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Quick question-best HSA account? 401k vs Roth?

March 20th, 2014 at 02:57 pm

Hi all

I have a high deductible insurance plan and got one because I am in fairly good health.

Any suggestions for the best HSA account?.. it seems like all have fees (unless you have a large balance). I would only put in $2000.

HSA Bank is fairly well rated.

I WISh I had more savings and am feeling I am 'still shoring' things up! Which is good but less exciting them saving and investing for growth.

I wrote down the basics of the Roth, 401k, HSA so I am clear on withdrawal rules, limits, tax deductibility.

Trying to learn!

And what are peoples views on the 401k vs Roth?

Do one (which) or both?
Thanks all.

Posted in Musings | 10 Comments »

10 Responses to “Quick question-best HSA account? 401k vs Roth?”

  1. Another Reader Says:
    March 20th, 2014 at 03:14 pm 1395328449
    1395328449

    401k's and IRA's come in two flavors, traditional and Roth. Not all employers offer the Roth 401k option. Generally, the rule of thumb is to contribute to the 401k up to the point of any match and then max out your IRA. In your case, your AGI probably prevents you from contributing to a traditional IRA, but not a Roth. If you have money left after the IRA, the general thinking is to go back and max out the 401k next.

    Get your AGI from your CPA and determine your IRA eligibility. If you have the funds, you can contribute until April 15th for 2013. In fact, your side bar indicates you may have already done that. If your AGI was really low, you might qualify for a traditional IRA for 2013 rather than a Roth. You would receive an additional tax deduction if you did that.

    Can't help with the HSA account.

  2. creditcardfree Says:
    March 20th, 2014 at 03:44 pm 1395330271
    1395330271

    We have money in my husband's TSP (like a 401K but for federal employees) and Roth IRAs for both of us.

  3. Carol Says:
    March 21st, 2014 at 12:16 am 1395361014
    1395361014

    Once you are retired, Roths are desirable to help you manage your taxes and tax brackets. So do what Another Reader said and try to do both.

  4. Looking Forward Says:
    March 21st, 2014 at 05:02 am 1395378160
    1395378160

    You can open a HSA with a credit union. One of these days I will open one. Our CU charges $25/year.. or something close to that.. I can't recall exactly.

    If you can get a Roth 401k I'd do that first and a Roth IRA (if you don't make too much) second.

  5. Carol Says:
    March 21st, 2014 at 12:36 pm 1395405366
    1395405366

    Home page of Morningstar had a discussion of this yesterday. Read the comments too.

  6. MonkeyMama Says:
    March 21st, 2014 at 01:33 pm 1395408822
    1395408822

    For the short run, I'd to Traditional 401k and Traditional IRA if eligible. I am assuming you are in a high tax bracket. This will generate up front tax savings to fund your emergency funds, and just to generate more cash flow in general. (If your tax bracket is 25% then when you put $1,000 in a ROTH it is gone, but if you put $1,000 in a Traditional 401k you will get $250 back in immediate tax savings. I am guessing that your actual marginal tax rate is higher than 25%).

    I can't say I would recommend ROTHs, regardless, unless you have taxable money sitting around that you want to tax shelter (by moving over into ROTH IRAs). I do not think that you do have money just sitting around in taxable accounts?

    Since you plan to retire very young AND very soon, I'd then convert 401ks to ROTH IRAs in retirement. The overall strategy is to get a large tax break now and then to convert over to ROTHs at much lower tax rates.

  7. Rachael777 Says:
    March 24th, 2014 at 10:53 pm 1395701587
    1395701587

    Monkey Mama and all. THANKS.. RIght now I contribute 10% to the 401k and already put in $3500 into the Roth. I forgot you can convert your 401k to a Roth IRA and do not have the details on that. I assume you pay tax on the conversion but I do plan to decrease work, so tax rate would be lower.. that sounds like it makes ALL sorts of sense..I will look into it.. also I contribute 'only' 10%.. I could maybe pick up the 401k to 16% in the future which would max me out at $17500. I am NOT able do this right now w the '6 homes' in transition, contract up for renewal, etc etc. So will hold at the 10% 401k and get some new sources of income and savings. Smile thanks all.

  8. Carol Says:
    March 25th, 2014 at 02:04 am 1395713056
    1395713056

    As usual Monkey Mama has it just right. Her advice is exactly the tax smart thing to do!

  9. MonkeyMama Says:
    March 26th, 2014 at 01:53 pm 1395841998
    1395841998

    P.S. Rachael, definitely discuss all of the above with your CPA. They would be able to give much better advice, knowing the specifics of your tax situation.

  10. Rachael777 Says:
    March 27th, 2014 at 08:31 pm 1395952317
    1395952317

    Got it. Thanks Smile

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