This year I switched my family from a traditional PPO plan to a high deductible plan with an HSA. This is a great move for our family. I have been reading about using an HSA as an investment vehicle for retirement, and I am now wondering if I should prioritize saving in my HSA for retirement.
Some details on my situation:
- Company pays the full premium for the insurance plan, but does not contribute to the HSA.
- Currently have saved a few thousand in HSA, but also have been using it for expenses.
- Some health expenses high/fixed - I will currently always meet my $2600 deductible due to prescription medication.
- Yearly Account fee of Approx $50 in addition to any investment fees in HSA
- Married with 3 young children. Currently investing in Roth IRAs and Company Roth 401k.
The big advantage of the HSA is clearly the tax free money for health expenses, which will only increase with age as I consider long term care and other expenses.
I am trying to consider the disadvantages of building up a large balance in an HSA. Some that seem significant are:
Limited options for investment. I see I can transfer HSA accounts, but there don't seem to be many options on the market. Many accounts seem to provide limited access to investments within the HSA.
Inheritance. Passing on an HSA after death is not good, from what i can tell. It immediately becomes taxable income to estate or to non-spouse beneficiaries. Huge advantage here for other IRA options for long-term investments.
Should I be prioritizing building a large retirement balance in an HSA over or alongside Roth and other IRA investments? Should I consider some sort of 'cap' or target value to fund my HSA? Admittedly, at this point there is a good argument for maxing out contributions to all accounts, if possible.
Any insight here is appreciated! Thanks.