HSA vs FSA
Both Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) let you pay for medical expenses with pre-tax dollars. HSAs require enrollment in a High Deductible Health Plan, contribution limits are $4,150 self / $8,300 family in 2024, balances roll over forever, can be invested, and follow you when you change jobs. FSAs are offered through employers, the 2024 limit is $3,200, and balances are typically use-it-or-lose-it by the end of the plan year (some employers allow a $640 carryover or a 2.5-month grace period). FSAs are owned by your employer; HSAs are owned by you.
You contribute $3,000 to a healthcare FSA but only spend $2,400 by year-end. If your employer doesn’t offer a grace period or carryover, $600 is forfeited back to the employer. Contrast with $3,000 in an HSA, unused funds stay in your account, can be invested in an S&P 500 index fund, and at ~10% over 30 years compound to roughly $52,000. Same starting contribution, very different ending balance.
Maxing your FSA to the limit early in the year ‘just in case’. If your medical spending comes in lower, the leftover money is forfeited. Project your actual expected costs (recurring prescriptions, planned procedures, dental) and contribute to those, not the IRS ceiling.
A 60-second lesson on this, with a worked drill, lives inside the Finlo app. Free, forever, on the basics.