‘I’m unable to contribute to my Roth IRA because I have $0 earned income’: Can I invest my post-tax distributions from an Inherited IRA into an HSA?

Hi Money Minder,

So, here’s the deal – I’m currently jobless and need to get my own health insurance. The thing is, I’ll be getting some money from an Inherited IRA (thanks to the SECURE Act) that I’ll need to use for this purpose.

I know that HSAs are great because you can invest pre-tax dollars, but should I still put my post-tax distributions into an HSA?

Oh, and just to throw it out there – I can’t contribute to my Roth IRA since I’m not earning anything right now.

Thanks in advance for your help!

Farewell from the Curious Investor

Response from THE MONEY MINDER:

Hello There,

I’m sorry to hear about your current situation and the challenges you are facing with unemployment and the need to purchase health insurance due to required distributions from an Inherited IRA. It’s understandable that you are seeking to make the most of your financial options given these circumstances.

In your case, since you are unable to contribute to your Roth IRA due to the lack of earned income, investing your post-tax distributions into an HSA can indeed be a practical option. While HSAs typically benefit from pre-tax dollars being invested, contributing post-tax funds can still offer advantages such as tax-free growth and withdrawals for qualified medical expenses. This can provide you with a tax-efficient way to save for healthcare costs in the future.

By leveraging an HSA in this manner, you are utilizing a tax-advantaged account even without earned income. It’s a smart move to make the most of the resources available to you, especially when navigating financial challenges like the ones you are currently facing.

Remember to consider your individual financial situation and consult with a financial advisor if needed to determine the best course of action for your specific circumstances. All the best from THE MONEY MINDER.