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The common wisdom in funding retirement is to first fund a 401k at work to the extent the employer matches your contributions. After all, that's free money from your employer. Then fund an IRA. But what about an HSA (used to be MSA) - a health savings account? Here are my reasons for making an HSA a priority BEFORE an IRA. Let me know what you think or if I'm missing anything.

1. An HSA is both tax deductible and tax free! A Roth IRA is tax free upon withdrawal but not tax deductible and a traditional IRA is tax deductible but taxable upon withdrawal. An HSA is the best of both worlds.

2. You might say, yeah, but the HSA has to be spent on eligible medical expenses. First of all, when you get older, you may have plenty of medical expenses to use it on. Second of all, and more importantly, you can spend it on whatever you want after age 65.

So is there any reason make funding an IRA a priority over funding an HSA? Funding both is best, if one can afford to. But if you can only afford, say $4000 per year, which should you fund?


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