HSA vs FSA

HSA vs FSA

I’m going to point out the key differences between a Flexible Spending acct and a Health Savings acct so that you can hopefully make the best decision for YOUR family.

1st it’s important to know whether your employer offers both types of plans

Can I do both? Usually no (exception)

Difference 1

HSA allowed only with a High Deductible Health Plan (HDHP), If your use of medical care is at a minimum and you believe it will continue that way, a HDHP May be a plan that you want to look at and a HSA along with it. 

A HDHP would charge lower premiums, but when you have health events, more has to come out of your pocket (or your HSA) before the insurance would start offsetting some of the cost.

On the other hand if you are a person or family that is a heavier user of Drs, hospitals, prescriptions etc, You may want to look at a plan with an FSA – which would pick up more of the cost of care WITHOUT having to hit such a high deductible 1st.

Difference 2

HSA lets you pick investments for your money in the plan where a FSA does not. Both are letting you contribute pre-tax dollars into then plan, but if you are able to build up a balance in your HSA over time, it may be wise to look at picking some investments, like mutual funds. Although they have more risk, they have the ability to grow more over time vs a cash account available in an FSA

Difference # 3

HSA – money that is not used can roll over that you don’t use year over year. It is portable – meaning that it come with you if you leave your employer. 

With a FSA – use it lose it. If not used by 12/31 or year contributed, you forfeit it. It’s gone.

If HSA dollars are not used by age 65, they can be withdrawn and spend on retirement expenses similar to other retirement account. 1 key difference is there is no RMD at 70.5