Does it always make sense to max out contributions to an HSA?

Does it always make sense to max out contributions to an HSA?
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I’m 29 years old and do not expect any significant medical expenses in the immediate future. I am wondering whether the tax benefits from an HSA are something to definitely take advantage of.


It depends. HSAs are underused; they can be a wonderful way to save for retirement and healthcare.
Here is a recent article of mine that does a really good job explaining HSAs:
Advantages of HSAs:
For qualified healthcare expenses:
• Goes in tax-free & comes out tax-free
• Lowers taxable income
• Tax-Free Growth
• Can choose any HSA provider, even those that have over low-cost investment options
o Equity-type investments are higher risk, but also have a better chance of meeting or exceeding healthcare inflation
• Can reimburse yourself anytime
• Can use for COBRA (in most cases)
• Can use for Long-Term-Care (LTC)
For retirement:
• Only taxed at ordinary income after age 65
• No RMD (Required Minimum Distribution)
• Tax-Deferred Growth
• Income-tax may be lower at age 65
• No income limits to contribute
I can’t speak to your specific situation, but generally speaking, if you are maxing out your Roth, and making a decent contribution to your 401k, an HSA can be a great option. Because of the 20% penalty you would have to have a good emergency fund and make sure there was little chance of needing the money, but it is a wonderful underused account type.
Good Luck!
Mark Struthers CFA, CFP®
For Sona’s Educational Series KnowThis! KnowThat! go to:
This is for informational purposes only. Your specific situation would need to be taken into account. All information is subject to change. Not to be considered investment, tax, or legal advice.


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