Is an HSA Use It or Lose It? Explained in Easy Terms

When it comes to Health Savings Accounts (HSAs), a common question that often arises is whether an HSA is 'use it or lose it.' The short answer is no, an HSA is not 'use it or lose it.' Unlike Flexible Spending Accounts (FSAs), which have a 'use it or lose it' rule, HSAs offer more flexibility and long-term benefits.

HSAs are designed to help individuals save and pay for qualified medical expenses now and in the future. Here's a breakdown of how HSAs work:

• Contributions to an HSA are tax-deductible.
• The money in an HSA grows tax-free through investments.
• Funds can be withdrawn tax-free for qualified medical expenses.
• There is no deadline for using the funds in an HSA, allowing them to roll over year after year.

It's important to note that HSAs have contribution limits set by the IRS each year. For 2021, the contribution limit for individuals is $3,600 and $7,200 for families. Individuals aged 55 and older can make an additional catch-up contribution of $1,000.

By understanding how HSAs work and their benefits, individuals can make the most of their healthcare savings while planning for the future. Remember, an HSA is a valuable tool that offers flexibility, tax advantages, and long-term savings potential.

Health Savings Accounts (HSAs) offer a distinct advantage over Flexible Spending Accounts (FSAs) as they allow your funds to roll over from year to year. Unlike FSAs, which often pressure you to spend your money quickly, HSAs give you the freedom to save for future healthcare needs.