HSA vs. FSA - Which is Better?
It's open enrollment period!! Which is always RIGHT before Thanksgiving even though there's nothing to be thankful for when it comes to the American healthcare system lol. And because choosing between an HSA vs FSA is very confusing… I wanted to be your guide!
Let's go over the differences between HSAs and FSAs, and which one you need!
- NO ANNUAL EXPIRATION! HSA funds carry over to the next year, while an FSA does not carry over- so you have to use it or you lose it.
- YOU CAN INVEST! Yes! You can invest your HSA funds. And what's better is the account is TRIPLE tax-advantaged. Contributions are pre-tax, investments grow tax-free and withdrawals for healthcare are tax-free too in retirement. Which… you will have. The average American couple spends over 300k on healthcare in retirement.
- IMMEDIATE ACCESS! FSAs give you the option of spending 100% of your funds at the beginning of the year whereas HSAs accumulate as you contribute.
- UNIVERSAL ELIGIBILITY! These are available regardless of your health insurance plan. There are no requirements! You can have any type of health insurance or even NO health insurance & still be eligible for an FSA!
Both HSAs and FSAs are valuable healthcare savings tools - the best choice depends on your situation:
Consider an HSA if you:
- Have an HDHP and want long-term investment growth
- Value account portability between jobs
- Want to save for healthcare in retirement by investing the funds inside
Consider an FSA if you:
- Need immediate access to funds
- Have predictable annual medical expenses
- Don't have an HDHP
Remember: Any dedicated healthcare savings is better than none. Both options help you prepare for medical expenses while reducing your tax burden!!
Here are some memes too to make this less painful:
