1. HSAs also have a weird "feature" - you have an unlimited reimbursement time limit. If I have $100 in an HSA account and spend $100 on an HSA-eligible medical procedure, I don't have to submit the receipt right away and get my $100 back. I can invest the $100 and then submit my $100 reimbursement sometime in retirement. It should only take 15-20 years for the investment to grow beyond the marginal tax + inflation for waiting, and then all capital gains beyond that point are free money (from the government?).
2. People compare Trad. IRA and Roth IRA a lot, but I've never seen any that consider the effects of the avoided current tax payments of a Trad. IRA. Ceteris paribus, if you are putting $6000 in an IRA this year, you have an extra ~$1500 in your pocket if you choose the Trad. IRA (because you avoided paying taxes right now). What do you do with that money? I'd argue that a proper comparison requires that you put that money in a non-tax-advantage account. That makes a difference, especially if you think you will have an early retirement situation!
3. In addition to the various states that have no income tax at all, there are a good number that do not tax retirement distributions at all. While the Feds may consider it as earned income, depending on where you live, your effective tax rate in retirement may be significantly reduced - also something that should be considered when comparing Trad. IRA with Roth IRA.
This is a really good article and I highly recommend reading through it. It collects a lot of great info in one place.
Thank you for the write-up! One correction I would make is that per [1] VTSAX does have a $3,000 investment minimum. Before, VTSMX used to have the $3,000 minimum and VTSAX $10,000. However, it looks like recently they've gotten rid of the VTSMX share class entirely and dropped the investment minimum of the VTSAX share class to $3,000.
[1] https://investor.vanguard.com/mutual-funds/profile/VTSAX
This isn't terribly interesting or useful, though. A casual reading of these accounts even in your early 20s immediately makes this information clear.
What pisses me off is no one talks about organizing your accounts around early retirement. There seems to be no benefit in using any tax advantaged accounts if, say for instance, you wanted to retire at 35. Further still, if you did use tax advantaged accounts and wanted to retire early, you've screwed yourself because you pay a penalty for pulling those funds out.
Interesting information, but I wish there was an easier way to keep track of this stuff
One important note for residents of California and New Jersey: if you live in one of these states you must pay state tax on HSA contributions and gains, the same as if it were a regular taxable account. Your HSA is still tax-advantaged at the federal level though
The biggest thing I see unmentioned is the ERISA protections. Do not turn your 401(k) into an IRA before understanding the implications of losing that protection. It's a safety mechanism for your future self.
I didn't realize my Roth IRA contributions limits are curtailed starting at ~$125k income.
My income is around that, although I guess I wouldn't hit the limit due to maxing my 401K.
What would happen if I contributed too much to an IRA one year? Would I have to pay a penalty during tax season? Would I get the difference back in cash?