Do I Want an HRA or HSA? - Understanding the Difference

When it comes to managing your healthcare expenses, choosing between a Health Reimbursement Account (HRA) and a Health Savings Account (HSA) can be confusing. Both accounts offer tax benefits and help cover eligible medical costs, but they have key differences that can impact your decision. Let's explore the features of each and help you decide which option may be best for you.

Health Reimbursement Account (HRA):

• Employer-funded account that reimburses you for qualified medical expenses.
• Contributions are made solely by your employer.
• Unused funds typically do not roll over from year to year.
• Funds are not portable if you change jobs.
• May have restrictions on eligible expenses.

Health Savings Account (HSA):

• Individual or employer-funded account for paying medical expenses.
• You can contribute to your HSA with pre-tax dollars.
• Unused funds roll over year after year and are yours to keep, even if you change jobs.
• Portable account that stays with you regardless of employment changes.
• Can invest HSA funds for potential growth.

Ultimately, the decision between an HRA and HSA depends on your individual needs and financial situation. If you want flexibility, portability, and potential investment growth, an HSA may be the better choice. However, if your employer offers an HRA and covers most of your medical expenses, it could be a more suitable option for you.

Choosing between a Health Reimbursement Account (HRA) and a Health Savings Account (HSA) is essential for your financial well-being. While both accounts have their perks, they serve different purposes. An HRA is usually sponsored by your employer and helps by reimbursing you for eligible medical costs, but keep in mind that it's entirely funded by your employer and unused funds often vanish at the end of the year.