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How You Can Benefit from a Health Savings Account (HSA) or Flexible Spending Account (FSA)

Updated: Oct 14, 2022

The Health Savings Account (HSA) or Flexible Spending Account (FSA) are not as popular as the typical retirement savings accounts, the 401k and 403b plans; however, they are a great tax and healthcare cost saving benefit that many people erroneously overlook. Below will delve into the basic components of the HSA and FSA and outline how you can benefit from enrolling in one of these healthcare cost saving accounts.

What is an HSA account?

A Health Savings Account (HSA) is a type of “savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses." By using untaxed dollars in a Health Savings Account (HSA), you can pay for deductibles, copayments, coinsurance, and some other health-related expenses to save money. In today's current economic climate, we need to take advantage of every opportunity we can to save money and be smarter with our money. Note that HSA funds generally may not be used to pay premiums. This type of account however allows those who have high deductible health plans, to set-aside additional funds in a tax-advantaged account to cover out-of-pocket medical expenses.

What is a Flexible Spending Account (FSA)?

The FSA account is usually offered through your employer. Similarly to the HSA, it allows you to put money into a special account to pay for copayments, deductibles, some drugs, and other out-of-pocket health care costs.

Any time you can save money on a pre-tax basis and use that money for needed qualified expenses, I believe it’s a win! Few things to consider before signing up, do you have out-of-pocket medical expenses such as co-payments, co-insurance and prescription drug expenses? If you are signing-up for the FSA account, you should try to come up with a ballpark figure of what your annual out-of-pocket cost is so you can know how much to elect to contribute to your FSA account. Generally funds in an FSA account must be spent within the plan year and are not rolled over. Through your employer, you may have a few months grace period or be allowed to carry-over a certain amount but it depends on the employer. So it's best to make sure that you will spend your contribution within the allowable time period. One thing that I love about the FSA, is that you can use benefits to make some common everyday purchases such as female hygiene and self-care products. Once you sign up with your employer, you should receive an FSA debit/credit card that you can use to access your funds and easily make eligible purchases. I like using the FSA online store to shop for eligible products because you don't have to think twice about whether or not your purchase is covered, and a few years ago Amazon also began allowing shoppers to search for and purchase FSA eligible products on their site's FSA/HSA store. Therefore, you can also conveniently shop for FSA/HSA eligible products on Amazon.

Maximum 2022 HSA Contributions

In 2022, you can contribute up to $3,650 for self-coverage and up to $7,300 for family coverage into an HSA. The money in an HSA never expires. Unlike flexible spending accounts (FSAs), all remaining HSA funds roll over each year. You may earn interest or other earnings, which are not taxable on an HSA account and after age 65 can use that money for non-medical expenses as well.

Maximum 2022 FSA Contributions

The contribution limit for 2022 is $2,850. Note if you are married, your spouse can also contribute that same amount with his or her employer. Even if you decide to waive health insurance coverage through your employer, with proof of coverage for example through your spouse’s plan, your employer may still allow you to contribute to an FSA account that you can use for eligible medical and dental out-of-pocket expenses.


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