I'm 44 and I have a lot of debt that I'm paying off aggressively with snowball method. I dump all my extra money towards it and it will take me a couple years to pay off most likely. However, I was able to max out my HSA for $4300 for 2025. I'll probably be doing the same thing for this year too. I DID and WILL have covered medical expenses that would make the withdrawal 100% tax-free. I am not behind in any payments or struggling to meet them, but I just can't decide if I should leave all my HSA contributions alone going forward or withdrawal it now and put towards my overall debt. My 401k has ~320K in it as well and I did temporarily reduce that from 5% (bare minimum) to 0%, so I can have some extra cash on hand to also put towards debt (~850/mo). I was going to readjust my contribution and budget later in the year for tax benefits (I am more concerned about current debt right now). I am doing the snowball method as I stated and that $4300 would eliminate one card right away vs. 3 months of the payment I was making. I am just undecided if I should use the HSA for a qualified withdrawal now or just leave it.
Posted by smc0881
2 Comments
I wouldn’t. Especially considering it won’t even eliminate all the debt and it’ll just wipe out one card.
Hold that for as long as you can for the triple tax benefits. Plus if you end up actually needing more intense medical care when you’re older, it’s better to have let that grow over the next 20 years and be much bigger to help with larger medical bills you might incur.
Reduce monthly spending first. If you’re passing up your 401K match you’re probably leaving 50% of every dollar contributed on the table. Most firms match through the year and if you take months off I don’t think you can get it back later.