan (HDHP) at work. Look at your particular health care needs to decide if you may be better off with a traditional health care plan or a HDHP plus HSA. If the later, then using the HSA as an investment account can be advantageous."
The paragraph explains two prerequisites are for use of an HSA. The link to the wiki on HSAs then explains the advantages.
I think I would combine 6 & 7 -- "6) contribute to a taxable account or use the backdoor Roth technique."
For an explanatory paragraph on combined # 6 I have in mind -- "Most people may find taxable investing more suitable. A backdoor Roth is more suitable for high income taxpayers who are not eligible for direct Roth IRA contributions, have no other traditional IRA assets, and expect to be in a higher tax bracket in retirement."
The paragraph outlines who is likely to find benefit, then the linked wiki article gives the details.
I think it is best under "See Also" to add a link to the wiki entry on "401k - Expensive or mediocre choices"
. New members often have investing priority questions about whether 401k expenses are so high that one should omit its use if there is no employer match or after getting the match.