What Does FSA or HSA Mean? All You Need to Know

Healthcare can be expensive, but there are tools like FSA (Flexible Spending Account) and HSA (Health Savings Account) that can help you save money on medical costs. So, what do FSA or HSA mean?

An FSA is a pre-tax savings account that you can use for qualified medical expenses. It allows you to set aside a portion of your paycheck to use for healthcare costs not covered by insurance. On the other hand, an HSA is a tax-advantaged savings account that is paired with a high-deductible health plan. It offers triple tax benefits - contributions are tax-deductible, funds grow tax-free, and withdrawals are tax-free when used for eligible medical expenses.

Here are some key differences between FSA and HSA:

• FSA funds typically expire at the end of the plan year or after a grace period, while HSA funds roll over year after year.
• FSAs are owned by your employer, meaning you may lose the funds if you change jobs, whereas HSAs are owned by you and are portable.
• FSAs have contribution limits set by the IRS each year, but HSAs have higher contribution limits and potential for investment growth.

If you're looking to manage your healthcare expenses effectively, it's important to understand the differences between an FSA (Flexible Spending Account) and an HSA (Health Savings Account). Both are excellent tools, but they serve different purposes. An FSA allows you to save pre-tax dollars for healthcare costs, while an HSA offers a more flexible approach with tax advantages that accumulate over time.