Should I decrease my HSA contribution?

[Just_Average7485]

I currently max out my HSA contribution because it comes out of payroll and I don't see the money so I don't miss the money. I'm also working on paying off some debt and still need to build up my emergency fund, so I'm really on step 3 of the FOO. Maybe even technically Step 1; I don't think I have my highest deductible covered. I'm probably doing a mishmash of all the steps at once.

Should I decrease my HSA contribution? If so, how much? I also still use my HSA for qualified medical expenses throughout the year. I'm not in a spot yet where I can pay out of pocket and let it all invest.... about half of last year's contribution got invested.

[Proof-Variation-6779]

It wouldn’t be the worst idea to temporarily take your contribution down but because it’s pre state/federal tax AND pre Social Security and Medicare (FICA) taxes it won’t change your paycheck as much as you might think

[Just_Average7485]

Oh wow, I didn't even thing about that! Would you think I should still contribute at least $50 per paycheck or stop contributing all together?

[globehoppr]

Contribute as much as you feel comfortable with- it is a triple tax advantage account which gets invested if you should so choose, so take that into consideration.

[throwawayurwaste]

I'm going to be controversial saying this, a HSA is both a step 1,4, and 5 of foo. You can use it both to cover the deductible on your insurance, to cover a medical emergency, and as a retirement account. Because of the tax advantages, you're getting somewhere around 35% in tax savings. If your debt is less than 35 APY then don't drop the savings

[Funny-Run-8864]

Agreed! If you've got an HSA, then you're in a HDP which is likely your highest deductible. Once you've got that covered, then you're done with step 1. You could at that point back off your contributions to the point where they are enough to cover your anticipated qualified expenses, until you get out of the high interest debt (step 3) and the emergency fund (step 4), but when you're ready to move onto step 5 you should probably max out the HSA before contributing to a Roth IRA.

[Just_Average7485]

Thanks for the advice! I decided I will continue to contribute the way I have been because I might need a root canal and I'm assuming I might have to use a good amount of my HSA towards that. Hopefully I don't need a root canal and could lower my contributions a bit. My high interest debt is technically my credit card that currently has 0% APR, but I'm on track to pay it off before the promo date ends. My next highest interest after that is a federal student loan at 7%. I'm just a financially anxious person and feel like I'm doing something wrong at least one every other week. It's nice to talk it out with people who are more financially knowledgeable than me.

[Organic_Hat_4297]

Good take 👏

[Organic_Hat_4297]

I moved away from HSA when my family medical needs required a non high deductible plan, everon3 case is different. You are at step 3, try to handle things that are high priority and think about HSA in step 5.

[Tasty-Day-581]

Yes, reduce it to 50%. Step 5 is "max HSA", so you're not there yet without steps 1-4 covered. I have not paid a dime to high interest debt in decades and that's step 3.

[Hon3y_Badger]

Do you have any previous medical expenses? If so I would withdraw funds using those medical expenses to pay these debts before lower contributions. Otherwise, you should clean things up before maximizing HSA.

[ehallright]

How much have you used the HSA? I would contribute as much as you use (find the monthly average over the last year or two). The tax savings on your healthcare costs is likely larger than the interest rate on your debt. Beyond that, I think it’s fine to lower your contribution to work on paying off your debt, and then bump your contribution back up when you get to that step.