Maxing out my HSA as a resident - terrible idea?

Discussion in 'Finance and Investment' started by theWUbear, Oct 6, 2017.

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  1. theWUbear

    theWUbear EM PGY1 7+ Year Member

    Jun 7, 2009
    I am a healthy PGY1 resident who chose a high deductible (~$1,500) health plan offered by my residency/employer because it offered the ability to contribute (and have the employer contribute) to an HSA.

    The money goes in the HSA tax free, grows tax free, and can be used tax free for medical expenses for the rest of my life. If I don't use it, I will withdraw it after age 65 without penalty but as income, being charged income tax.

    I am maxing it out, at $3,100 for this annual year and investing it within the HSA account - hoping to get 10% returns annually.

    Here's the thing: if I didn't do the HSA, I would not get $40/month from my employer paid into a savings account, but I would get that $3,100 into my bank account taxed at 10% (my low income tax). Instead, I run the risk of this money being withdrawn at age 65 at whatever tax bracket I am at that time (maybe 33%).

    The difference between 10% and 33% is huge - means I'm making a big loss putting the money in the HSA if I plan on using it as an investment account. The thing not yet considered is the money growing tax free if in the HSA vs not if I invest money on my own right now. I have no idea how capital gains taxes work and whether money invested in, for instance, Vangard funds, for 30 years, are subject to significant capital gains taxes.

    Would love anyone's thoughts on the matter regarding the utility of a healthy, healthcare non-user Resident (in low tax bracket) investing in HSAs
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  3. ThoracicGuy

    ThoracicGuy 2+ Year Member

    Jun 11, 2013
    If you have medical expenses, it can be withdrawn tax free. If you take it out in retirement, it will be taxed like an IRA. The HSA is a win-win thing. I'd keep doing it, especially since you're getting an employer addition to it.
  4. Zenabi90


    Jul 14, 2017
    I agree with the above. You're healthy now, but you have no idea what may or may not happen in the future. With an employer match (even partial), that's "free" money. Anytime I see an employer match, I would always consider contributing the amount required to maximize the "free" money as a good idea.

    Consider the following article from a non-anonymous source, published by a respected site (Forbes):
    Why You Should Max Out Your HSA Before Your 401(k)

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