Health Savings Account

We have a H S A account that we are contributing to each month. We also contribute to our 401K’s. We presently have a OOP maximum of $5000 for our family of 5. I believe the max we can contribute is about $6200 annually. The HSA has an investment option with some well known fund families (Vanguard) that you can use as long as you keep a minimum in the investment account. Given the tax advantages of the HSA, would it be wise to max the contributions to the HSA before considering maxing or raising the contribution to the 401Ks (after meeting the employer match)?

Terry Says:  You’re fortunate to have enough money to contribute to both types of accounts.  But the use of the HSA is more limited — although you can use it for health expenses in future years.  You might consider using it to fund a Long Term Care Insurance policy — although that will have some tax implications when you use the benefits.  Other than that, I’d suggest you max out on the 40l(K) first, with all its opportunity to diversify your investments.  That advice holds — unless you anticipate using the money for some type of surgery or medical cost that is allowable under the plan, but not fully covered — ie braces for your children, dental work for yourself, or  perhaps a surgeon’s fee for hip replacement, something that you anticipate and know that your  insurance plan will require you to contribute a large amount to the procedure.