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PaperclipPerfector  1mo ago (text post)   2090 thread views

Small-Scale Question Sunday for September 28, 2025

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

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The so-called “Shoebox Strategy” for an HSA seems to me to be strictly wrong for most people:

  1. If you execute the shoebox strategy, your money will remain in the HSA to grow “probably, hopefully, mostly tax-free” and you will be responsible for storing the receipts for more years than you would otherwise.
  2. If you instead cash out the amount right away and then coincidentally make a Roth contribution of an equal amount, then your money will be growing “surely tax-free”, which is generally better, and you get to immediately start the 7-year timer to be allowed to throw away your receipts.
  3. If you are already maxing out every tax-advantaged channel, and so cannot implement strategy (2), you should at least consider just withdrawing it and making a straight-up investment in some tax-efficient growth asset, since you're probably in a position to take advantage of the “surely tax-free” growth of the death basis step-up.

The only case I can see where the “shoebox strategy” wins over (2) is if you anticipate HSA exhaustion before age 60, and the only case I can see where it wins over (3) is if you anticipate HSA exhaustion before death.

Am I missing anything else here?

⸻

EDIT: just to be clear, by “strictly wrong” I mean “strictly beat by another strategy”, not “strictly beat by the default 'stupid' strategy of making the withdrawal immediately and keeping the proceeds in a 0% interest checking account or taxable savings account”.

  1. Roth IRA limits are not that high. ~250K currently, with for two-income family - or moderately well earning one-income - is not a lot. Once you hit that, no Roth for you.
  2. After 60, there will likely be a significant amount of medical bills. No insurance, as far as I know, covers 100% - especially not Medicare. So getting the money out of the HSA wouldn't be a big problem, however unlike Roth you can get this money untaxed on the way in and on the way out.

Roth IRA limits are not that high. ~250K currently, with for two-income family - or moderately well earning one-income - is not a lot. Once you hit that, no Roth for you.

Mega-backdoor Roth 401k allows up to 70k/year contributions with no income limit. Your employer has to offer it. FAANG does. It's a normal roth in terms of tax treatment.

When leaving the employer, you can convert to roth IRA with no penalties. Even better, you can leave it as non-roth until leaving the company, again with no penalties (but ofc you pay the income taxes to convert to roth).

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