Ask Annex Question

I need to fund my HAS in retirement. I’m a year away from medicare. Should I fund it from a distribution from my Traditional IRA or Roth IRA? Wouldn’t the Roth be the better choice from a tax standpoint?


Ask Annex Answer


The current Federal tax code allows an individual to transfer funds from their IRA to an HSA once in their lifetime.  The “rollover” is limited to the maximum annual contribution allowed into an HSA.  Assuming you have a family health insurance plan your maximum allowed contribution in 2017 is $7,750 including a $1,000 catch up provision.

You have questioned if it makes more sense to take the distribution from your Roth IRA as opposed to your traditional IRA.  We believe the best course is using your traditional IRA for two reasons:

  1. The rollover from the traditional IRA will be a tax neutral transaction meaning the IRA distribution will be taxed as ordinary income but the HSA contribution will be deductible “above the line” thus offsetting the IRA distribution income.
  2. Your Roth IRA is already growing tax free.  From a tax standpoint we would want to fund the HSA contribution with assets that would otherwise normally be subject to taxation.
We hope this has answered your question.  Let us know if we can provide further assistance.
Best regards,
Ron Johnson, CFP®
Annex Wealth Management, Financial Planning Specialist



Advisory Services offered through Annex Wealth Management®, LLC. Securities offered through H. Beck, Inc Member FINRA & SIPC. Annex Wealth Management®, LLC and H. Beck, Inc are separate and unrelated companies.

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