HSA versus FSA (For Dummies!) – Jessica Gertler

Jessica Gertler
HSA versus FSA For Dummies Jessica Gertler

Photo by nrd on Unsplash

A Health Savings Account (HSA) and Flexible Savings Account (FSA) are savings accounts used for the payment of health expenses. You can allocate a portion of your ongoing paychecks to both accounts pre-tax, saving you money. There are more limitations to using an FSA compared to an HSA. Flexible Savings Account? More like “Less-Flexible” Savings Account, am I right?! I’m not wrong. Here is a list of things you can do with an HSA that you cannot do with an FSA:

1) Earn interest

2) Contribute while self-employed

3) Change your contribution amount mid-year

4) Withdraw money (this is taxed if withdrawal is not for health expense)

5) Contribute up to $3,500 per year for self-only coverage and $7,000 for family coverage (compared to FSA’s $2,700 limit)

6) Hold onto your funds indefinitely; FSA funds are forfeited mid-year if you change jobs and are automatically forfeited at the end of the year when not used. If it’s December and you have FSA money to kill, schedule those appointments. Does your pinky-toe feel weird? Perhaps it’s time to try acupuncture.

At first glance, the HSA has a lot more flexibility than the FSA. The catch? You can only contribute to an HSA if you have a high-deductible health plan which may or may not make sense for you — this is another decision you’ll have to think through. Whether you choose to have an FSA exclusively or in addition to your HSA can be influenced by whether you have predictable health expenses. Perhaps $10 a month to an FSA will cover your anxiety prescription. Surprise hip replacement this Winter? You can maximize your contributions to your HSA and FSA and apply it toward your deductible while minimizing your taxes. Meanwhile, do your best to eat healthy and hydrate. Perhaps meditate. Hug your dog. Did you just sneeze? OMG cover your mouth.

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