HSA vs 401k

[Pacun]

Let's say that my company's 401k matches 50% of my contributions with a ceiling of 6% of my salary.

If my salary is $100K, I need to deposit on my 401k $6k and the company will give me the max ($3K) for my salary.  If I have another 6K to invest, I should invest it in my HSA (I have family) if I want immediate benefits, correct?

It is my understanding that 401k plans pay FICA but HSAs don't, correct?

Of course in the long, long run, 401k will perform better.

[Roberts]

I think you are right but an HSA really should be looked at as a tax avoidance strategy for medical expenses and not compared to a retirement plan.

I know many people who had grand ideas that their HSA would grow to pay for medical expenses in retirement but every year they burn through the funds.

[Lee B]

Doesn't the HSA have to be integrated with a high deductible health insurance plan ?

[Pacun]

Yes, it is. Not everybody qualifies for HSA but the same is true for 401k.

I am comparing situations when the person qualifies for both.

[Randall]

I'm not sure what you mean by the FICA connection with HSAs.   I don't know if the HSA plan is thru the employer but individual HSA contributions are after FICA or SE tax.  Also with HSAs, I don't think health insurance premiums are a qualified expense for HSA money.  So if you are thinking about the HSA money used in retirement, you'll need to use on qualified medical expenses or it will be taxable.

 

[Pacun]

Randall,

I was talking about immediate benefits within the tax year and both plans are from my employer

[WITAXLADY]

after retirement - HSA's I believe can be used for insurance premiums...

[Randall]

14 hours ago, WITAXLADY said:

after retirement - HSA's I believe can be used for insurance premiums...

Not so sure.  I'll have to look up sometime.

 

[jklcpa]

iirc, HSAs can be used after retirement for the primary health insurance premiums including medicare and the medicare drug coverage,  and long-term care policy premiums, but cannot be used for medigap supplemental policies. If the premiums aren't paid directly from the hsa, the owner can request reimbursement from the account for these. If paying for these or being reimbursed from the hsa, then obviously they aren't eligible for inclusion as Sch A deductions. 

HSA can also pay COBRA premiums.