California: Order of Operations

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Topic Author
ebrasmus21
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California: Order of Operations

Post by ebrasmus21 » Thu Jan 03, 2019 1:26 pm

CA Residents.

What should the order of investment operations be? With respect to 401k, IRAs, HSAs, so on and so forth. More specifically, I suppose, I've been socking away cash to my HSA at the expense of saving in my IRA.
Last edited by ebrasmus21 on Thu Jan 03, 2019 1:44 pm, edited 1 time in total.

Alan S.
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Re: California: Order of Operations

Post by Alan S. » Thu Jan 03, 2019 1:41 pm

That is probably a good idea, assuming that you are at least making 401k contributions up to the employer matching limit because an HSA is the only account with the triple benefit (deduction, tax deferred, and conditional tax free distributions).

Granted, in CA your HSA account is worth less than most other states because CA does not conform to the federal HSA tax rules, but the HSA should still receive high priority.

If you did not have 401k access however, then you might weight HSA to Roth or deductible TIRA contributions about 2:1 subject to their applicable limits.

Topic Author
ebrasmus21
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Re: California: Order of Operations

Post by ebrasmus21 » Thu Jan 03, 2019 2:08 pm

Alan S. wrote:
Thu Jan 03, 2019 1:41 pm
That is probably a good idea, assuming that you are at least making 401k contributions up to the employer matching limit because an HSA is the only account with the triple benefit (deduction, tax deferred, and conditional tax free distributions).

Granted, in CA your HSA account is worth less than most other states because CA does not conform to the federal HSA tax rules, but the HSA should still receive high priority.

If you did not have 401k access however, then you might weight HSA to Roth or deductible TIRA contributions about 2:1 subject to their applicable limits.
Thank you, Alan. For 2018 I maxed the 401k and HSA along with contributing a little to my tIRA. We have the HSA in 50% cash and 50% Vang TIPS fund and I'm okay with that unless wiser BH can enlighten.

EarningBack
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Re: California: Order of Operations

Post by EarningBack » Sat Nov 16, 2019 8:59 pm

Wanted to briefly revive this thread if possible. If I'm currently maxing out Roth IRA space, and contributing 10% to Roth 401k (employer matches 50% up to 6%). Would it be worthwhile to open an HSA and just take the employer contribution? They put in 1k a year for a family. I'm thinking I would be better off working on building up the amount that I can contribute to the 401k before putting my own money into the HSA, no?

I've never made enough to have a taxable account, and I know in CA an HSA is basically a taxable account. Though there is the federal tax benefit. I've been using Kaiser for several years, but the premiums are considerably cheaper for the HDHP with HSA. I am relatively healthy, late 30s with a young daughter so I'm trying to decide if the juice is worth the squeeze.

Big Dog
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Re: California: Order of Operations

Post by Big Dog » Sat Nov 16, 2019 9:27 pm

EarningBack wrote:
Sat Nov 16, 2019 8:59 pm

I've never made enough to have a taxable account, and I know in CA an HSA is basically a taxable account. Though there is the federal tax benefit. I've been using Kaiser for several years, but the premiums are considerably cheaper for the HDHP with HSA. I am relatively healthy, late 30s with a young daughter so I'm trying to decide if the juice is worth the squeeze.
You can treat your CA HSA as part of your bond holdings (in your Asset Allocation), and hold US Treasuries in the account (which can be tax-free depending on what you buy).

EarningBack
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Re: California: Order of Operations

Post by EarningBack » Sat Nov 16, 2019 9:38 pm

Right now I've got all my bond holdings (20% of portfolio) in a previous employer's 401k (non-Roth), and there's plenty of room for rebalancing when necessary. I suppose I could use the HSA for future bond holdings, but I'm trying to figure out if that makes sense based on my situation. I'm not sure if it's worthwhile to invest in a program like Quicken to start tracking capital gains just for the HSA.

lakpr
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Re: California: Order of Operations

Post by lakpr » Sat Nov 16, 2019 9:48 pm

EarningBack wrote:
Sat Nov 16, 2019 9:38 pm
Right now I've got all my bond holdings (20% of portfolio) in a previous employer's 401k (non-Roth), and there's plenty of room for rebalancing when necessary. I suppose I could use the HSA for future bond holdings, but I'm trying to figure out if that makes sense based on my situation. I'm not sure if it's worthwhile to invest in a program like Quicken to start tracking capital gains just for the HSA.
If you invest HSA in treasury funds only, then you don't need to track anything. All gains in an HSA are tax free per Fed rules, and because your investment is in Treasuries, they are state tax free.

To compensate for treasuries in HSA, move some bonds in your old 401k to equities.

I recommend long term treasuries than intermediate term or short term treasuries, due to their higher yield

EarningBack
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Re: California: Order of Operations

Post by EarningBack » Sun Nov 17, 2019 2:39 am

lakpr wrote:
Sat Nov 16, 2019 9:48 pm
If you invest HSA in treasury funds only, then you don't need to track anything. All gains in an HSA are tax free per Fed rules, and because your investment is in Treasuries, they are state tax free.
That doesn't all appear to be true based on this thread:

viewtopic.php?f=1&t=279583

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