Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs) and what you need to know

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Many employers offer a choice between a Health Savings Account (HSA) and a Flexible Spending Account (FSA), but what’s the difference?

Since you typically cannot use both, here are three differentiators to consider:

Flexible Spending Account Health Savings Account
Annual Contribution Limits Up to $2,650 individual

Up to $5,300 per household

Up to $3,450 individual*

Up to $6,900 per household

Ownership Owned by employer and lost with job change, unless eligible for continuation through COBRA Owned by individual and carries over with employment changes
Rollover Rules Employer chooses whether:

Funds expire at the end of the year

Employees get a grace period of 2.5 months to use funds

Employees can roll over $500 into next year’s FSA

Unused funds roll over every year

* If you are age 55 or older, you can make “catch up” contributions, which add $1,000 per year to your HSA contribution limit.

Additionally, both accounts offer tax benefits. That is, contributions are pretax amounts that directly reduce your taxable income.

Although, the ability to roll unused funds to subsequent years is specific to the HSA account. This presents an opportunity to invest contributions for potential growth, to hedge the rising costs of health care expenses.

Per usual, this decision should be considered within your overall financial plan. If you’d like to discuss which might be better for you, we are happy to start the conversation.

The information contained herein represents the views of Westwood Wealth Management at a specific point in time and is based on information believed to be reliable. No representation or warranty is made concerning the accuracy or completeness of any data compiled herein. Any statements non-factual in nature constitute only current opinion, which is subject to change. Any statements concerning financial market trends are based on current market conditions, which will fluctuate. Past performance is not indicative of future results. All information provided herein is for informational purposes only and is not intended to be, and should not be interpreted as, an offer, solicitation, or recommendation to buy or sell or otherwise invest in any of the securities/sectors/countries that may be mentioned.