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Phase 5: HSA + Roth IRA — Where Planning Starts to Compound

Writer: Paul Jarvis
Paul Jarvis
11 minutes ago
5 min read

Partner & Wealth Advisor | Prime Capital Financial, Fargo ND



Figures below are 2026 IRS limits. For 2027, HSA limits rise to $4,500 (self-only) and $9,000 (family).

Phase 5 of the Financial Order of Operations signals the shift from “stable” to “strategic.”

If you’ve handled the earlier phases—cash reserves, insurance, debt strategy, and obtaining the 401(k) match—this phase introduces two vehicles that can materially improve long-term outcomes:

  1. Health Savings Accounts (HSA)
  2. Roth IRAs

Both are simple on the surface. Both get powerful when you understand the rules.

1) HSA: tax advantages with long-term flexibility (when you’re eligible)


An HSA is available when you’re covered by a qualifying high-deductible health plan (HDHP). When you’re eligible, it offers a rare combination of benefits:

  • Contributions can be tax-deductible.
  • Growth can be tax-free.
  • Qualified medical withdrawals are tax-free.

For 2026, the contribution limits are:

  • $4,400 for self-only coverage.
  • $8,750 for family coverage.
  • +$1,000 catch-up if you’re 55+ by year-end. (Once you’re enrolled in Medicare, all HSA contributions stop.)

A practical approach many people use: keep enough cash in the HSA to cover near-term expected expenses, and invest the remainder for long-term appreciation.

Over time, that creates flexibility for larger expenses that tend to show up later—dental is a common one—without forcing you to pull from retirement accounts at the wrong time.

Pro Tip: If you pay qualified medical expenses out of pocket after your HSA is open and keep good documentation, you can later reimburse yourself from the HSA. That can allow the HSA to stay invested longer.

2) Roth IRA: after-tax contributions, tax-free growth, tax-free qualified withdrawals


A Roth IRA is funded with after-tax dollars. The benefit is what happens next:

  • Growth is tax-free.
  • Qualified withdrawals are tax-free.

For 2026, the IRA contribution limits are:

  • $7,500 per person.
  • $8,600 if you’re 50+ (includes the newly indexed $1,100 catch-up).

3) 2026 Roth IRA income limits: single and married filing jointly


Roth IRA contribution eligibility relies on modified adjusted gross income (MAGI).
For 2026, the phase-out ranges are:

  • Single / Head of Household: $153,000 to $168,000 MAGI.
  • Married Filing Jointly: $242,000 to $252,000 MAGI.
  • Married Filing Separately: $0 to $10,000 MAGI.

If you’re below the range, you can make a full Roth contribution; inside it, a partial one.

If you’re above it, that’s where the backdoor Roth becomes part of the conversation.


What’s New for Phase 5 in 2026?

HSA Eligibility: Expanded Coverage: Under the One Big Beautiful Bill Act (OBBBA), Bronze and Catastrophic plans available as individual coverage through a Marketplace/Exchange are now HSA-eligible.

Direct Primary Care: DPC is Qualified: Fees for qualifying Direct Primary Care arrangements (up to $150/month self-only or $300/month family) are now qualified medical expenses, and having DPC no longer blocks HSA contributions if you’re otherwise HSA-eligible (e.g., covered by an HDHP).

Roth Catch-ups: High Earner Mandate: If your 2025 FICA wages from your employer topped $150k, your 2026 catch-up contributions to that employer’s plan must be Roth.

IRA Catch-up: Indexed for Inflation: The age 50+ catch-up rose to $1,100 for 2026, bringing the total limit to $8,600.


Backdoor Roth + the two rules that matter


Common scenario: “I’m over the Roth income limit—now what?”

If your income is above the Roth IRA phaseout for 2026, a common strategy is the backdoor Roth:

  1. Make a non-deductible contribution to a Traditional IRA.
  2. Convert that amount to a Roth IRA.

Two rules to understand before you do it:

  • 1) Pro-rata rule (tax impact): If you already have pre-tax money in any Traditional/SEP/SIMPLE IRA, the conversion is taxed based on the ratio of pre-tax to after-tax dollars across all of your Traditional/SEP/SIMPLE IRA balances as of December 31 of the year you convert. For example, if you have $90,000 in pre-tax IRA money and $10,000 in after-tax contributions, then 10% of any conversion amount will be considered after-tax, and 90% will be considered pre-tax for tax purposes.
  • Translation: The IRS doesn’t let you isolate only the after-tax portion if you have other pre-tax IRA money in the background. If you like the coffee analogy, once pre-tax and after-tax dollars are mixed, each conversion “pour” contains a proportional blend.
  • 2) Roth 5-year rules (timing impact): For earnings to come out tax-free, it must be at least 5 tax years since your first Roth IRA contribution (the clock starts January 1 of that year), and you generally need to be 59½ (or meet another qualifying exception). Also note a 5 year rule on conversions. Here is a helpful resource from Fidelity: Fidelity Roth Conversion and 5-year Rules

Best practice: Before doing a backdoor Roth, take inventory of your IRA accounts (including rollovers from old 401(k)s). The tax result depends on what already exists.

Sources (IRS Reference)




About the author: Paul Jarvis, CFP®, is a Partner and Wealth Advisor who leads Prime Capital Financial's Fargo, North Dakota office. More about Paul · Firm bio · Verify on SEC IAPD


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