Where do I invest first ROTH or HSA?

Hi, In order to reduce tax liability where should I invest first, ROTH or HSA? We already max out 401(K).

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Well, a Roth won’t impact your tax liability at all this year. That’s how Roth works. You put already taxed money in, but then it’s protected from taxes forever. So if you’re trying to reduce taxes THIS year, you’d go for the HSA.

If you’re trying to reduce taxes throughout your life, it’s kind of a toss up. It depends on your tax bracket now, vs tax bracket later and if tax rates or tax laws change. I personally like the flexibility of Roth and getting taxes out of the way.

HSAs actually offer an even better “triple” tax benefit:

  1. Money that goes in is a tax deduction
  2. Tax deferred growth
  3. Tax FREE withdrawals for qualified medical expenses.

Nothing really beats that. After age 65, it basically converts to a regular IRA, where you can make withdrawals for any reason, but the tax on the full amount withdrawn is due at that time.

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