Thanks for your thoughts. There is an additional factor that I forgot to mention (although it could have been inferred) -- I have the option of contributing pre-tax funds to a 403b (I'm not maxed out yet). Making the same total contributions,
Making the same net contributions and same investment assumptions (assuming the HSA at least has an index fund option, and making the Roth after-tax contribution to have the same net effect on take-home pay)
| Plan A with HSA |
Plan B with FSA and pre-tax 403b |
|
With $3000 out of pocket expenses, contribute $5150 to HSA
|
With $3000 out of pocket,
$600 covered by HRA, contribute $2400 to FSA and $2750 pre-tax 403b
|
|
Saves income tax and employment taxes on $5150
|
Saves income taxes on $5150 and saves employment taxes on $2400
|
|
Tax savings relative to Plan B is $210 per year
|
|
|
With $2150 unspent each year, projected value of HSA at age 65 is $24,706
|
With $2750 invested, projected value of 403b at age 65is $31,601
|
|
Withdrawals are tax-free if spent on medical care, taxable if withdrawn for other purposes after age 65
|
Withdrawals are taxable
|
|
$210 per year savings now, and $24,000 non-taxable in retirement if spent on medical
|
No current savings and $24,000 after taxes (estimated)
|
So there is still a difference but not huge.
