HSA vs FSA: Which is Right for You?
Both HSAs and FSAs offer tax advantages for medical expenses, but they differ significantly in eligibility, ownership, rollover rules, and long-term benefits. Here's everything you need to know.
Quick Comparison Table
| Feature | HSA (Health Savings Account) | FSA (Flexible Spending Account) |
|---|---|---|
| Eligibility | Must have HDHP | Any health plan (employer-offered) |
| 2024 Contribution Limit | $4,150 (individual) $8,300 (family) | $3,200 |
| Rollover | ✓ Unlimited rollover | × Use-it-or-lose-it* |
| Ownership | You own it (portable) | Employer owns it |
| Investment Options | ✓ Can invest in stocks/funds | × No investment option |
| Fund Availability | Only what's contributed | Full amount from day 1 |
| Tax Benefits | Triple tax advantage | Tax-free contributions & withdrawals |
| Job Changes | Goes with you | Generally forfeited |
* Some FSAs allow up to $660 carryover (2025) or 2.5-month grace period (employer dependent)
Key Differences Explained
1. Eligibility Requirements
HSA:
- ✓ Must have HDHP
- ✓ No other health coverage
- ✓ Not on Medicare
- ✓ Not a dependent
- ✓ Self-employed can open HSA
FSA:
- ✓ Any health plan
- ✓ Must be employer-offered
- × Not available if self-employed
- × Cannot combine with general-purpose FSA
2. Rollover & "Use-It-Or-Lose-It" Rule
HSA: Unlimited Rollover ✓
Funds roll over year after year with no expiration. Your HSA can grow to $100,000+ over decades. Unused funds become retirement savings!
FSA: Use-It-Or-Lose-It (Mostly) ×
By default, unused FSA funds are forfeited at year-end. However, employers can offer:
- • Carryover: Up to $660 (2025) rolls to next year
- • Grace period: 2.5 extra months to spend funds
- • Employer chooses ONE option (not both)
3. Ownership & Portability
HSA: You Own It ✓
Your HSA is like a bank account—it's yours forever. Change jobs? Your HSA goes with you. Retire? Keep using it. It's never forfeited.
FSA: Employer Owns It ×
Leave your job and you typically forfeit remaining FSA funds (unless you elect COBRA continuation). Your employer decides FSA rules.
4. Investment & Growth Potential
HSA: Investment Vehicle ✓
Most HSA providers let you invest funds in mutual funds, ETFs, or stocks once you reach a minimum balance ($1,000-2,000). Your HSA can grow tax-free like a 401(k).
Example: 20-Year Growth
$4,000/year at 7% return = $164,000 (tax-free)
FSA: No Investment Option ×
FSA funds sit in cash with minimal interest. No opportunity for long-term growth.
5. Fund Availability
HSA: Gradual Access
You can only use what you've contributed. If you elected $4,150 annually but only contributed $1,000 so far, only $1,000 is available.
FSA: Full Amount Day 1 ✓
If you elect $3,200 annually, the full $3,200 is available from day one—even if you've only contributed $100 via payroll. This is great for large, early-year expenses.
Which One Should You Choose?
Choose HSA if:
- You're healthy with low medical expenses and want to save for the future
- You want to invest for tax-free growth
- You're comfortable with a high-deductible health plan
- You change jobs frequently (portability matters)
- You want a "super retirement account" for healthcare
Choose FSA if:
- You have predictable, high medical expenses each year
- You need full funds available immediately for a planned procedure
- You don't qualify for an HSA (no HDHP)
- You prefer a traditional health plan with lower deductibles
- You're disciplined about using funds before year-end
Can You Have Both?
Yes, but with limitations:
- × You CANNOT have an HSA and a general-purpose medical FSA simultaneously
- ✓ You CAN have an HSA + Limited Purpose FSA (LPFSA) for dental/vision only
- ✓ You CAN have an HSA + Dependent Care FSA for childcare expenses
Track HSA or FSA Expenses Effortlessly
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